Basic Info

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Nominee Information

Institutional Information

Member State Kenya
Institution Name Water Sector Trust Fund
Institution Type Public Agency
Administrative Level National
Name of initiative Output Based Aid Programme
Projects Operational Years 6
Website of Institution www.waterfund.go.ke

Question 1: About the Initiative

Is this a public sector initiative? Yes

Question 2: Categories

Is the initiative relevant to one of the UNPSA categories? Enhancing the effectiveness of public institutions to reach the SDGs
UNPSACriteria
NoItems

Question 3: Sustainable Development Goals

Is the initiative relevant to any of the 17 SDG(s)? Yes
If you answered yes above, please specify which SDG is the most relevant to the initiative. (hold Ctrl to select multiple)
Goal 6: Clean Water and Sanitation
Which target(s) within the SDGs specified above is the initiative relevant to? (hold Ctrl to select multiple)
6.1 By 2030, achieve universal and equitable access to safe and affordable drinking water for all
6.2 By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations
6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally
6.4 By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity
6.a By 2030, expand international cooperation and capacity-building support to developing countries in water- and sanitation-related activities and programmes, including water harvesting, desalination, water efficiency, wastewater treatment, recycling and reuse technologies

Question 4: Implementation Date

Has the initiative been implemented for two or more years Yes
Please provide date of implemenation (dd/MM/yyyy) 03 Dec 2014

Question 5: Partners

Has the United Nations or any UN agencies been involved in this initiative? No
Which UN agency was involved? (hold Ctrl to select multiple)
Please provide details

Question 6: Previous Participation

1. Has the initiative submitted an application for consideration in the past 3 years (2017-2019)? No

Question 7: UNPSA Awards

Has the initiative already won a UNPS Award? No

Question 8: Other Awards

Has the initiative won other Public Service Awards? No

Question 9: How did you learn about UNPSA?

How did you learn about UNPSA? EMAIL

Question 10: Validation Consent

I give consent to contact relevant persons and entities to inquire about the initiative for validation purpose. Yes

Question 1: About the Initiative

Is this a public sector initiative? Yes

Question 2: Categories

Is the initiative relevant to one of the UNPSA categories? Enhancing the effectiveness of public institutions to reach the SDGs
UNPSACriteria
NoItems

Question 3: Sustainable Development Goals

Is the initiative relevant to any of the 17 SDG(s)? Yes
If you answered yes above, please specify which SDG is the most relevant to the initiative. (hold Ctrl to select multiple)
Goal 6: Clean Water and Sanitation
Which target(s) within the SDGs specified above is the initiative relevant to? (hold Ctrl to select multiple)
6.1 By 2030, achieve universal and equitable access to safe and affordable drinking water for all
6.2 By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations
6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally
6.4 By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity
6.a By 2030, expand international cooperation and capacity-building support to developing countries in water- and sanitation-related activities and programmes, including water harvesting, desalination, water efficiency, wastewater treatment, recycling and reuse technologies

Question 4: Implementation Date

Has the initiative been implemented for two or more years Yes
Please provide date of implemenation (dd/MM/yyyy) 03 Dec 2014

Question 5: Partners

Has the United Nations or any UN agencies been involved in this initiative? No
Which UN agency was involved? (hold Ctrl to select multiple)
Please provide details

Question 6: Previous Participation

1. Has the initiative submitted an application for consideration in the past 3 years (2017-2019)? No

Question 7: UNPSA Awards

Has the initiative already won a UNPS Award? No

Question 8: Other Awards

Has the initiative won other Public Service Awards? No

Question 9: How did you learn about UNPSA?

How did you learn about UNPSA? EMAIL

Question 10: Validation Consent

I give consent to contact relevant persons and entities to inquire about the initiative for validation purpose. Yes

Nomination form

Questions/Answers

Question 1

Please briefly describe the initiative, what issue or challenge it aims to address and specify its objectives. (300 words maximum)
Kenya Output Based Aid (OBA), the “Project”, for low-income areas provides output-based aid subsidies to Water Services Providers (WSPs) subprojects financed with commercial loans that achieve a mix of the following outputs: new individual water and sewer connections, water kiosks and public water supply points, and public toilets. The maximum OBA subsidy is 60 percent of the amount borrowed for investment. The OBA project supports the Kenya Vision 2030, the national development plan objective that “improved water and sanitation are available and accessible to all” by the year 2030 and has a clear poverty focus. Resultant benefits include access to water connections, access to improved water kiosks, access to sewer connections and access to public toilets. The impacts of the subprojects completed to date have been reduced disease incidences through access to clean water, time saved by women and girls accessing water, straight from a tap within their households or from a nearby public water kiosk, and improved livelihoods as a result of increased disposable income due to reduced costs of buying water from private vendors. The project development objective (PDO) is to increase the number of people in low income areas with access to improved water supply and sanitation services. This objective is being realized by incentivizing WSPs selected from Kenya’s 47 counties to invest in water supply and sanitation improvement subprojects to benefit households in low income areas by applying one-off OBA subsidies to make water and sanitation access affordable. The primary beneficiaries of the OBA Fund are 120,500 residents of low income areas who are gaining access to water and sanitation services through individual water and sewerage connections, public water and or public sanitation services (water kiosks and public toilets) constructed near or within their areas of residence.

Question 2

Please explain how the initiative is linked to the selected category. (100 words maximum)
The project implementing entities are licensed Water Service Providers (WSPs) who are public institutions under County Governments. The project assists the WSPs to become commercial entities that are run as profit making. By financing the expansion of water or sewer pipeline networks and installation of household connections, the WSPs are able to reach out to more people with improved access to clean water and sanitation services in line with SDG number 6. The project finances WSPs based on outputs achieved. This has improved WSPs on transparency and accountability and also the efficiencies required in continuously providing water to its residents.

Question 3

a. Please specify which SDGs and target(s) the initiative supports and describe concretely how the initiative has contributed to their implementation. (200 words maximum)
The project supports the SDG (6) “Ensure availability and sustainable management of water and sanitation for all”. The OBA project targeted to connect 120,500 people in the low income areas of Kenya with access to clean water supply and improved sanitation services. The project identified nine WSPs in Kenya which implemented 23,238 individual household water and sewer connections, 33 public water kiosks and 7 yard taps. A total of 124,763 people will be reached with water and sanitation services. The WSPs were assisted by the project in the preparation of bankable proposals comprising of a) detailed technical designs b) financial proposals c) environmental and social impact assessment reports (ESIAs) d) resettlement action plans (RAPs) e) market demand assessments and f) social connection policies. The bankable proposals were then submitted to a commercial bank for credit assessment after which a loan agreement for access to a construction loan would be signed. The Project also assisted the WSPs to procure works contractors, undertake construction and supervising consultants and the main works. Main works included the laying of water and sewer pipes and the installation of individual household connections, construction of public water kiosks and yard taps.
b. Please describe what makes the initiative sustainable in social, economic and environmental terms. (100 words maximum)
The project supports implementation of subprojects by following Environmental and Social-Impact Assessment(ESIA) procedures and approved construction licenses issued by National Environment Management Authority (NEMA) of Kenya in managing the environmental and social issues during construction. The works contractors undertakes construction of the subprojects by following the NEMA license general, construction, operational, notification and decommissioning conditions. The project enforces compensation of all project affected persons (PAPs) on easements, encroachments and physical displacements. Works would only be implemented after full compensation of PAPs. The subprojects contribute towards income generation and economic growth both at county & national governments.

Question 4

a. Please explain how the initiative has addressed a significant shortfall in governance, public administration or public service within the context of a given country or region. (200 words maximum)
WaterFund OBA Programme in conjunction with World Bank has continuously trained senior management of Water Services Providers on corporate governance issues. Those trained included Managing Directors, Technical and Commercial Managers. The project eligibility criteria for WSPs to access the OBA subsidy also included a letter of No Objection from County Governments and Water Services Boards. This meant that the County Governments and the WSBs would take responsibility of also monitoring the implementation of the subprojects from time to time as the provision of water and sanitation services in the counties is a devolved function under the Counties. The administration of the loans received from the commercial banks was done by a project team of internal staff selected by the Managing director of that WSP. WaterFund's Internal Audit and OBA project manager would from time to time undertake ad hoc audits on the subproject construction and how the loans disbursed would be used under the subprojects. The WaterFund OBA project team would also assess if the subproject target areas are in the low income areas and that water provision distributed to the residents is of good quality i.e value for money to the customers.
b. Please describe how your initiative addresses gender inequality in the country context. (100 words maximum)
The project targeted connecting all households within target subproject areas. Both male and female headed households, people with disability and marginalized communities whose households where situated in the subproject areas had an equal chance of having a water connection to their households. The project provided a social connection policy targeting households who could not afford to buy materials required for a connection, to access them on credit from the WSP. The project would then subsidize the cost of the connection to the WSP and the beneficiaries would only pay 40% of the cost of the installation.
c. Please describe who the target group(s) were, and explain how the initiative improved outcomes for these target groups. (200 words maximum)
The project targeted beneficiaries residing in the low income areas of Kenya. Any project located within the Kenyan 47 counties was eligible, if it targeted at least 30% of the population residing in the low income areas. The low income areas were first checked if they were mapped within the "MajiData". The MajiData, is a Kenyan Water Sector Data Base containing annually updated data used for decision-making processes and reporting on: water supply and sanitation services for WSPs and counties’ performance; map and data presentation; and projects in urban low income areas. The project improved the livelihoods of the beneficiaries of the low income areas as the cost of buying water significantly reduced from an average of KShs. 20 (0.2 USD) per 20 litre Jerrycan from private vendors to KSh. 2 (0.02 USD) per 20 litre jerrycan from public water kiosks managed by WSPs. The project also resulted in reduction of waterborne diseases among the residences of the low income areas as they no longer collected untreated water from unprotected wells, rivers and dams. The water from the WSP supply network is treated with water treatment chemicals and tested for microorganisms before it is discharged for use.

Question 5

a. Please describe how the initiative was implemented including key developments and steps, monitoring and evaluation activities, and the chronology. (300 words)
The OBA project, is implemented by WaterFund, with financial support from the World Bank in Kenya. WaterFund and World Bank approached interested commercial banks in the development the financial criteria of WSPs, how a 60% subsidy would be disbursed, as well as approaching USAID for a 50% credit guarantee. Four commercial banks namely Sidian bank, KCB bank, Housing Finance and Cooperative bank registered for the 50% credit guarantee. The financing agreement was signed between World Bank and National Treasury of Kenya. WaterFund then requested for bankable proposals from WSPs.The OBA Programme is a demand driven project where a WSP isoffered pre-financing through a commercial loan and later accesses a 60% OBA subsidy. The project identified eight Water and Sanitation Companies namely Embu, Nyeri, Kisumu, Mathira, Nol Turesh, Murang’a South, Murang’a and Mathira for financing. The WSPs were then required to develop bankable proposals which would be assessed by WaterFund before a certificate of eligibility for accessing the OBA subsidy was issued. WSPs were issued with technical assistance funding for them to procure technical consultants in the development of the bankable proposals. A total of KSh. 66 million (603,400USD) has so far been disbursed for the procurement of consultants for bankable proposal development and supervision of works. The WSPs were assisted by WaterFund to procure contractors who would undertake the actual construction works on behalf of the WSPs. Physical works were implemented by the contractors over a period of 12 to 24 months and monitoring of the construction phase would be done by the supervising consultants, the WSPs technical managers, WaterFund project manager and short term consultants. Evaluation of activities under the subprojects would be done by an Independent Verification Agent (IVA) hired by WaterFund as well as through the audit and Monitoring and Evaluation (M&E) departments under WaterFund.
b. Please clearly explain the obstacles encountered and how they were overcome. (100 words)
The project encountered obstacles in the compensation of project affected persons (PAPs). There were delays in the compensation of PAPs even after a gazette notice was issued, as PAPs took time to claim their compensation. The WSPs therefore opened an interest earning account were the funds were deposited. The PAPs where then paid as and when they would claim their compensation. There were also delays in loan disbursements by banks as they lacked proper understanding on technicalities of project implementation in the water sector which led to WaterFund undertaking field assessments with the bank staff to understand project procedures.

Question 6

a. Please explain in what ways the initiative is innovative in the context of your country or region. (100 words maximum)
The project presented a new way of financing subprojects in the water sector. The linking of WSPs with commercial banks for pre-financing and blending it with a 60% subsidy made the commercial loans cheaper at repayment. A 60% subsidy was disbursed and used to reduce the 100% loan drawdown reducing both the principal loan amount and the interest amount accrued during the construction period. The disbursement of subsidies based on results encouraged all participating WSPs to meet their pre-agreed targets as signed in subsidiary agreements with WaterFund and immediately resulted in instant revenue generation from individual household connections installed.
b. Please describe, if relevant, how the initiative drew inspiration from successful initiatives in other regions, countries and localities. (100 words maximum)
The project was financed through the GPOBA, which is a global partnership program administered by the World Bank. The implementation of the Kenya OBA was inspired from other OBA projects implemented by GPOBA across a variety of sectors, among them water, energy, health, and education. By September 2015, the GPOBA had a portfolio of 44 projects with USD228 million in commitments for subsidy funding and ongoing technical assistance activities. The success under the GPOBA program demonstrated that OBA can deliver a diverse range of services and lasting results for the poor, inspired the implementation of the Kenya OBA project.
c. If emerging and frontier technologies were used, please state how these were integrated into the initiative and/or how the initiative embraced digital government. (100 words maximum)
The WaterFund used online tool named ODK Collect. It is an Android app built on open source survey-based data gathering tool that captures text, numerical data and images and geo-referenced information. This tool was used to capture all the baseline data related to the programme. The tool was also used in subsequent monitoring and to ascertain the operational status, revenue collection, age, success rate and condition of the individual projects. Data collected in available in an online server and can also be used to visualize the locations of the projects on a map.

Question 7

a. Has the initiative been transferred and/or adapted to other contexts (e.g. other cities, countries or regions) to your organization’s knowledge? If yes, please explain where and how. (200 words maximum)
The OBA project concept of financing the water and sanitation sector has been transferred to various cities and counties across Kenya. A majority of commercial banks have adopted the financing mechanism of the OBA project and these include Equity bank, KCB bank, ABC and Stanbic bank in Kenya. The concept of WSPs procuring works contractors and disbursing loans against Interim Payment Certificate (IPCs) have made commercial banks comfortable lending to the water and sanitation sector. The OBA concept has also been adopted by various donors and private firms who are partnering with WSPs that have completed subprojects under the OBA project. A new concept was developed under the Kenya Pooled Water Fund (KPWF) funded by the Government of Netherlands, where a number of WSPs are put in a pool and bonds raised as capital to finance the water and sanitation sector infrastructure development. The loans to be given to the WSPs will have long loan tenors of up to 30 years allowing the WSPs to comfortably repay their loans. The loans will be issued at free market rates and with improved incomes, where the WSPs will be expected to repay their loans on time without defaulting.
b. If not yet transferred/adapted to other contexts, please describe the potential for transferability. (200 words maximum)
The OBA project context has potential for transferability as a similar project named Aid on Delivery (AoD),has been implemented by WaterFund with financial support from KfW (The German Development Bank (KfW). The AoD project has to date implemented one subproject under Embu Water and Sanitation Company (EWASCO) at a value of KSh. 107 million. Subprojects under AoD are pre-financed by commercial banks and receive a 50% subsidy for a maximum loan of KSh. 150 million. The AoD project has received an additional funding for implementation of an additional eight new projects under WaterFund. WaterFund has developed a new Revolving Fund concept which has borrowed a lot from the OBA project. The concept will involve WSPs as the implementing agents and WaterFund will receive seed capital from the Government of Kenya (GoK) and any other donor(s). The grants received from the GoK/donors at zero percent will be blended with capital from commercial banks (currently at an average of 11% per annum). By combining the grant (at 0%) and capital from the commercial banks (at 11%) will enable the financing of WSPs at concessionary rates below the current free market rates. This will be cheaper for WSPs at repayment.

Question 8

a. What specific resources (i.e. financial, human or others) were used to implement the initiative? (100 words maximum)
The project received a grant valued at USD11.107 million from the Swedish International Development Agency (SIDA) through the World Bank Global for Partnership for Results-Based Approaches (GPRBA). The project was managed by a Results Based Financing project manager and a project assistant who were hired under WaterFund for day to day management of the project. The project also hired five external short term consultants hired as a technical consultant, financial consultant, procurement consultant, environmental and social impact assessment consultant and a legal consultant. These were engaged under the project on a need basis from time to time.
b. Please explain what makes the initiative sustainable over time, in financial and institutional terms. (100 words maximum)
The project concept is expected to be replicated by WaterFund and incorporated as an internal product under three Kenyan commercial banks namely Cooperative bank of Kenya, Sidian bank and Family bank. WaterFund is working on applying for a second phase of funding for the OBA project from the World Bank and other donors for financing of other WSPs that did not participate in the first phaseoffunding. The WSPs that were previously financed under the OBA project are now accessing loans from the commercial banks without OBA subsidies following the good lending practices employed under the project.

Question 9

a. Was the initiative formally evaluated either internally or externally?
Yes
b. Please describe how it was evaluated and by whom? (100 words maximum)
The WaterFund, through its monitoring and evaluation (M&E) department conducted a sustainability testing through the Joint Annual Operations Monitoring assessment and sustainability testing of the OBA investments which sought to establish if the programme is sustainable (JAOME) and objective of ensuring that at least 80 percent of the installed connections are getting water services and that the households were paying their bills in full and on time to secure its long-term sustainability. The sustainability testing entailed stratified sampling methodology where the assessment targeted to capture a sample of 5% to 10% of the connected households.
c. Please describe the indicators and tools used. (100 words maximum)
The Fund used online tool: ODK collect. It is an Android app built on open source survey-based data gathering tool that captures text, numerical data and images and Geo-information. The objective of the sustainability testing was to assess the following Key Performance Indicators: Number of customer’s connections, Timeliness in the receipt of water bills for the connected customers, Timeliness in payment of bills, if the customers in question were being billed, Timeliness in payment, where such payments were being made. The JAOME sought to assess the following indicators: Operational status; Revenue collection; Age and success rate, and; Condition of facility.
d. What were the main findings of the evaluation (e.g. adequacy of resources mobilized for the initiative, quality of implementation and challenges faced, main outcomes, sustainability of the initiative, impacts) and how is this information being used to inform the initiative’s implementation? (200 words maximum)
Resource mobilisation and implementation approach was found to be a perfect fit to the realisation of enhanced access to water services in underserved areas. The OBA programme scored 83% in the Sustainability Index, with higher than average scoring across three indicators (operational status, revenue collection and age survival). 86% of the investments were operational at the time of visit. The revenue collection was impressive at 93%. The key challenges reported were: delays in implementation due to slow uptake of loans by the WSPs; contractor challenges with handling large scale projects resulting in delays; quality management and compliance challenges by the contractors; and COVID-19 related challenges. The implementation of the programme has been identified as a game changer in the Kenya Water Sector financing approaches. This model leverages private sector financing into the public sector investments which results in provision of the required capital investments in water, accelerating the realisation of enhanced access to water and sanitation services. This programme enhances utilities credit rating hence securing their ability to access low-cost credit from the private and public financiers. The key lesson learned from the programme’s implementation was that it is possible to tap into private sector financing to provide sustainable public investments.

Question 10

Please describe how the initiative is inscribed in the relevant institutional landscape (for example, how is it situated with respect to relevant government agencies, and how have these institutional relationships been operating). (200 words maximum)
Water Act 2016, mandated WaterFund to provide conditional and unconditional grants to the Counties, to assist in financing the development of and management of water services in the rural and urban underserved areas. The OBA project, implemented under WaterFund's Investments Programme is operates within a nexus of various government agencies as seen below 1. The OBA programme is implemented by WSPs which are government agencies mandated to provide water and sanitation services to households within their jurisdiction. The County Governments, in charge of WSPs also monitored the WSPs in the implementation of the sub-projects. The WSPs are also regulated by the Water Services Regulation Board (WASREB) which sets approved a water tariffs for billing of water users by the WSP. 2. Other additional stakeholders for the OBA Programme include the commercial banks which are private entities that are dependent on the reviews by WASREB on tariff approval and implementation. The tariff reviews enable the WSPs to repay their loans. 3.WaterFund assists the WSPs in the implementation of the subprojects by following the World Bank guidelines on donor funded projects, while the county governments provided overall oversight in the subprojects implementation.

Question 11

The 2030 Agenda for Sustainable Development puts emphasis on collaboration, engagement, partnerships, and inclusion. Please describe which stakeholders were engaged in designing, implementing and evaluating the initiative and how this engagement took place. (200 words maximum)
The World Bank and WaterFund were involved in the initial design of the OBA project by identifying interested commercial banks to partner with in the pre-financing of interested WSPs. Four commercial banks were identified namely: KCB bank, Sidian bank, Corporative bank and Housing Finance bank which had access to a 50% USAID guarantee. After identifying the commercial banks, WaterFund then created awareness and capacity built 60 WSPs on the OBA programme through workshops. Interested WSPs eventually applied for the funding. The WSPs engaged their County governments in the preparation of bankable proposals and a letter of no objection from the County government was part of the criteria for eligibility to access the 60% subsidy. The WSPs then applied for a commercial loan from a commercial bank of their choice. The WSPs procured works contractors and supervising consultants to assist them during construction. The sub-project outputs were then evaluated by WaterFund trough an Independent Verification Agent (IVA) hired by WaterFund to verify the pre-agreed targets that if achieved, would trigger the disbursement of the 60% OBA subsidy. WaterFund's Monitoring and Evaluation department also evaluated the outputs.

Question 12

Please describe the key lessons learned, and how your organization plans to improve the initiative. (200 words maximum)
The project has noted that for successful implementation of the subprojects, a bankable proposal must be prepared by the WSPs internal staff. However, in the event that they do not have the capacity to do so, external consultants can be procured to assist the staff. The technical staff must be involved in the process of development of the bankable proposal so that in the near future they will be able to do it on their own and save the organization funds for continual hiring of external consultants. The project also noted that the commercial bank staff needed to get training on how to manage subprojects implemented in the water and sanitation sector. Most of the bank staff did not have any prior experience in financing the water and sanitation sector. This delay their approval of IPCs and the disbursement of the loans as reimbursement to the contractors. The Project proposes to train the staff of new banks interested in financing WSPs before and during implementation. The design of subprojects also needed to be done in parallel with a resettlement action plan. This is important in identifying project affected persons and compensating them on time for smooth subproject implementation.

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