News Experts Urge Credit Lines to Fill Persistent WASH Financing Gap
Experts Urge Credit Lines to Fill Persistent WASH Financing
April 25, 2026
Just one in eight of Ethiopia’s banks and microfinance institutions currently provide dedicated water and sanitation financing, a key constraint in a sector facing a USD1.14 billion annual funding shortfall, say experts who gathered in Addis Ababa this week for the Aqua for All WASH Finance Program.
Data presented by Aqua for All, a Netherlands-based NGO working in water and sanitation projects in Africa and Asia, revealed that only a dozen of the nearly 90 financial institutions in Ethiopia have a dedicated water and sanitation credit line.
Hezkel Aynalem, CEO of the program, stated that private sector risk perceptions, policy constraints, and weak project pipelines limit lending to the sector despite evidence of high repayment rates.
“There is perceived high risk and non-return, limited understanding of the WASH sector,” he said, noting that most financial institutions “think there is no business case for the water sector.”
The financing shortfall comes as Ethiopia requires approximately USD 2.2 billion annually to meet water and sanitation targets but faces a gap of USD 1.14 billion each year. Per capita spending has remained largely unchanged at about USD 12 over the past decade.
Globally, the sector faces an annual USD 138 billion deficit, with Sub-Saharan Africa needing to increase spending by 9.5 times current levels, and fragile states requiring up to 42 times more investment.
Hezkel identified multiple systemic barriers limiting private finance, including lack of data, weak pipelines of investment-ready projects, and regulatory constraints.
“There is no reference to the default. There is no reference to the return. There is no reference to how to market this sector,” he said, describing the absence of nationwide sectoral data as a major bottleneck.
He also pointed to “weak link between market development and finance,” noting that the pipeline of bankable WASH projects remains underdeveloped.
“Incentives are misaligned. Public funds are not sufficiently crowding in the private sector,” Hezkel said, adding that financial institutions require mechanisms that both reduce risk and demonstrate returns.
Foreign exchange shortages were also highlighted as a constraint affecting WASH-related businesses reliant on imported inputs, alongside broader macroeconomic challenges.
The Aqua for All WASH Finance Program, currently in its 2024–2026 phase, aims to address these barriers by working directly with banks and microfinance institutions to establish dedicated credit lines and build a financing ecosystem.
According to the CEO, the program is designed to address these barriers by de-risking investments and building a pipeline of finance-ready projects through partnerships with microfinance institutions, banks, and government stakeholders.
It also includes technical assistance, development of standardized WASH financing toolkits, and creation of a revolving credit facility linking banks and microfinance institutions.
“We needed to link microfinances with banks… we create a revolving credit facility,” Hezkel said, describing a model that supports both wholesale lending to microfinance institutions and direct lending to households and small enterprises.
Participating institutions include multiple microfinance providers and banks, with a mix of private and public entities involved to “diversify the portfolio and generate evidence that this works.”
According to the CEO, the program’s early results show that microfinance institutions can deliver WASH loans at scale.
“The microfinance have 97 percent return rates to loans,” he said, presenting repayment performance as evidence against prevailing risk perceptions.
Hezkel emphasized that initial incentives and technical support are necessary to onboard financial institutions, but “once the financial sector builds confidence… you don’t need any more support.”
Program data indicates that nearly 16,800 households and over 400 small enterprises have been financed so far, reaching more than 87,000 beneficiaries and generating close to 3,000 jobs.
Hezkel said traditional public financing mechanisms, “tax and transfer”, are insufficient to meet growing demand. “The funding… is simply not sufficient to meet the people and beyond to achieve universal access,” he said.
“Private finance is not an option, but a very essential step,” he added, calling for expanded participation from banks, microfinance institutions, and other private sector actors.