Introduction of CMP in to OWNP

1. Introduction of CMP in to OWNP Eyob Defere OWNP Consultant, August 2013

2. Outline • Sector Policy • Rural WASH • Evolution of CMP • Description of CMP • Introduction of CMP in to OWNP

3. 1-The Sector Policy • Understanding the sector policy the key to appreciate CMP in Rural WASH • It is also essential to assess whether CMP is supported with the sector policy • It is vital to analyze the introduction of CMP in to OWNP within the context of the sector policy

4. 1-Sector Policy • Promote the development of water supply and sanitation on participation-driven and responsive approaches without compromising social-equity norms • Identify and promote the development of appropriate, efficient, reliable and affordable WSS technologies, which are demand driven and have got great acceptability among the local communities. • Create and promote a sense of awareness in communities of the ownership and their responsibilities for operation and maintenance of water supply and sanitation systems and develop participatory management practices

5. 1-Sector Policy and Strategy • Ensure self-reliance through promotion of self financing; To this end, engage the participation of banks, private operators, micro financing institutions • Ensure transparency, fairness, responsibility and accountability in the utilization and management of the Water Supply and Sanitation (WSS) funds, namely through Community Water Committees

6. 1-Sector Policy • Provide incentives to local stakeholders such as community groups, to encourage their participation in the planning, design, implementation and management of WSS systems

7. 2-Rural WASH • Rural WASH is providing essential social service to over 80% of the population of the Country • Providing water supply to hundreds of thousands of communities with different socio-economic and cultural identities • It requires organizing tens of thousands of communities to operate and sustain these schemes

8. 2-Rural WASH • It requires strong government structures at woreda level that will organize and provide technical support to communities and small scale service providers • It requires small scale service providers that will construct the schemes and provide post construction services when required • Enabling environment is required to facilitate the implementation of Rural WASH

9. 2-Rural WASH (Targets) • Water supply access in rural areas is increasing substantially from 19% in 1990 reaching 67% in 2013 • The target is achieving universal access by 2015 with 98% access to water supply, and reduction of proportion of non-functioning facilities to 10%.

10. 2-Rural WASH (Plans) • To realize universal access to water to rural communities plans have been developed based on GTP targets • A total of over 100,000 schemes of which 58,118 conventional new water points and 19,190 household dug wells and 25,038 community dug wells and rehabilitation of 20,610 existing schemes

11. 2-Rural WASH (Challenges) • Main challenges in rural WASH are • Low implementation capacity • High level of non- functionality of schemes • Low absorption capacity • Significant human resource capacity challenges, in particular at woreda level, despite large but limited program/project-based capacity building initiatives

12. 3-Evolution of CMP • Desire by the GOE to empower communities has led to higher level of community involvement in rural WASH in late 1990s • Challenges of Rural WASH required a new approach with innovative financing and implementation modality • RWSEP (which was launched in 1994)recognizing policy directions and GOE’s commitment towards more community empowerment, established community development fund (CDF) in 2003 (progressively) • Since 2007, project funds have been transferred via the Bureau of Finance and Economic Development (BoFED) at regional level

13. Milestones of CMP RWSEP started CDF modality operational in 12 Woredas Community Development Fund piloted 1994 2003 2005 2007 2009 2011 Fund management was shifted to BoFED CDF scaled up to BSG and UNICEF CDF incorporated into WIF (CMP) and COWASH started

14. 3-Evolution of CMP • Recognition of the success of RWSEP by JTR and other studies led to growing interest by GOE and donors to understand CDF more • Consequently, the World Bank, Water and Sanitation Program (WSP)-Africa has been requested by the Government of Finland, to undertake an independent study to evaluate the achievements of CDF and to recommend concrete and feasible measures to scale up the [CDF] funding mechanism.

15. 3-Evolution of CMPEvaluation of CDF by WSP The main findings of the study were that: • The RWSEP implementation rate has increased by up to a factor of 5 (from an average of 200 water points per year (1994-2003) from 2003, to over 1000 water points per year in 2008/9) (by then the National average was 30 water points). • The technical quality of the facilities built is satisfactory and functionality rates for CDF schemes (94%) are above average for Amhara (estimated at over 75%) • Utilization of investment budgets has increased from an average of around 53% between 1998-2002 (pre-CDF) to close to 100% during the end of Phase III / start of Phase IV (compared to below 50% for other large donor programs). • CDF can and shall be mainstreamed and scaled up in the Country.

16. 3-Evolution of CMPAssessment of CDF by GOE • In 2010 teams of government officials from MoFED and MoWR have made an assessment visit in Amhara region to look in to the potential of mainstreaming CDF and its compatibility with systems of GOE. Findings were the following: • Immediately open a serious dialogue with relevant WASH development partners for the adoption of CDF as a funding mechanism. • There is no time to waste, as the sector is falling behind schedule to reach the UAP targets • Amhara and Benishangul-Gumuz regional governments should be urged to take immediate steps to scale up the CDF in their regions. • GoE procedures are effectively used in CDF. Outsourcing fund transfer management to a financial intermediary (ACSI) was not perceived to pose a regulatory problem for scaling up and/or replication in other regions. • Woreda and community level control mechanisms are not only sufficient but effective. With minor modifications to the existing CDF procurement and financial manuals it can be mainstreamed with the government procedures.

17. 3-Evolution of CMPAssessment of CMP by WAE-2013 • CMP approach has demonstrated benefits in terms of implementation speed and functionality from which the NGO sector could usefully learn. • It brings higher level of sustainability of services • NGO funding of community-run institutions via an MFI intermediary should not be an impediment to their adoption of the CMP model

18. 3-Evolution of CMP Public Finance Management Assessment Amhara Regional Government, MoFED Findings • The Public Finance Review carried out in Amhara Region by MoFED in 2010 found that the RWSEP project financed by Government of Finland for rural water supply is channel 1 (Since 2007).

19. 3-Evolution of CMPInitiation of COWASH • Based on recommendations of GOE and WSP assessment to scale up CDF, and the call from GoE, GoF decided to provide new support to GOE to assist the scaling up effort. • Accordingly GoE and GOF initiated the COWASH Project in 5 regions • The objective of the COWASH phase I project; • accelerated implementation of the Universal Access Plan (UAP) through the adoption and application of community-led WASH financing mechanism”.

20. Based on the positive experience of the first year project and encouraging budget commitment of regions GOF has also indicated its willingness to double its support and allocate additional 11 MEUR, making the total programme cost 22MEuro. • During this period, following the sectoral developments, CoWASH was revised and designed to be a transitional programme towards the sector wide approach to OWNP. • Accordingly CMP was captured in the sector’s guiding doc. the WIF

21. 3-Evolution of CMPIntroduction of CMP in the WIF • To consolidate the harmonization efforts and creating more effective implementation mechanism • To establish effective integration between water, sanitation and hygiene interventions • The emergence of CDF as an effective financing and implementation modality • Led to the establishment of WIF, where CMP has been recognized as one of the implementation modalities of Rural WASH

22. 4- CMP • One of the implementation and financing modalities of Rural WASH • Cost effective and sustainable solution • Fully in line with Sector Policy and GOE development agenda • Enhancing implementation capacity in Rural WASH

23. 4- CMPMAIN ELEMENTS of CMP • Community leads the development process – demand based- planning to implemetaion and beyond • Community owns the water system from the beginning – no handing over only enauguration!! • Community is responsible for the management of the fund – high absorbtion capcaity • Community is responsible for water supply operation and maintenance (O&M) – low functionality - sustainabity

24. Capacity building of communities extended to contract and financial management, quick maintenance and monitoring processes • Woreda’s role: from implementer to coordinator, controller, facilitatorimplementation and fund management tasks, which are outsourced to the communities and financial intermediaries

25. Total investments 1 Billion USD Total number of planned water points: 93,000 WPs Planned number of new rural water points vs. planned investments 71,000 WPs 79 % HDWs, SPs, SWs 42 % 2015 2013 2014

26. Current CMP Financing arrangements Financier BoFED Regional Governments Water Bureau MFI WFO Community Investments Capacity Building Goods Services

27. 4- CMPWhy MFI were used • Initially tender was floated for all interested • CBE was not interested • DBE was too expensive with 7% commission and capacity building requirement • Woreda Finance had no capacity and raised the issue of WASHCO legality • MFI’s cost effective (3% = 1.5 % commission and 1.5 % capacity building) and access to communities and compatibility with their core business

28. Water Bureau WaSH Account CMP Investment Fund Flow CMP Account Financial Intermediary Account Finance Bureau WaSH Account Instructions to transfer to WWT CMP Account CMP Account Upon Request Financial Intermediary Sub-Branch Account Reports and disbursement requests Woreda WaSH Team WWT CMP Account WASHCOs Payment requests Accounts/Ledgers Withdrawal Authorizations O&M Saving accounts Artisans, suppliers, contractors, etc…

29. 5. CMP Financing in OWNPPrinciples of OWNP • Program management based on GOE policy, systems, rules and regulations • Woredas at the center of the OWNP • Woredas are responsible for deciding what kind of modality to apply • Woredas responsible for woredal level planning, organizing, implementing, reporting and oversight (when communities implement)

30. 5. CMP Fund Channeling in OWNP • Under the OWNP, Once Woredas decide to use CMP then they will disburses directly to communities using either the Commercial Banks or the MFIs wherever they are applicable

31. 5. CMP Financing in OWNPWhy using MFI introduced as an option? • Channeling through MFI has worked for the past 10 years • Now being scaled up in three more regions reaching the total regions with CMP implementations to five, • WoFED can use its capacity to effectively administer and regulate the overall WASH fund

32. 5. CMP Financing in OWNPHow it works • If a service provider or (MFI) is used, WoFED, in agreement with the community, will enter into an agreement with the service provider, subject to the prior approval of BoFED to ensure compliance with GoE’s public financial management rules. • Disbursements to the service provider (MFI) will be subject to prior approval from the WWT and WoFED.

33. 5. CMP Financing in OWNPHow it works • The service provider (MFI) will submit monthly disbursement and utilization reports to WoFED. • Original copies of relevant financial records will be maintained by the WoFED. • WoFED will report quarterly to BoFED on utilization of WASH funds, including funds for CMP investment funds

34. 5. CMP Financing in OWNPPayment to WASHCOs • After signing the Funding Agreement WWT chairperson writes a letter to WoFED in order to notify the signatories of the WASHCO and to release the first installment to WASHCO. • All payments to WASHCOs will be approved by the WWT. • Second installment of payments will be paid when 80% of the first installment is expended and evidence for transaction is submitted to the CMP supervisor and WASH accountant.

35. 5. CMP Financing in OWNPPayment to WASHCOs • The receipts and transaction evidences shall be submitted by WASHCOs to the CMP supervisor and he will work with WASHCOs to clean up all receipts and documents. Then the CMP supervisor will submit the documents to the WASH accountant in WoFED. • If the WASH accountant does not approve the documents then he will give it back to the CMP supervisor for his follow up and correction.

36. 5. CMP Financing in OWNPControls and Safeguards • The community signs a funding agreement which specifies the obligations of the community. • For the payment to be released from the bank/MFI, two signatories from WWT shall authorize based on recommendations of the CMP supervisor on the progress of the work • Both the artisan and the WASHCO shall submit separate progress reports for payment release to be effected and their report shall be verified by woreda water office staff • The WASHCO shall submit expenditure documents for 80% of advance or previous payment for another request to be effected.

37. 5. CMP Financing in OWNPConclusion • All efforts must be made that while working the details that GOE financial management policies are followed. • The Generic CMP Financial Management Guideline Once Finalized will be included as part of the one WASH National Programme Document • Regardless of the mode of channeling the responsibility for managing CMP investment fund shall be with WoFED

38. 5. CMP Financing in OWNPConclusion • For phase 2 beyond July 2015, the program anticipates to channel CMP investment fund to the communities as far as possible through WoFED via the Commercial Bank or MFIs as appropriate. • During phase I using only WoFED to disburse to communities before building its capacities could hamper the effective implementation of Program • Implement the agreed Transition Plan to facilitate the smooth transition during the two years period and ensure effective implementation of CMP in Rural WASH

39. Thank You