IWA is running quarterly sanitation dialogues throughout 2025 to advance learning and accelerate progress in sanitation. Florence Laker explains.
Africa’s urban population is rapidly expanding with urbanisation levels projected to rise from 54% in 2020 to 65% by 2050. By then, the continent is expected to have more than 159 urban agglomerations with over 1 million inhabitants and 17 megacities – cities with more than 10 million people – making it the continent with the second-highest number of megacities globally. This growth places increasing pressure on existing sanitation systems, yet current investment levels fall far short of what is required to deliver safe, equitable and sustainable services across the continent.
To drive dialogue and action, the International Water Association (IWA) is running quarterly Sanitation Dialogues through its Inclusive Urban Sanitation (IUS) Initiative to foster advocacy, learning and knowledge exchange on inclusive urban sanitation. A regional subset, the Africa Sanitation Dialogues are coordinated by IWA through its leadership of the Africa City-Wide Inclusive Sanitation (CWIS) Network, to maintain engagement throughout 2025.
The first Africa Sanitation Dialogue, co-hosted by the African Development Bank (AfDB) and IWA, focused on exploring innovative financing solutions to scale urban sanitation investments in Africa. The discussions were structured around three key segments – international financial institutions, local financial institutions and local non-financial institutions.
Sanitation financing in Africa
Opening the session, Ousseynou Guène, manager of the Water Security and Sanitation Division for North and Central Africa Regions at AfDB, presented a sobering picture. Sub-Saharan Africa requires an estimated $69 billion annually to achieve safely managed sanitation – comprising $25.7 billion in capital and $13.2 billion for operations and maintenance. Yet only $10-15 billion is currently being invested each year, leaving a financing gap of up to $30 billion. Guène cited weak project preparation as a key barrier, saying: “One of the fundamental reasons why most countries find it difficult to mobilise financial resources is the lack of project preparation capacity.”
To address this, AfDB is supporting the design of scalable, bankable, and innovative sanitation projects through the African Water Facility (AWF), the continent’s only dedicated project preparation facility hosted by AfDB. The AWF provides demand driven financial and technical assistance to enable governments to invest in water and sanitation service delivery. The AWF’s Africa Urban Sanitation Investment Initiative (AUSII), which is dedicated to urban sanitation, further supports the design of scalable, bankable, and innovative sanitation projects.
Guène emphasised the growing potential of climate finance, highlighting AfDB’s Climate Action Window that aims to mobilise $4 billion by this year to provide rapid and coherent access to climate finance, support co-financing, and prioritise the most vulnerable countries, fragile states and those affected by conflict.
While the private sector currently accounts for only 10-20% of sanitation financing, AfDB is scaling up non-sovereign operations and promoting corporate loans for creditworthy utilities. Guène also highlighted untapped funding sources, such as Africa’s $700 billion in pension and sovereign wealth funds, and microfinance options for small- and medium-sized enterprises (SMEs). To conclude, Guène said: “Strong governance, sector dialogue, and clear communication of results will be essential to closing the financing gap.”
International financial institutions
Liliane Sandra Kente, principal water and sanitation specialist at AfDB, outlined AUSII’s ambition to connect 15 million people to safely managed sanitation over the next decade. Achieving this will require a mix of innovation – ranging from dry sanitation technologies to value-from-waste models, the bundling of projects for scale and tapping into blended and climate finance. Explaining the importance of innovation to accelerate access to safely managed sanitation, she emphasised that: “Out-of-the-box thinking is key to real sector impact.”
Framing sanitation as a climate investment
Sanyu Lutalo, senior water and sanitation specialist and CWIS programme lead at the World Bank, made the case for positioning sanitation within national climate agendas. She stressed that the costs of implementing climate resilient systems are expected to be far lower than the cost of inaction, and explained that despite substantial financing needs, sanitation receives just a small portion of climate-related development finance.
To change this paradigm, she advised that sanitation be reframed as a climate investment – noting that climate finance follows climate policy. She, therefore, urged countries to integrate sanitation into their Nationally Determined Contributions (NDCs) and National Adaptation Plans (NAPs). She explained that countries and cities need to tap into a diverse mix of climate finance instruments, including new funding and financing mechanisms, such as climate and green finance. She also advised that the sale of new products created from sanitation ‘waste’ streams could be used to help bridge the funding gap.
She further highlighted the need to prepare climate smart projects and to bundle projects, where feasible, to meet the eligibility criteria for funding from the Green Climate Fund (GCF), the Global Environment Facility (GEF), and results-based financing opportunities. She explained that public investment tools, such as loans and guarantees backed by International Financial Institutions (IFI), remain essential.
She also emphasised the importance of strengthening institutions to prepare bankable, climate smart sanitation projects to create an enabling environment for private investment. Concluding, she said: “Climate finance is not a silver bullet, but it can be a powerful lever.”
Islamic finance for sustainable sanitation
Bipin Dangol, senior sanitation expert at the Islamic Development Bank (IsDB), highlighted two innovative financing mechanisms – the Lives and Livelihoods Fund (LLF) that blends concessional loans and grants to support CWIS in 10 secondary cities in Bangladesh, targeting underserved, low-income populations; and the Green and Sustainability Sukuk, a Shariah-compliant financial instrument, that mobilises private, climate-aligned capital for environmentally sustainable sanitation and infrastructure projects across IsDB member countries. He clarified that as a Shariah-compliant bank, IsDB does not finance projects through interest-bearing loans.
Financing sanitation MSMEs
Micro-, small-, and medium-sized (MSMEs) sanitation enterprises play a crucial role in addressing the global water and sanitation crisis. Francis Musinguzi, Africa regional director at Water.org, highlighted two barriers to expanding SME financing in sanitation. Firstly, he highlighted that understanding of the sanitation value chain is limited and explained that the diverse financing needs of enterprises within the value chain can constrain capital flow. Secondly, he said that the capacity of SMEs to develop bankable proposals was often weak. Water.org helps to address these difficulties by providing technical assistance, results-based grants, and revolving capital to banks and SMEs. He said: “The biggest barrier is a lack of understanding of sanitation enterprises. If we unlock that, we can unlock capital.”
Risk-sharing instruments and mechanisms
Joshua Kibet, who oversees Aqua for All’s partnerships with financial institutions across Eastern Africa, explained how sanitation continues to receive minimal investment from financial institutions, receiving only 12% of commercial bank investment.
To try to shift this trend, Aqua for All uses risk-sharing tools like first-loss capital and concessional finance to lower investment risks in sanitation. In Ethiopia, it partnered with the Hilton Foundation to provide 30% of the capital in a revolving credit facility, with a commercial bank contributing the remaining 70%. This model boosts lender confidence and expands access to finance for sanitation enterprises. Kibet noted that sanitation requires “very adapted instruments to attract investment finance” and underscored the need for tailored financing solutions to unlock greater investment.
Building systems for scalable investment
Dietske Simons, head of impact at the United Nations (UN) Sanitation and Hygiene Fund (SHF), emphasised the importance of aligning public and private finance to scale sanitation investments, saying: “If we want to transform the sanitation sector, we need a diversity of financing options across the value chain.” She highlighted Uganda as an example of political leadership, where SHF – working with Water for People – supported a results-based mechanism with government co-funding. She also gave the example of Nigeria, where SHF is partnering with the Development Bank of Nigeria to unlock local currency financing for sanitation, focusing on capacity building and enabling sustainable capital flows.
Local non-financial institutions
Chola Mbilima, senior regulatory expert in water and sanitation at the National Water and Sanitation Council (NWASCO), described Zambia’s sanitation surcharge – a 2.5% levy on water bills (excluding public water point users), scalable up to 5%, and introduced in 2007. The surcharge, now implemented by seven utilities, raised more than
$5.5 million by 2024, funding both sewered and non-sewered sanitation projects. The funds are ring-fenced, ensuring dedicated use for sanitation. Mbilima explained that the design of the scheme makes it scalable, demand-responsive and performance-linked. She said that what makes the sanitation surcharge unique is that it is a local initiative, rather than coming from a donor or bank. She noted that the surcharge has enabled utilities to expand safely managed services despite limited national funding.
Leveraging and blended financing
Mouhamadou Gueye of the National Sanitation Office of Senegal (ONAS) shared how the country successfully leveraged $293.6 million in financing between 2020 and 2025, building on a $13.3 million Gates Foundation funding grant for Senegal’s Faecal Sludge Market Structuring Program (PSMBV). The original funds supported training, studies and omni processors (sewage treatment plants developed by Janicki Industries and funded by the Gates Foundation that convert human waste into valuable resources such as potable water, electricity, and fertiliser). Other investments included a $50 million Inclusive Sanitation Project reaching eight cities, co-funded by the IsDB, amounting to a 35% grant and a 65% loan, and a project to renew emptiers’ trucks, where $2 million of grant-backed collateral leveraged $4 million in bank loans. He described these as blended approaches that combine public, private and philanthropic funds.
Why dialogue matters
The Africa Sanitation Dialogue demonstrated that, while the sanitation financing gap is substantial, scalable and innovative solutions do exist. From Islamic bonds and sanitation surcharges to climate-smart planning and risk-sharing tools, Africa can mobilise diverse financing sources when stakeholders act in partnership and with urgency.
More information
To watch the Africa Sanitation Dialogue recording and access past webinars visit www.youtube.com/@InternationalWaterAssociation/videos
For more information about the Africa Sanitation Dialogues, contact florence.laker@iwahq.org.
The author:
Florence Laker is senior officer, Inclusive Urban Sanitation, IWA
Key takeaways from IWA’s Africa Sanitation Dialogue
- Sanitation investment in Africa continues to fall short, but growing political attention signals a potential paradigm shift.
- Project preparation and private sector engagement remain critical to unlocking financing.
- Framing sanitation as a climate investment presents real potential, but it must follow a sound climate rationale.
- Local financing remains a challenge, with sanitation still perceived as high-risk.
- Innovative local solutions are showing strong potential, such as Zambia’s sanitation surcharge and Senegal’s utility-led model for leveraging funds.
- There is a collective call for continued dialogue and deeper dives into themes such as climate finance, derisking, sanitation surcharges and the preparation of bankable projects.
