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Ensure financial stability of initiatives by reviewing multiple financing options

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Ensure financial stability of initiatives by reviewing multiple financing options

Ensure financial stability of initiatives by reviewing multiple financing options

Posted on August 22, 2019 by Karina de Souza

Authoring Organizations: Pacific Institute
Consulting Organizations: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Universal: Yes
Last Updated Aug 29, 2019

Overview

Financial instability poses a major challenge for many medium-term and long-term water stewardship partnerships. This instability should be mediated by seeking funding outside grant-making or donations – such as through partner contributions or revenue generating activities – and utilizing volunteers where feasible. Ultimately, a blended finance approach yields a resilient partnership.

Benefits

For longer projects, short-term funding through time-limited grants can result in premature interruption of projects due to funding completion. Although volunteers can be a valuable resource for projects, they are not a sustainable resource longer-term. Their in-kind contributions may not always match up to the project skills requirements and high turnover is likely due to lack of payment which will in turn require careful (and potentially costly) oversight and volunteer management by the project to prevent duplication of work

Guidance

Without alternative financing beyond the initial grant, the project runs the risk of being forced to stop and losing momentum. To avoid these issues, partners should seek financing options beyond grants from the start of the partnership. These alternative financing opportunities could include contributions from all partners, whether in-kind or cash. A loan mechanism for commercially viable projects may also be an option. Revenue generating activities should also be considered. When planning or designing your project, ensure that:

  • Firstly, a legitimate, registered entity is in place to manage and receive funds
  • Alternate strategies are considered in addition to the initial funding
    • your project may be eligible for continued funding through other local programs
    • your initial grant may include seed funding for small business enterprises, such as biomass value chains, to fund project maintenance in the longer term
  • Provision has been made for short, medium, and long-term activities
  • Activities are correctly costed to facilitate future investment decisions
  • Investments in kind through sharing expertise or manpower are considered, as these may be easier to secure than cash
  • The right local and national stakeholders are involved to help secure longer-term funding, such as government organizations or private sector partners with a direct interest in water security

Example

The Water Balancing project in George, South Africa, will continue beyond the end of International Water Stewardship Programme (IWaSP) support from GIZ. The World Wildlife Fund, a key implementing partner for this project, has secured funding for the next five years from the brewing company ABinBEV to help secure the local water supply through a collective and inclusive partnership approach. The partners are exploring a further investment from the Department of Environmental Affairs for clearing alien invasive plant species. This extra funding will allow the project to develop its financial sustainability strategy by researching  a potential biomass value chain using the cleared vegetation.

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This lesson learned reflects the beliefs and experiences of the author, not necessarily the Pacific Institute, CEO Water Mandate, or UN Global Compact.