How Water Bonds Could Help More Funding Flow Into Africa

Summary

The video examines the potential of blue and green bonds to finance water infrastructure in Africa, citing examples from Benin and Tanzania. It discusses how these bonds can mitigate currency risk and attract investors, but highlights obstacles such as low credit ratings and reduced aid. The analysis concludes that water bonds remain limited due to institutional and market constraints.

• African nations face a massive financing gap for water infrastructure.
• Blue and green bonds are emerging as potential funding solutions.
• Benin issued a €500 million SDG bond in 2021, partially for water access, which was twice oversubscribed.
• Tanzania's Tanga UWASA issued a local currency green bond to mitigate currency risk.
• Most African countries lack investment grade ratings, limiting access to commercial bond markets.
• Non-commercial funding sources like aid have decreased, increasing reliance on commercial solutions.
• Bonds require institutional capacity and must offer gains to attract private investors.
• Water bonds are currently exceptions rather than widespread solutions in Africa.