DBS, South-east Asia’s largest lender, will be loaning an undisclosed sum of money under a blended-finance project that supplies fresh water to three cities in Indonesia.

The Singapore bank was among the signatories at the signing of the loan agreement at the World Water Forum in Bali on Tuesday (May 21); also present were representatives of Indonesian water purification company Karian Water Services, the Asian Development Bank, the International Finance Corporation, as well as Export-Import Bank of Korea, South Korea’s official export-credit agency.

The total project, estimated to cost around 3.4 trillion Indonesian rupiah (S$285.8 million), marks the first time a mix of public- and private-sector funds have been used in the country’s water sector. Such blended-finance projects entail corralling “catalytic capital” (in the form of grants or concessional loans) to lower the costs of financing, and so attract private sources of capital.

The water project aims to develop a regional supply system that would pipe fresh water to some two million residents in Jakarta, Tangerang and South Tangerang.

The loan agreement follows from a public-private partnership agreement between Karian Water Services and Indonesia’s Public Works and Housing Ministry for the Karian-Serpong Regional Water Supply project announced in 2021. DBS was the financial advisor to Karian Water Services.

Ganesh Padmanabhan, head of project finance at DBS’ institutional banking group, said the project would reduce reliance on the extraction of groundwater as a source of domestic and industrial water. It would also address the land-subsidence issue in one of the world’s largest cities.

He described the blended-finance project as “an innovative way to unlock capital to accelerate the development of critical infrastructure. It is also testament to the strength of collective action and the role of public-private partnerships to help create a more sustainable future”.