Sectoral approaches of water resources management have dominated in the past and are still prevailing. This leads to fragmented and uncoordinated development and management of water. Moreover, water management is usually in the hands of top-down institutions although their legitimacy and effectiveness are questioned increasingly. Thus, an increased competition for the finite resource of water is aggravated by inefficient governance. IWRM brings coordination and collaboration among the individual sectors, plus a fostering of stakeholder participation, transparency and cost-effective local management. (CAP-NET 2006)

Many of the underlying causes can be traced to three types of governance failure, which are inherent in most countries:

• Market failure (e.g. incomplete/non-existent property rights, incorrected environmental and social externalities, incomplete information, information asymmetries, monopoly)
• Institutional system failure (e.g. lack of worker commitment, no public respect/compliance culture, incomplete regulatory systems, failure to regulate monopolies, no legitimacy for regulators or service providers)
• Government failure (e.g. water agencies acting to further internal, not public interests, capture vested interests, capacity constraints, bureaucracy, lack of accountability) (IUCN 2011)