Water supply and sanitation coverage in Honduras has increased significantly in the last decades. HOwever, the sector is still characterized by poor service quality and poor efficiency in many places. COverage gaps still remain, particularly in rural areas. IN 2003, a new Framework Law for water supply and sanitation was passed. IT includes service decentralization from the national utility SANAA to the municipalities. IT also creates a policy council and a regulatory agency. NEvertheless, the new institutions remain weak and the process of decentralization has been slow. FUrthermore, there is no policy of sector financing.