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A Microfinance Solution for Water, Sanitation, and Health in Peri-Urban and Rural Areas
Presented at the Fifth World Water Forum Dr. Richard E. ThorstenIstanbul, Turkey Director of International ProgramsMarch 19, 2009 WaterPartners
The Watsan Finance ChallengeEstimated that between $10 and $30 billion in
annual additional resources needed to meet global water and sanitation coverage objectives.
Traditional subsidy-based watsan financingOften directed toward higher-income consumptionNot responsive to demand for improvements or ability
to finance improvements among underprivilegedIncapable of handling future repairs and expansionsDiscourages people from developing own solutions
WaterPartners and WaterCreditWhat is WaterPartners?
Non-profit organization founded in 1990 to address water and sanitation crisis
Active in South Asia, East and West Africa, and Central America
Work with local implementing partners to execute effective, sustainable programs
Offer mix of financing models, including WaterCreditWhat is WaterCredit?
WaterCredit enables households and communities to gain access to credit to access water and sanitation.
First projects began in 2004 Current programs in Bangladesh, India, & Kenya. Other
countries under consideration for expansion Invested $1.6 million in programs thus far. Partners have
doubled investment from other capital sources. Over 133,000 people have benefited directly from our
watsan loan programs to date.
Multiple WaterCredit ModelsGrants to support “software” aspects of watsan
programsGrants to develop revolving loan fundsDirect lending to non-governmental organizations
(NGOs) and microfinance institutions (MFIs)Support to NGOs and communities for technical
and financial capacity developmentSmart subsidies for MFIs to enter watsan sectorLoan guarantees for commercial creditorsPartnerships among NGOs, MFIs, private sector,
and governmentsEstablishment of new MFIs
WaterPartners
MFINGOs
Self Help Groupsor CBO
acting as aMicroutility
($) To Subsidize
-
Start Up Costs &
Credit Enhancement
Fees
CapitalMarkets
$ Fees forCredit E
nhanceme
nt
Example Construct of WaterCredit 20.
Loans @MarketRates
TechnicalAssistance
Beneficiaries
Connection Fees
Water
Water Fees
Donor Grant $
$ For Providing Technical Assistance,
&Mobilizing Communities
Loans at Com
mercialRates
Credit E
nhanceme
nt
Community Mobilization
& Training
RepayLoans
Attribute Gramalaya BASIX GUARDIANYear Began 2004 2007 2008
Customers Women formed self-help group federation
Joint lending groups, NGOs
Women formed self-help groups
WP Capital $500,000 $332,000 $380,000
Other Capital $390,000 TBD $1,200,000
Loan Size (household)
$91 $100 - $300 Rural: $100
Urban: $200
Interest & Repayments
12-18% interest
12-24 month period
16% JLG, 24% NGO
12-18 month period
15-18% interest
12-24 month period
Customers 31,982 (direct)
24,000 (additional)
6,106 20,000 (estimated)
Repayment % 78% (98% since ’06) 95% TBD
Sample Program Information
WaterCredit InnovationsSocial capital as substitute for individual financial
collateralRecycling and leveraging end user paymentsSmart subsidies for microfinance institutionsPartnerships among organizations that enable them to
reach more people by doing what they do bestWaterPartners: Program design & management, capacity
developmentNGOs: Community mobilization and developmentMFIs: Financial training, investment, and managementPrivate sector: Construction and repair servicesPublic sector: Service provision, regulation
Secondary spin-offs, including creation of new economic opportunities and clientele for deposits and other loan programs
Some ChallengesCommunity-based models have not fared as well as self-
help group modelsPartner capacity to execute pilot WaterCredit models
NGOs: Financial managementMFIs: Limited water/sanitation exposure
Seasonal income flows require advance plans for repayments
Political involvement in decisions regarding system connections and management
Resistance among groups controlling existing services (i.e. “water mafias”)
Sanitation program involves both demand assessment and demand generation.
Perception of water as free gift or right that must be subsidized
Some Lessons Learned to DateWatsan loan programs differ from traditional
income-generating loan products.Appreciate demand and supply sides of marketWork in areas with microfinance track recordDevelop partnerships with effective, appropriate
institutions (NGOs, MFIs, govt., private sector, etc.)
Set terms according to what market will bear, not solely on prior experiences
Ensure groups are sufficiently trained to manage loans and new services
Prepare to subsidize non-financial program aspects, at least in the short run
ConclusionsEvidence that substantial numbers of poor
households are willing to take out and repay loans to receive water connections and toilets
Micro-credit programs can work effectively in the water and sanitation sector.
WaterCredit has improved people’s health, economic livelihoods, and overall well-being.
WaterCredit has also empowered women by enabling them to access loan capital and improve their dignity.
WaterCredit will benefit more people by recycling loan repayments and leveraging commercial capital.
Thank You!