MICROCAPITAL.ORG STORY: The Use Of Microfinance To Facilitate Access To Water - Lessons From Water.Org and Its Water Credit Initiatives

A recent report on the news portal Microfinance Focus [1] discusses the ‘Water Credit’ [2] initiative introduced by Water.Org [3] in order to promote sustainable access to water. Water.Org is a non-profit organization that was co-founded by Mr Matt Damon and Mr Gary White in 1990. Among other things, the organization works with stakeholders in the water sector to derive financing solutions and create partnerships with a view to improving access to clean water in the developing world.The Water Credit Initiative introduces the concept of microfinance into the water sector. By providing micro-loans to individuals and communities in developing countries who do not have access to conventional credit, Water Credit aims to enable people to immediately address their own water needs. As an example, the loan enables individuals to purchase essential supplies of water instead of having to spend valuable time seeking supplies from neighbours and other informal sources. The freed time is then used by the borrower in gainful employment, a factor that promotes repayment of the micro-loan. As these loans are repaid, they can be redeployed to additional people in need of safe water.

Water.Org conducted pilot projects for Water Credit in 2003 in Dhaka in Bangladesh, and then in rural Tamil Nadu in India in 2004. In 2005, it expanded the Water Credit Initiative to Kenya, where the focus has been on community-level loans to build wells, water tanks, pipes and related infrastructure. In 2009, Water Credit was introduced in East Africa. So far Water.Org has invested USD 1.2 million in Water Credit programmess and its affiliates have raised USD 4 million from commercial banks. So far 110,000 microborrowers have been served under the Water credit initiative, 90% of them women. The repayment rate has been stated to be 91 percent whilst the interest rates on the loans vary from 10 to 24 percent. Mr Gary White, executive director of Water.Org was quoted as saying that “early funding from Open Square Foundation and the Michael & Susan Dell Foundation [4], along with more recent funding from Pepsi Co Foundation [6], has helped us empower these women to not just become entrepreneurs but also to set an example of what can happen through innovative solutions and partnerships,”. He added that Water.Org is now able to secure loan commitments from local banks to the amount of Rupees 1 crore ($2 million) to fund water and sanitation loan portfolios.

By Chinq Yee Chong, Research Assistant

Bibliography

[1] Microfinance Focus Report on ‘Microfinance loans for water-starved people’: http://www.microfinancefocus.com/news/?p=305

[2] The Water Credit initiative: http://water.org/watercredit

[3] Water.Org: http://water.org/

[4] Michael & Susan Dell Foundation: www.msdf.org/

[5] International Water And Sanitation Centre report on ‘Microfinance for Water, Sanitation and Hygiene’: http://www.irc.nl/page/37958