MICROFINANCE PAPER WRAP-UP: “Water, Sanitation and Microfinance Toolkit 1: Introduction to Opportunities in Water, Sanitation and Hygiene Finance,” Published by Water.org, MicroSave

“Water, Sanitation and Microfinance Toolkit 1: Introduction to Opportunities in Water, Sanitation and Hygiene Finance;” published by Water.org and MicroSave, 2013, 75 pages, available at http://www.washmicrofinance.org/

Water insecurity and unhygienic sanitation practices pose significant health and financial risks in the developing world. Water.org, a US-based nonprofit that promotes clean water solutions in poor countries, and MicroSave, an India-based for-profit technical assistance consultancy, have produced a series of “toolkits” to provide information for financial institutions about water, sanitation and hygiene (WASH) investments. “Introduction to Opportunities in Water, Sanitation and Hygiene Finance” provides a background on WASH investing, products used to improve water and sanitation access such as toilets and water storage devices, and business models for microfinance providers and financial institutions to deliver WASH facilities.

The report estimates that 768 million people lack access to “improved sources of water” – such as from indoor plumbing or protected wells – and 2.5 billion lack access to “improved sanitation facilities” such as from ventilated pit latrines. Instead, they typically source their water from unprotected wells and utilize improvised latrines without hygienic drainage systems. The report blames a range of factors for these conditions, namely a lack of investment from local government, water shortages caused by environmental changes and faulty infrastructure, and a lack of land ownership that limits household investments in WASH facilities.

The authors argue that microfinance providers, which are experienced in lending for entrepreneurial endeavors, can provide loans for WASH facilities while making a profit. One study values global demand for microfinance for WASH facilities between 2004 and 2015 at approximately USD 12 billion. WASH loans can be used to establish household water connections, toilet construction, water filtration, ventilated improved pits and septic tanks, among other facilities. In India, where toilet installations cost USD 250, WASH loans provided by microfinance institutions (MFIs) generally range from USD 100 to USD 1,000. There are a range of ways to manage improved water and sanitation technologies such as through municipalities, community groups or individuals.

Traditional financial institutions, microfinance providers and partners such as non-financial non-governmental organizations (NGOs) and private investors can collaborate to provide WASH facilities. One business model allows for a client to apply and seek approval for a WASH loan from a microfinance provider. The microfinance provider then forwards client information to an approved WASH product manufacturer, which will deliver the product to the client. Upon delivery, the microfinance provider will pay the manufacturer and the client will make payments to the microfinance provider. By disbursing loans directly to WASH-product manufacturers rather than borrowers, the risk of loan misuse is reduced.

By Meraj Husain, Research Associate

About Water.org

Water.org is a nonprofit organization that was founded in 1990 by Matt Damon and Gary White and is headquartered in the United States. The organization aims to provide access to safe water and sanitation in Africa, Central America and South Asia. Its WaterCredit program is a microfinance-based initiative to promote sustainable water access. As of 2012, Water.org had USD 9.2 million in total assets and operations in 9 countries.

About MicroSave

Established in Uganda with United Nations funding in 1998, MicroSave is a for-profit technical assistance, training and resource center that relocated its headquarters to Lucknow, India, in 2006 with support from India’s ICICI Bank. In 2008, MicroSave was transformed into a consulting company, which has since completed projects in India and eleven African countries.

Sources and Additional Information

[1] WASH Microfinance, 2013, “Toolkit 1: Introduction to Opportunities in Water, Sanitation, and Hygiene Finance,” http://www.washmicrofinance.org/

MicroCapital, January 15, 2013, “Securing the Silent: Microinsurance in India: The Story So Far” by Premasis Mukherjee, Rosalind Piggot and Sunil Bhat; published by MicroSave,” https://www.microcapital.org/microfinance-paper-wrap-up-securing-the-silent-microinsurance-in-india-the-story-so-far-by-premasis-mukherjee-rosalind-piggot-and-sunil-bhat-published-by-microsave/

MicroCapital, November 17, 2010, “Water.org, MasterCard Foundation Launch $3.6m Partnership to Boost WaterCredit Program That Uses Microfinance to Increase Access to Clean Water in Africa,” https://www.microcapital.org/microcapital-brief-water-org-mastercard-foundation-launch-3-6m-partnership-to-boost-watercredit-program-that-uses-microfinance-to-increase-access-to-clean-water-in-africa/

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