Tag Archives: microfinance

WASHplus Weekly: Focus on Microfinance

Issue 128 January 3, 2014 | Focus on Microfinance

Many thanks to Blake McKinlay from iDE for suggesting the topic for this issue and for sharing an interesting study in Cambodia on determining the impact microfinance has on the uptake of latrines. Other resources include a just-published Water for the People review of its microfinance experiences in seven countries, a SHARE blog post on microfinance issues, and country studies from Ghana, Kenya, among others. weekly


Understanding Willingness to Pay for Sanitary Latrines in Rural Cambodia: Findings from Four Field Experiments of iDE Cambodia’s Sanitation Marketing Program, 2013. N Shah, IDinsight. (Policy Brief) | (Complete Report) |
Given the low willingness to pay for latrines with cash, efforts to sell latrines at market price without any financing mechanism will lead to continued low penetration. The major implication of this study is that offering microfinance loans for latrines will dramatically increase uptake of latrines, while also making distribution significantly cheaper per latrine sold. Large-scale efforts to offer financing packages for latrines should be aggressively pursued in rural Cambodia and have the potential to increase latrine coverage from the current national rural level of 20 percent to 60 percent.

Evaluating the Potential of Microfinance for Sanitation in Tanzania, 2013. S Trémolet, SHARE. (Link)
Microfinance could be used in two main ways to promote access to sustainable sanitation services: by enabling households to spread out the costs of investing in household sanitation solutions (such as latrines and septic tanks), thereby improving the affordability of such investments and by supporting the development of a broad range of sanitation service providers, including masons, communal toilet block operators, or pit latrine emptiers.

Improved Sanitation and its Impact on Children: An Exploration of Sanergy, 2013. H Esper. (Link)
This child impact case study examines the positive impacts of improved sanitation on households and communities, using Sanergy’s experience in Kenya. This for-profit enterprise operates franchises in Nairobi’s slums and provides modular sanitation facilities and entrepreneurial training.

Market-Based Financing: WSP/RWSN Webinar Series, 2013. (Webinar) | (All Webinars) |
This webinar explores experiences with using local banks to provide commercial or semi-commercial loans for the construction, expansion, and major rehabilitation of rural and small town water schemes, using cases from Kenya and Uganda.

Microfinance as a Potential Catalyst for Improved Sanitation: A Synthesis of Water for People’s Sanitation Lending Experiences in Seven Countries, 2013. C Chatterley, Water For People. (Link)
To learn how best to facilitate sanitation microfinance, Water for People has been piloting various lending models with diverse partners in seven countries (Bolivia, Guatemala, India, Malawi, Peru, Rwanda, and Uganda). This report aims to synthesize these experiences to inform general guidance for initiating and improving programs, providing lessons learned and recommendations.

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Microfinance as a potential cataylst for improved sanitation

. Summary of sanitation lending and product delivery models. Water for People

. Summary of sanitation lending and product delivery models. Water for People

Microfinance allows middle- and lower-income households to invest in desirable sanitation products, so that public funding can be freed up to reach the poorest, according to Water for People (WfP). In a new report [1], WfP reviews their experiences in piloting various lending models in seven countries: Bolivia, Guatemala, India, Malawi, Peru, Rwanda and Uganda.

The report provides lessons and recommendations for donors wishing to engage in sanitation microfinancing. The four key recommendations are:

  1. Think like a business
  2. Support lending institutions based on the microfinance climate and capacity needs
  3. Build an autonomous sanitation microfinance market
  4. Track progress and lessons

The report is part of WfP’s Sanitation as a Business (SaaB) program, funded by a Gates Foundation grant.

Read the full report

[1]  Chatterley, C. et al, 2013. Microfinance as a potential catalyst for improved sanitation : a synthesis of Water For People’s sanitation lending experiences in seven countries. Denver, CO,USA: Water For People. Available at: <http://www.waterforpeople.org/assets/files/sanitation-microfinance.pdf>

Source: Christie Chatterley et al., Microfinance as a potential cataylst for improved sanitation, Water for People, 27 Dec 2013

Evaluating the potential of microfinance for sanitation in India

Evaluating the potential of microfinance for sanitation in India, 2013.

Sophie Trémolet, T V S Ravi Kumar. SHARE. india-microfinance

This case study investigates how household financing for sanitation can be mobilised via microfinance institutions and commercial banks in order to accelerate sustainable access to sanitation facilities and/or services. The research (conducted in India between May and June 2011) sought to document existing experiences in providing microfinance services to households to allow them to invest in sanitation solutions that meet their needs. The objective of the research was to map out the existing provision of microfinance for sanitation, identify where opportunities for future market development lie and identify how the development of such a market could be fostered (through the targeted use of public funds or regulatory changes for example).

This research has identified that there is potentially high demand for sanitation microfinance in India, due to a combination of factors. Coverage rates remain low (particularly in rural areas) and national policies emphasise household investments (combined with subsidies in some cases, such as in the Total Sanitation Campaign which provide ex-post subsidies once the household has made the investment, hence the need for pre-financing). By 2010, only 31% of India’s population had access to improved sanitation facilities (WHO/UNICEF, 2010).

Evaluating the potential of microfinance for sanitation in Tanzania

Evaluating the potential of microfinance for sanitation in Tanzania, 2013.

Sophie Trémolet, George Muruka. SHARE.

The objectives of the case study are to investigate how household financing for sanitation can be mobilised via microfinance institutions, community banks and mass market commercial banks in order to accelerate sustainable access to sanitation facilities and/or services. tanzania-share

The research conducted in Tanzania is exploratory in nature. It seeks to map out the existing provision of microfinance for sanitation, to identify where opportunities for future market development lie and to identify how the development of such a market could be fostered (through the targeted use of public funds or regulatory changes for example). The case  study in Tanzania will feed into broader research about how donors can channel financing
for water and sanitation to small-scale actors.

WASHplus Weekly – Financing for WASH

This issue of the WASHplus Weekly contains case studies and evaluations of financing methods for water, sanitation, and hygiene (WASH) and Indoor Air Pollution (IAP) projects.  Included in the WASH sector is an IRC review of sanitation financing models, a GTZ review on financing rural water supply, and case studies from Kenya and Mali. Please let WASHplus know if you have additional resources on this topic or suggestions for future issues of the Weekly.

India: crowd funding for sanitation and water

Social enterprise Milaap has set up an online microlending platform that enables anyone to give a household loan for the construction of a toilet or water connection for the poor in India. Based in Bangalore, India, with its headquarters in Singapore, Milaap was founded in June 2010 by Sourabh Sharma, Anoj Viswanathan and Mayukh Choudhury.

Milaap copied the basic concept from Kiva.org, the first mirco-credit crowd funding platform to improve livelihoods of the poor, but expanded its scope to not only include micro-enterprises but also sanitation, water, health care, renewable energy and vocational training. Whereas banking restrictions prevent US-based Kiva.org from serving clients in India, Milaap was able to gain approval from the Reserve Bank of India (RBI) to enable lenders outside India (especially Non-resident Indians or NRIs) to lend to India through their website.

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Making the Poor Pay for Public Goods via Microfinance

Making the Poor Pay for Public Goods via Microfinance: Economic and Political Pitfalls in the Case of Water and Sanitation, 2011.

Philip Mader, Max Planck Institute for the Study of Societies.

This paper critically assesses microfinance’s expansion into the provision of public goods. It focuses on the problem of public goods and collective action and refers to the specific example of water and sanitation. The microfinancing of water and sanitation is a private business model which requires households to recognise, internalise and capitalise the benefits from improved water and sanitation. This requirement is not assured.

Water and sanitation, being closely linked to underlying common-pool resources, are public goods which depend on collective governance solutions. They also have shifting public/private characteristics and are merit goods which depend on networks to enable provision to take place.

Two cases, from Vietnam and India, are presented and evaluated. Despite their dissimilar settings and institutional designs, evidence is found that both projects encountered similar and comparable problems at the collective level which individual microfinance loans could not address. The paper concludes that trying to make the poor pay for public goods runs into four pitfalls: politics, public capacity, values and equity.

Ghana: first National Environmental Sanitation Conference takes place in Kumasi

The government should set up a revolving fund for Community-Led Total Sanitation (CLTS) initiatives, in collaboration with Micro-Finance Institutions (MFIs) and local government. This was one of the recommendations from Ghana’s first National Environmental Sanitation Conference (NESCON).

The conference was held in Kumasi from 8-10 December in Kumasi, Ashanti Region. The theme was “building partnerships for scaling up improved environmental sanitation services”, covering both solid waste management and household sanitation.

The conference presented, among others, highlights of the Environmental Sanitation Policy (Revised 2010), the National Environmental Sanitation Strategy and Action Plan (NESSAP) and the Strategic Environmental Sanitation Investment Plan (SESIP) and District Environmental Sanitation Strategy and Action Plans (DESSAPs).

NESCON 2010 was organised by the Environmental Health and Sanitation Directorate (EHSD) of the Ministry of Local Government and Rural Development (MLGRD) in partnership with Development Partners (DPs), Metropolitan, Municipal and District Assemblies (MMDAs), Private Operators and others.

Read the concluding statement and recommendations and all presentations.

Source: Abu Wambei, RCN Ghana, 18 Dec 2010

Taps flow for the poor and the credit goes to microfinance

Asha Pande had spent hours queuing up with her neighbours to fetch water from a public tap at her slum in Dahegaon Rangari in Koradi, near Nagpur. Squabbles frequently erupted as the water supply turned erratic. She resolved to undertake a gruelling 6-km journey every day to draw water from the Kolar river, but this exacerbated her backache.

An overexerted Asha was unable to work regularly and her family’s financial woes deepened. It was at this juncture that she applied for water credit by joining a self-help group run by ESAF, a microfinance institution which partners Water.org. A water pipe was installed at her home and she was able to supplement her family’s income like she used to earlier.

Trekking long distances for water forms part of the daily grind for women at the bottom of the pyramid — be it in the slums of Tiruchi or the shantytowns of Nairobi. And there is no guarantee for the quality of the water or the safety of the women fetching it from long distances, especially in the wee hours of the morning. Can a mix of microfinance and smart subsidies help millions of women break free from the double whammy of poor sanitation and water delivery?

Water.org — co-founded by the social entrepreneur Gary White and Hollywood actor Matt Damon — has in place the WaterCredit initiative, wherein microfinance institutions (MFIs) and watsan (water and sanitation) NGOs collaborate to provide poor households access to water and sanitation through loan programmes.

Savings all the way

Communities in India have been highly receptive to the WaterCredit initiative, says April Rinne, Director of WaterCredit. “The watsan loans are not income generating, but income enhancing,” explains this Harvard-educated lawyer with years of experience in microfinance.

Loans ranging from $100 to $150 are provided to individual borrowers to help install water/sewer connections, which in turn save time and enable the women to focus on income generating activities. It is estimated that women and girls often spend six hours a day commuting to and from water sources. “WaterCredit helps communities arrest health expenditure and directs investment in productive activities,” says Pon Aananth, WaterCredit officer in Tiruchi.

Mahadevi, a sari seller in Kanchipuram, joined Hand in Hand’s self-help group and took a Rs 6,000 loan to construct a toilet and install a tap at home. “Before taking the WaterCredit, I used to walk 2 km every day to fetch water and hide behind bushes to attend nature’s call,” she recalls. Dignity is a huge demand driver for watsan credit, says April.

Gender issues are strongly entwined with the watsan sector. Girls who shoulder the daily responsibility of fetching water for the family end up missing school on many days and, in extreme cases, even drop out.

Curse of ‘poverty penalty’

The poor typically pay 12 times more for every litre of water compared to the rest. However, this jinx of ‘poverty penalty’ can be broken using watsan loans at 10-24 per cent interest (including service fees) to build low-cost latrines and water taps.

Water.org deploys both philanthropic and commercial capital to make watsan credit sustainable and scalable in the long run. It has also entered markets across Latin America and Africa. “Water.org typically enters countries with a sophisticated microfinance industry,” says April. “We have witnessed a huge demand for watsan loans, and we have also been able to meet our social performance targets through the initiative,” says Paul Sathiyananathan, Executive Director, Guardian MFI, which partners Water.org

Watsan loans have a whopping 98 per cent repayment rate in India and Water.org has made inroads into Karnataka and Orissa by tying up with microfinance bodies Grameen Koota and BISWA respectively.

Citing water and land availability as some of the key challenges facing the watsan sector, Suresh Krishna, Managing Director of Grameen Koota, says, “Sanitary latrines are essential aspirations for the rural poor. In the past they used to expect the Government to provide sanitation facilities, but now the mindset is changing in favour of water and sanitation-based micro-loans.”

Seven out of the eight UN millennium development goals are directly related to water and sanitation, and market research indicates immense scope for scaling up watsan credit.

Beyond gender divide

April believes that the benefits of watsan are not limited to women alone, but extend to the entire family. Take, for instance, Masilamani, a daily labourer who has suffered a heart attack and still had to walk a long distance every day to relieve himself as there was no toilet near his home. His wife, Jayalakshmi, took Rs 6,000 loan from Hand in Hand, an MFI partnering Water.org in Tamil Nadu, to build a toilet at home. She repaid it in monthly instalments of Rs 500 in a year.

“My sons could not get ready for school on time as there was no water and toilet at home,” says Nirmala, a housewife in Tiruchi whose husband is an agricultural worker. She took a watsan loan of Rs 7,500 from Guardian. “Thankfully, my sons are now punctual and there is no risk of water-borne diseases spreading,” says a relieved Nirmala.

April narrates how the patriarch of a South Indian family had laid down a pre-condition in his will directing his sons and daughters to construct toilets for their respective families before claiming their share of the inheritance. “Evidently, a toilet cannot be equally divided among four children,” she quips.

Source – Hindu Business Online