Microfinance for Sanitation Policy Brief, May 2017. SHARE.
This policy brief highlights the Sanitation and Hygiene Applied Research for Equity (SHARE) Consortium’s contribution to the knowledge base on microfinance for sanitation.
The brief defines sanitation microfinance and summarises research conducted in India and Tanzania. It then discusses the research gaps that still exist and provides recommendations for improving policies and programmes on microfinance for sanitation globally.
Using microfinance to facilitate household investment in sanitation in rural Cambodia. Health Policy and Planning, November 2016.
Authors: Kimberley H Geissler-1, Jeffrey Goldberg-2 and Sheila Leatherman-3. Author affiliations: 1 – University of Massachusetts School of Public Health and Health Sciences, Amherst, MA 01003, USA. 2 – Office of Water, Bureau for Economic Growth, Education, and Environment, US Agency for International Development, Washington, DC, USA. 3 – Gillings School of Global Public Health, University of North Carolina, Chapel Hill, NC, USA
Improved sanitation access is extremely low in rural Cambodia. Non-governmental organizations have helped build local supply side latrine markets to promote household latrine purchase and use, but households cite inability to pay as a key barrier to purchase.
To examine the extent to which microfinance can be used to facilitate household investment in sanitation, we applied a two-pronged assessment: (1) to address the gap between interest in and use of microfinance, we conducted a pilot study to assess microfinance demand and feasibility of integration with a sanitation marketing program and (2) using a household survey (n = 935) at latrine sales events in two rural provinces, we assessed attitudes about microfinance and financing for sanitation.
We found substantial stated intent to use a microfinance institution (MFI) loan to purchase a latrine (27%). Five percent of current owners used an MFI loan for latrine purchase.
Credit officers attended 159 events, with 4761 individuals attending. Actual loan applications were low, with 4% of sales events attendees applying for a loan immediately following the event (mean = 1.7 loans per event).
Ongoing coordination was challenging, requiring management commitment from the sanitation marketing program and commitment to social responsibility from the MFI.
Given the importance of improving sanitation coverage and concomitant health impacts, linking functional sanitation markets to already operational finance markets has the potential to give individuals and households more financial flexibility.
Further product research and better integration of private vendors and financing modalities are necessary to create a scalable microfinance option for sanitation markets.
Facilitating Access to Finance for Household Investment in Sanitation in Bangladesh, August 2016. World Bank.
Approach to Blended Finance: The provision of an output-based aid (OBA) subsidy to microfinance institutions (MFIs) in Bangladesh is used to help MFIs develop sanitation products and extend their reach to poorer households.
Microfinance (the provision of financial services to low-income people) is emerging as a viable avenue to facilitate increased access to finance for households to water and sanitation products, and for small-scale water service providers’ business development.
OBA is a form of results-based financing where subsidies are paid to service providers based on verification of pre-agreed water and sanitation project targets defined during project design, thereby offering a strong incentive for the delivery of results.
Combining an OBA subsidy with a microfinance loan helps reduce households’ cash constraints by spreading repayment over time, and makes investment in improved sanitation more affordable overall.
Posted in Economic Benefits, South Asia
Tagged Bangladesh, microfinance, sanitation financing
Using microfinance to facilitate household investment in sanitation in rural Cambodia. Health Policy & Planning, May 2016.
Authors: Kimberley H Geissler, Jeffrey Goldberg and Sheila Leatherman
Improved sanitation access is extremely low in rural Cambodia. Non-governmental organizations have helped build local supply side latrine markets to promote household latrine purchase and use, but households cite inability to pay as a key barrier to purchase.
To examine the extent to which microfinance can be used to facilitate household investment in sanitation, we applied a two-pronged assessment: (1) to address the gap between interest in and use of microfinance, we conducted a pilot study to assess microfinance demand and feasibility of integration with a sanitation marketing program and (2) using a household survey (n = 935) at latrine sales events in two rural provinces, we assessed attitudes about microfinance and financing for sanitation.
We found substantial stated intent to use a microfinance institution (MFI) loan to purchase a latrine (27%). Five percent of current owners used an MFI loan for latrine purchase. Credit officers attended 159 events, with 4761 individuals attending. Actual loan applications were low, with 4% of sales events attendees applying for a loan immediately following the event (mean = 1.7 loans per event). Ongoing coordination was challenging, requiring management commitment from the sanitation marketing program and commitment to social responsibility from the MFI.
Given the importance of improving sanitation coverage and concomitant health impacts, linking functional sanitation markets to already operational finance markets has the potential to give individuals and households more financial flexibility. Further product research and better integration of private vendors and financing modalities are necessary to create a scalable microfinance option for sanitation markets.
Resources on Microfinance for WASH, 2015. Improve International.
Compiled by Improve International as of 12/16/15 – We compiled some resources on microfinance (which includes village saving and loan groups). They are sorted by type of resource: case study, guidance, lessons learned, program description, research, and toolkit.
This is not intended to be comprehensive. If you have other resources or descriptions of your programs that you would like to share, please send them to info@improveinternational.org.
Can microfinance help increase access to sanitation? Today, 2.5 billion people do not use proper sanitation facilities. Essential services for maintaining latrines and treating faecal sludge are also underdeveloped. In many places, toilets can cost up to one year of income for poor households. Private operators of sanitation services do not have enough capital to acquire more equipment and respond to growing demand.
Since 2010, Trémolet Consulting and research partners based in Kenya MicroSave have been exploring the potential of microfinance for helping sanitation markets to develop. The research, funded by SHARE/DFID, culminated with an action-research in Tanzania in which financial institutions were trained to provide financial services for sanitation. This film explains why microfinance should be explored further, and potentially, included in sanitation programmes.
The film also presents what has been done in Tanzania under the action-research and takes the views of households, sanitation entrepreneurs, microfinance institutions and researchers.
Posted in Africa, Economic Benefits, Multimedia
Tagged credit, microfinance, Tanzania, videos
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. 
REPORTS/WEBINARS
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.
. 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:
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
Posted in Africa, Funding, Latin America & Caribbean, Publications, Sanitary Facilities, South Asia
Tagged Bolivia, finance, Guatemala, India, Malawi, microfinance, Peru, Rwanda, Sanitation as a business, Uganda, Water for People
Evaluating the potential of microfinance for sanitation in India, 2013.
Sophie Trémolet, T V S Ravi Kumar. SHARE. 
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, 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. 
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.
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