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Discover Ga West's 5-year Compound Sanitation Strategy and HFC Boafo's micro-finance loan products. Explore findings from sanitation financing interviews in Ghana.
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Outline: • Brief of Ga West’s 5-year Compound Sanitation Strategy • HFC Boafo’s micro-finance loan products • Findings from sanitation financing interviews
Relevant Delivery Principles Catapulting the Private Sector into Pole Position • Collaborative and aggressive marketing campaign • Create a customer and business-friendly environment • Engaging sanitation providers • Mobilizing private finance
HFC BOAFO MICRO-FINANCE LOAN PRODUCTS 5Loan Products Available: • Multiple landlords (ABUSUA) Up to GHC 30,000 to be granted • Singe landlord (EFIEWURA) Up to GHC 30,000 to be granted • Landlord + tenants (Nkabom) Up to GHC 50,000 to be granted • Adjoining houses (OMAMA) Up to GHC 20,000 to be granted per house • Sanitation providers (WASAB) Up to GHC 50,000 to be granted NB. • Source of funds for loan HFC Boafo’s own funds • Interest rate 3% per month • Repayment period 4 to 36 months
Key results of sanitation financing interviews conducted by PATH – 8 Interviews: • Microfinance Institutions (MFIs) (2) • Banks (2) • Government (1) • Greater Accra Metropolitan Area (GAMA) Sanitation and Water Project (World Bank funded) • NGOs (2) • YSEF, Slum Dwellers International • Clean Team (1) • Goal: Gain understanding of role, operations, potential involvement of finance organizations in Ghana.
Ghana: Macroeconomic instability and credit contraction • Financing requirement of the government is effectively vacuuming credit and liquidity out of the private sector. • Inflation: non-food rate 23%. • Government of Ghana 180-day Treasury bonds yield 26%. “Loan recoveries are a problem. We are buying government bonds” - Bank “Approved loan clients are down 25% in the last three months” - MFI • All banks/MFIs noted three strategic initiatives: • Reduce loans. • Buy Treasury bonds. • Increase deposits.
Ghana: Macroeconomic instability and credit contraction • $1bn International Monetary Fund rescue loan tied to a structural adjustment program. • Stabilization to be a painful multi-year process through at least 2017. • Credit is very expensive: • Commercial loans >30% • MFIs 40%-60% Overall effect: Private-sector financing is restricted.
Reliance on concessionary international capital • Major sanitation finance projects in Ghana 100% grant funded • Revolving loan demonstration project could pave new approach • Near-term opportunities with World Bank project • Possible to Profitable (P2P) project • Dutch Ministry of Foreign Affairs, SNV, and Fidelity Bank • €2M grant (project administration), €4M revolving fund; target 3000+ households and 500+ MSMEs • Opportunity International (UK) and Sinapi Aba • Department for International Development, Opportunity International, and Sinapi Aba MFI-cum-bank • Pending funding, broadly similar to SNV-Fidelity Bank project • GAMA Sanitation and Water Project • World Bank and municipal government of Accra • $34/150M for sanitation, 5-year grant project; target 50,000 HH toilets
Key Takeaways Severe credit contraction eliminates most financing options. Notable Sanitation Financing pilots in Ghana depend on grant capital. Low-hanging fruit opportunity with World Bank project in Accra. Challenging access to low-cost capital for MFIs: Identify and connect with social ventures/donors to provide seed capital for revolving funds Lower cost capital = lower interest rates charged while remaining profitable to MFI partner. Lower interest rates = greater loan ‘affordability’ and potential beneficiary reach.
There are opportunities to: partner with well-capitalized Sanitation Financing projects such as SNV-Fidelity to extend and enhance their impact; and collaborate with World Bank GAMA PCU project in Accra.
