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The WaterCredit Initiative:

The WaterCredit Initiative:. A Microfinance Solution for Water, Sanitation, and Health in Peri-Urban and Rural Areas. Presented at the Fifth World Water Forum Dr. Richard E. Thorsten Istanbul, Turkey Director of International Programs March 19, 2009 WaterPartners.

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The WaterCredit Initiative:

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  1. The WaterCredit Initiative: A Microfinance Solution for Water, Sanitation, and Health in Peri-Urban and Rural Areas Presented at the Fifth World Water Forum Dr. Richard E. Thorsten Istanbul, Turkey Director of International Programs March 19, 2009 WaterPartners

  2. The Watsan Finance Challenge • Estimated that between $10 and $30 billion in annual additional resources needed to meet global water and sanitation coverage objectives. • Traditional subsidy-based watsan financing • Often directed toward higher-income consumption • Not responsive to demand for improvements or ability to finance improvements among underprivileged • Incapable of handling future repairs and expansions • Discourages people from developing own solutions

  3. WaterPartners and WaterCredit • What is WaterPartners? • Non-profit organization founded in 1990 to address water and sanitation crisis • Active in South Asia, East and West Africa, and Central America • Work with local implementing partners to execute effective, sustainable programs • Offer mix of financing models, including WaterCredit • What is WaterCredit? • WaterCredit enables households and communities to gain access to credit to access water and sanitation. • First projects began in 2004 • Current programs in Bangladesh, India, & Kenya. Other countries under consideration for expansion • Invested $1.6 million in programs thus far. Partners have doubled investment from other capital sources. • Over 133,000 people have benefited directly from our watsan loan programs to date.

  4. Multiple WaterCredit Models • Grants to support “software” aspects of watsan programs • Grants to develop revolving loan funds • Direct lending to non-governmental organizations (NGOs) and microfinance institutions (MFIs) • Support to NGOs and communities for technical and financial capacity development • Smart subsidies for MFIs to enter watsan sector • Loan guarantees for commercial creditors • Partnerships among NGOs, MFIs, private sector, and governments • Establishment of new MFIs

  5. Sample Program Information

  6. WaterCredit Innovations • Social capital as substitute for individual financial collateral • Recycling and leveraging end user payments • Smart subsidies for microfinance institutions • Partnerships among organizations that enable them to reach more people by doing what they do best • WaterPartners: Program design & management, capacity development • NGOs: Community mobilization and development • MFIs: Financial training, investment, and management • Private sector: Construction and repair services • Public sector: Service provision, regulation • Secondary spin-offs, including creation of new economic opportunities and clientele for deposits and other loan programs

  7. Some Challenges • Community-based models have not fared as well as self-help group models • Partner capacity to execute pilot WaterCredit models • NGOs: Financial management • MFIs: Limited water/sanitation exposure • Seasonal income flows require advance plans for repayments • Political involvement in decisions regarding system connections and management • Resistance among groups controlling existing services (i.e. “water mafias”) • Sanitation program involves both demand assessment and demand generation. • Perception of water as free gift or right that must be subsidized

  8. Some Lessons Learned to Date • Watsan loan programs differ from traditional income-generating loan products. • Appreciate demand and supply sides of market • Work in areas with microfinance track record • Develop partnerships with effective, appropriate institutions (NGOs, MFIs, govt., private sector, etc.) • Set terms according to what market will bear, not solely on prior experiences • Ensure groups are sufficiently trained to manage loans and new services • Prepare to subsidize non-financial program aspects, at least in the short run

  9. Conclusions • Evidence that substantial numbers of poor households are willing to take out and repay loans to receive water connections and toilets • Micro-credit programs can work effectively in the water and sanitation sector. • WaterCredit has improved people’s health, economic livelihoods, and overall well-being. • WaterCredit has also empowered women by enabling them to access loan capital and improve their dignity. • WaterCredit will benefit more people by recycling loan repayments and leveraging commercial capital.

  10. Thank You!

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