Investment Opportunities for Micro-Finance Institutions in

Renewable Energy, Water and Sanitation

Presentation by Patrick LumumbaEast Africa WaterCredit Programme

Officer

Water.org and WaterCreditWhat is Water.org?

– Non-profit organization founded in 1990 to address water and sanitation crisis (by a former UNC graduate)

– Relaunched as Water.org with Matt Damon in 2009– 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.– Over 140,000 people have benefited to date

What is Renewable Energy?Renewable Energy is energy which comes from

natural resources such as sunlight, wind, rain, tides and geothermal heat which are naturally replenished. In 2006, 18% of global final energy consumption came from renewables.

Type % contribution

Biomass 13.0

Hydro-electric 3.0

Wind 2.4

Solar

Bio-fuels

Micro-Credit for Water and SanitationThis is an innovative application of micro-credit to

provide loans to small enterprises and households in order to increase access to an improved water source and sanitation. Examples of WatSan products includeType Type

Toilets, Septic Tanks & Latrines

Water Asset Financing

Water Connections SME loans for WatSan

Water Harvesting Package Water Value Additions products

Opportunities for MFIs in Renewable Energy, Water and Sanitation (REWS)

• Globally, over 850M entrepreneurs are in need of finance

• In most developing countries, over 50% of the population do not have access to finance

• Over 0.9B people do not have access to clean water;• Over 2.6B people do not have access to proper

sanitation• Active poor in developing countries spend about 6-

8% of their total income on different types of energy

NB: Kenya has the world’s highest household solar ownership rate with roughly 30,000 small (20-100watt) solar power systems sold per year.

Opportunities for MFIs in REWS contd.• As of today, MF has reached about 130M people in

developing countries many of whom live in areas with severe water shortages and poor sanitation.

• Potential demand to the tune of USD 12B in microloans in the next 12 years mainly for rural sanitation (www.gatesfoundation.org )

• People’s/client own initiatives– Client demand on MFIs– People’s creativity– Groups/SHGs/CBOs coming together through REWs SMEs

• Government Initiatives

Opportunities for MFIs in REWS contd.

• Indirect income revenue for their clients• Increased retention of clients by MFIs by offering

additional products;• Up-scaling of existing successfully donor REWS

projects• Facilitate their clients to own assets that improve

their Quality of Life. ‘Water is Life. Sanitation is Dignity. Renewable Energy is the future’.

• It enables MFIs meet their Multiple Bottom Line missions

Challenges Hindering MFIs from Up-scaling REWS Products

• Lack of specific REWS Credit product services• Lack of REWS expertise• Perceived risks associated with REWS Credit

products• REWS products are not direct income-generating

products• ‘Before-Sales’ logistics and ‘After-Sales’ issues

raised by clients on REWS Credit products

Challenges Hindering MFIs from Up-scaling REWS Products contd.

• Inadequate credit capital• Perception by the public that provision of

REWS is the role of the Government• Lack of support to conduct market

development campaigns, promotion, exposure visits etc

• Inhibiting MFI regulatory frameworks• Tracking of REWS products is a challenge

Possible Solutions to the Challenges• Lack of Specific REWS Credit Products:– Assistance to develop appropriate products– Partnership with manufacturers and other service

providers to develop innovative products– Integration of Research & Product Development– Establishment of Special Project Departments

• Lack of REWS Expertise:– Partnerships and collaborations

• Perceived Risks:– Design Risk Management Frameworks– Some of the risks are just perceived

Possible Solutions to the Challenges contd.• Logistics Challenges:– Proper pilot-testing processes– Well-thought out and well-structured collaborations

• Inadequate Credit Capital and Support: – Convincing Wholesale Lenders and Development

Partners on the sustainability of REWS Credit Products and their impact to improve quality of life of clients

– Its an opportunity for philanthropic partners to facilitate/capacitate MFIs to initiate and institutionalize REWS products

WaterCredit Innovations by Water.org• Microfinance used institutions as conduit for WatSan loans• Strategic subsidies for MFIs to develop WatSan loan programs• Recycling and leveraging end user payments• Partnerships among organizations that enable them to reach more people by doing what they do best– Water.org: 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– Creation of new economic opportunities

Ahsanteni Sana kwa Kunisikiliza

(Swahili for: Thank you very much for Listening to me)