Role of Microfinance in Role of Microfinance in Sanitation in BangladeshSanitation in Bangladesh

Babar Kabir, PhDBabar Kabir, PhDTanzeba Ambereen HuqTanzeba Ambereen Huq

IntroductionIntroduction WSS coverage in BangladeshWSS coverage in Bangladesh

Source: UNDP 2006, JMP 2006, SDNP 2005, UNICEF Bangladesh 2006

CoverageCoverage 19901990 20002000 20052005 20062006

Safe Safe water water

85.2%85.2% 97%97% 74%74% 74% 74% 11

SanitatioSanitation n

21%21% 41% 41% 22 39% 39% 33 39%39%

[1] reduced due to arsenic contamination[2] includes non water seal latrine[3] fixed defecation is considered by GOB as latrinization coverage which is 84% in 2006

MicrofinanceMicrofinance Micro-finance refers the micro-credit loan provided to the Micro-finance refers the micro-credit loan provided to the

poor people without collateral to improve their economical poor people without collateral to improve their economical condition and to bring them into the mainstream of condition and to bring them into the mainstream of development to achieve the MDG goals. development to achieve the MDG goals.

BRAC is one of the largest global providers of financial BRAC is one of the largest global providers of financial services for the poor by following credit plus approach. By services for the poor by following credit plus approach. By December 2007, we were serving 7.37 million poor, December 2007, we were serving 7.37 million poor, landless and disadvantaged people, mostly women. so far landless and disadvantaged people, mostly women. so far BRAC has disbursed USD 4.6 billion with a 99.5% BRAC has disbursed USD 4.6 billion with a 99.5% recovery rate.recovery rate.

Micro-Finance in Micro-Finance in sanitationsanitation

Demand creation for services, hygiene Demand creation for services, hygiene promotion and education coupled with promotion and education coupled with integrated water, sanitation and hygiene integrated water, sanitation and hygiene messages and motivation of communities messages and motivation of communities are the primary objectives of WASH. are the primary objectives of WASH.

WASH pioneered the provision of micro WASH pioneered the provision of micro loans to private sector entrepreneurs in loans to private sector entrepreneurs in BangladeshBangladesh

WASH provides micro loans to enable the WASH provides micro loans to enable the poor install safe water and sanitation poor install safe water and sanitation facilities at their homes.facilities at their homes.

ContextContext BRAC WASH is working in 150 sub-districts BRAC WASH is working in 150 sub-districts

consisting of 1546 unions with an integrated consisting of 1546 unions with an integrated approach to provide improved water and approach to provide improved water and sanitation facilities with good hygienic practice sanitation facilities with good hygienic practice to more than 38 million people.to more than 38 million people.

WASH provided WASH provided 122,356 micro loans to poor micro loans to poor families to install latrines at their homes. families to install latrines at their homes. Loan Loan amount equivalent to US$ 1.45 million.amount equivalent to US$ 1.45 million.

WASH provided WASH provided 1714 entrepreneurs to set up entrepreneurs to set up rural sanitation centers in 150 working sub-rural sanitation centers in 150 working sub-districts (Dec 2008)districts (Dec 2008). . Loan amount is Loan amount is equivalent to US$ 0.25 millionequivalent to US$ 0.25 million

Loan to Loan to developdevelopentrepreneursentrepreneurs

Aimed to Aimed to ensure proper ensure proper

sanitation, sanitation, Hygienic Hygienic

practice for the practice for the rural poor.rural poor.

Demand creation in Demand creation in W & S SectorW & S Sector

Lessons learnedLessons learned No perceived return on taking loan for sanitation.

Social mobilization is therefore a must. Transaction, interest rate is at times cumbersome . To provide subsidy and ensure safety nets would be

one of the key challenges. There is no precise perception on the necessities of

a sanitary latrine by the community. There is no tangible outcome to see. Water & sanitation does not provide an income, as

such people are reluctant to invest by taking loans for services. Health benefits are difficult to explain to people for living on cents ; not even $1 /day.

If full recovery is to be made, it should include soft cost (social If full recovery is to be made, it should include soft cost (social mobilization) then repayment becomes difficult. Hardware costs mobilization) then repayment becomes difficult. Hardware costs can be recovered fully. can be recovered fully.

High transaction costs for very small micro loansHigh transaction costs for very small micro loans

ChallengesChallenges

Our experience indicates that it is not possible to recover entire loan costs for WS&H.

e.g. if a loan of taka 1000 is provided, then the recovery of taka 1000+680)=1680 Tk with interest becomes difficult

+680 Tk for administrative cost (average/year)

Loan (Irrespective of loan size)

Recovery Loan + TK 680 + service charge

Thank you