CATALYZING A MARKET FOR SANITATION MICROFINANCE IN PERI-URBAN BLANTYRE

BY WATER FOR PEOPLE MALAWI

PRESENTED BY GORDON MUMBO

AT Water Aid East Africa Regional Workshop in

Dar Es SalaamTanzania

May 16 ,2014

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Some of the challenges before MFI

• Slow progress on scaling up Sanitation

• Poor latrine Quality• Entrepreneurs would

find customers start work but not completed due to lack of cash

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Malawi DataMap of Malawi showing Water For People EF districts and Thematic District WASH DATA

• Total Population : >16,800,000• Urban Population: : 15.7%• National Urbanization Rate:4.2%

• Per capita Income : US$ 900/year

• National Water Coverage :83%

• National Sanitation Coverage: 51%

• Hygiene coverage : 37%

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Population 16.8 million

GNI per capita $360

Loans $33.2m

Active borrowers 148,705

Deposits $39.4m

Depositors 488,881

BLANTYRE URBANISATION CONTEXT

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• Pop ≈ 723 000

• Urbanization rate of 2.08%

per annum (≈ 2 people/hr)

• 70% live in high density,

unplanned slum dwellings

• 36000 households in need

of improved toilets

Required Resources for the 36,000 house holds ???

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• 36,000 latrines x MWK 100,000 =

• MWK 3,600,000, 000.00

• USD 9, 000, 000.00

• € 6,923,076.92

• GBP 6,000,000.00

Methodology

• Market assessment

• Partnered with Opportunity Bank in 2011

• Microcredit lending to low income households

• Used social group loan model – trust is the collateral

• 2%-5% default rate

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• Loan guarantee was offered to minimize default losses to the value USD 20, 000.00

• Interest rate kept at 2% per month

• 20% of the loan deposited with bank as collateral

• Group formation was also used as collateral

Methodology: roles and responsibilities

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W4P OIBMMobilize communities into social loan groups X Conduct training of loan groups in group dynamics, loan repayment and leadership

X X

Issue the loans to households XFollow-up of loan payments XVerification of constructed latrines X

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SUCCESSES

• Small Scale Sanitation Entrepreneurs now able to sustain themselves without W4P support

• One Entrepreneur got an enterprise loan to boost His sanitation businesses

• 210 household sanitation loans were disbursed and latrines constructed

• Total loan amount = US$43,600• Loan guarantee to

OIBM=USD20,000• Please note that OIBM matched

with US$20,000

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SUCCESSES

Outside MFI Loans• 21 SANITATION Business

established• 1000 latrines emptied

by Sanitation Entrepreneurs

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Challenges/lessons

• One of the sanitation loans did not turned out to a latrine

• OIBM not willing to continue with the Program without the guarantee

• NGO (W4P) involvement contributed to defaults

• Limited technology options

• Cost to form and manage new lending groups should not be under estimated

• Local partner buy in is crucial

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Way Forward

• Explore New lending institutions TEECs MFI

• Savings and Credit Cooperative Organizations (SACCOs)

• Match Sanitation Products and Services with Technology Development.

• Lending institution should run the show.

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How will TEECS work differently

FunctionsCurrent Future

Who does? Who pays? Who will do? Who will pay?

Sanitation financing promotion Hygiene Village W4P TEECs TEECsFacilitate the formation of lending groups including documentation Hygiene Village W4P HHs / TEECs HHs / TEECs

Broker deal between bank & borrowers Hygiene Village W4P N/A N/A

Conduct loan group training Hygiene Village & OIBM W4P TEECs TEECs

Provide guarantee for sanitation loans W4P W4P Market-

drivenMarket-driven

Issue the loans to households OIBM OIBM TEECs TEECsManage household to builder payment Hygiene Village W4P Market-

drivenMarket-driven

Follow-up of loan payments OIBM OIBM TEECs TEECsVerification of constructed latrines W4P W4P TEECs TEECs

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Thank you for listening

• Please watch this video https://www.youtube.com/watch?v=DCH0FaVsu_c and(https://www.youtube.com/watch?v=lrIAnj5E-Yk)