East Africa Workshop on Microfinance for Sanitation

Ledger Bahari Beach Hotel

May, 16, 2014

Patrick Alubbe

Regional Director

Water.org – E.A.

Water.org Non-profit organization founded in 1990 to address water

and sanitation crisis (by a former UNC graduate) Re-launched as Water.org with Matt Damon in 2009Active in South Asia, East and West Africa, and Central

AmericaWork with local implementing partners to execute

effective, sustainable programsOffer mix of financing models, including WaterCredit

VisionWater.org envisions the day when everyone in the world can take a safe drink of water and experience the dignity of a toilet.

WO Programs

• Ethiopia and Ghana– Direct Impact – WC being introduced

• Kenya, Uganda, Bangladesh, South India– Direct Impact + WC

• Peru and Indonesia – WC

Why Microfinance + WASH?

Why microfinance + WASH• Market segmentation within base of the

pyramid• Not enough subsidies to solve water and

sanitation access• Investments leveraged, more people reached• Beneficiaries to customers who can choose

their own solutions • Income enhancing and sometimes income

generating

WaterCredit Model

WaterCredit Model

WaterCredit Globally

Elements of WaterCredit• Market Assessment • Product Development• Monitoring and

Evaluation

Market assessment

Market Assessment

Why assess the market?• Discover needs and demands of clients to

develop appropriate products• Determine target audience for WASH products• Set price, terms (interest, repayment)• Identify other stakeholders in WASH space• Collect baseline conditions to measure impact• Ensure market is not saturated

Product Development

Renovated Community toilet with Eco-friendly Filter bed Septic tank at Malayappapuram

Inner view of the Toilet

Before After repairingrepairing

Septic tank Filter bed septic tank

Product Development • A specific phase to develop and test out new loan

products for WASH sector• Data from market assessment to tangible products • Develop and test technologies- rainwater harvesting

systems or toilets• Must fit JMP description for improved access• Price and features acceptable to clients?• Pilot test in handful of branches/communities• Monitor and revise as needed

Monitoring and Evaluation

Monitoring and Evaluation• Provides feedback to product development• Portfolio quality

– Repayments, portfolio at risk, loan amounts, product types

– Completeness and functionality of product– Borrower profile (branch/site, income, gender,

birth year)• Impact

– Time saved, increased earnings, health– Anecdotes, personal stories of borrowers

Monitoring and EvaluationActivities• Partner reports (monthly + quarterly)• Field audits- regional + US staff• Financial audits by third party• Baseline/end evaluation studies• Impact research by third party• WaterCredit Forum to share challenges and

knowledge

Monitoring and EvaluationTools• Standardized reporting by all partners • WaterPortal

– Internal database system for program information

– Online interface for global access

– Partners upload data for review

Challenges faced and solutions

• Community-based models have not fared as well as self-help group models

Partner capacity to execute pilot WaterCredit modelsNGOs: Financial managementMFIs: Limited water/sanitation exposure

Seasonal income flows require advance plans for repaymentsPolitical involvement in decisions regarding system connections and

management

Resistance among groups controlling existing services (i.e. “water mafias”)

Sanitation programs often involve both demand assessment and demand generation.

Perception of water as free gift or right that must be subsidized

Current MFI Implementation challenges and way forward1. WASH Loans are behind target

-Initial targets set by all FSPs not met. WF: Program extensions

2. Low WASH budget utilization-Slow burn rates by FSPs.WF: -FSPs encouraged to implement as per workplans on time.

3. WASH Product mix unbalanced-Water harvesting the predominant product. How about other WASH products e.g. sanitation, wells & boreholes, etc.?

WF: -Sanitation products needs to be supported through collaboration with NGOs, public health depts. and CLTS programs

3. Implementation challenges and way forward Cont’d4. Inadequate monitoring of WASH loans

-Danger of counting non-WASH loans – fund diversions.-Need to confirm proper installation, proper usage, no. of

beneficiaries?WF: - FSPs to ensure only WASH loans are reported. -WO to schedule frequent field monitoring visits (by

staff/consultants)

5. Capacity gaps on WASH- FSPs still lack in-house technical skills to effectively appraise

borehole and sanitation loans. WF: Water.org provide necessary links – Technical NGOs, Governement

WaterCredit Globally

Impact to date• Over 253,000 loans allowing more than 1.2 million

people to gain access to water and sanitation• 41 partners in four countries (India, Bangladesh,

Indonesia, Kenya, Uganda and Peru)• $8.6 M in subsidies leveraged $48 M in commercial

capital and Social capital• Women clients 93%• 99% repayment rate ( Since 2003)• $147 average loan amount

Progress to-date • Program activities

-Market demand studies, product development, staff and borrower trainings and pilot testing activities done by FSPs in KE.

-WASH Products (mostly water related) rolled out in KE. Sanitation products still under pilot in some FSPs.

• No of loans-Disbursed 17,000 loans to date- 47% of the program

target (36,000). • Loan Portfolio

- FSPs have disbursed USD 9.8 Million (KES 835.8 Million) to date.

Some Lessons Learned to Date

Watsan loans differ from core MFI loan products (income-enhancing vs. income-generating).

Appreciate demand and supply sides of marketWork in areas with microfinance track recordDevelop partnerships with effective, appropriate institutions

(NGOs, MFIs, govt., private sector, etc.)Set terms according to what market will bear, not solely on

prior experiencesEnsure groups are sufficiently trained to manage loans and

new servicesPrepare to subsidize non-financial program aspects, at least

in the short run

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.