Microfinance for sanitation: WaterAid's experience and how does it fit its programmes
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Remi Kaupp, programme officer at WaterAid, presents WaterAid's experience with supporting microfinance for sanitation in various country programmes. The presentation also provides a good summary table of how microfinance fits into sanitation programmes.
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Microfinance for sanitation: WaterAid's experience and how does it fit its programmes
- 1. WaterAid’s experience Embedding microfinance into sanitation programmes 1
- 3. »Interest – as part of sanitation marketing (Madagascar, West Africa, Rwanda…) and no- subsidy approach (CLTS) »Actual experience – mostly with ROSCAs e.g. Nepal, some direct loans in Zambia, guarantees in Madagascar »Contrast with Bangladesh – decision NOT to engage with microfinance given different aims »Discussion in India – bridge finance for NBA Financing WASH facilities
- 4. »Study done on microfinance Experience of partners: »Ghana – APDO / KCCCUU – credit union »Ghana – People’s Dialogue – revolving fund »Burkina Faso – sanitation shops Case study – West Africa
- 5. »Pit emptiers – Malawi, Mozambique, Tanzania, Bangladesh »Pump mechanics & sanitary pad manufacturing – India »Water delegated management – Mozambique »Sanitation marketing – e.g. biogas in Ethiopia Little done with microfinance beyond Tanzania! Supporting sanitation entrepreneurs
- 6. Different options for financing entrepreneurs: »Loans from a revolving fund managed by BDS provider Hatch Consultants – 3 years, 10% interest overall »Bank loans from KCB – 12% annual, 2 years, secured by WA guarantee in TZS »Success factors seem linked more to type of entrepreneur than type of finance! Case study – Tanzania
- 7. Financing WASH entrepreneurs Financing WASH facilities Type Business finance Household consumption finance Linkages with Business Development Services with ROSCAs / community groups Schedule Align with business model Align with household finances Aim for WASH Build private sector delivery of services Increase WASH coverage Scaling-up Build credit rating Build demand in community Risk reduction Good business modelling, marketing & follow-up Savings, deposits, collateral, demand-raising Issues “Business spirit”, policy constraints Tenure & landlords, inflation, subsidies by other actors Inspiration Small business finance Housing microfinance Ideally…. Take equity in business Loan as top-up Where microfinance can fit with WA
- 8. »How to work with a different breed of partners – aligning goals & methods »Role of WA in supporting businesses – Business Development Services / Financing? »How to build capacity of delivery partners? »Advocacy – MF regulation? Ongoing discussions
Notas do Editor
- Nepal – Lumanti supporting S&C groups and issuing loans for WASH facilities – empowering women who are asking for right. Some interest rate subsidy. Zambia - Under the self supply project (supported by Stone Family Foundation funding in Milenge District), we do provide microloans to poor and low income communities for improvement of their traditional water sources. The loans are not given in form of money, but in form of improvement materials such as cement, windlass, rope and bucket etc. The services does not include savings, credit or insurance as is normally in micro financing. It only involves material loans and payments. This is supposed to work as a revolving fund. Madagascar – CEM – loans at 0% over 12 to 24 months. But now with OTIV – guarantee fund (£800) for loans at 1.5% monthly or 18% annually – 6 to 24 months – SanPlat & pit latrines – poor agreement (amount of loans, responsibility for chasing, not actual guarantee, % unknown). No proper loan appraisal but “morality assessment” if under $600 (malagasy context…) Bangladesh took decision NOT to work on MF as it distorts incentives - then only focus is loan uptake (opportunity to discuss how to partner when incentives are different – easy to criticise WA but reality is that such partnerships are hard – need business-type relationships) India - Nirmal Bharat Abhiyan
- Afram Plains Development Organization - NGO – 50M cedis loans with 3% monthly interest – not directly with WA Kete Krachi Community Cooperative Credit Union PDG – careful! Sanitation shops – WA did it – give money to community, which manages loans – e.g. with VARENA-ASSO . Revolving 5 times, 90% recovery – combined with marketing and committee management
- First loan = 3.2% APR Guarantee – 80%, 100% - unclear even from the agreement – says 80%, then 100%, but actual amount covers 10% more than principal + interest Poor comprehension by entrepreneurs
- Working with different partners – OK with Lumanti and CCI as long as they talk about WASH and communities (but for example they do rental housign and other business-like ventures – not engaging with that!) Business support – direct financing, broker, BDS provider… or not. Whether we see some role for us – Saturday’s discussion