WaterCredit is the first program of its kind that puts microfinance tools to work in the water, sanitation and hygiene (WASH) sector. By connecting financial institutions (FIs) to communities in developing countries in need of clean water and toilets, small loans are then made to individuals and households. As loans are repaid, they can be redeployed to additional people in need of safe water, reducing the need for subsidies, which can then be freed up to help those who need it most.
WaterCredit seeks to tackle two related goals: lack of access to safe water and sanitation, and lack of access to finance to secure these necessities among those living in poverty throughout the developing world.
There is more demand than public and private funding available to finance global watsan needs. There will never be enough subsidies in the world to solve this challenge. New models of financing and market engagement are needed to achieve the goal of universal watsan access.
Historically, public and development funds for watsan benefited those who already had some kind of water system. Meanwhile, the lower income individuals in the same area typically pay higher prices for vended water (up to 5-10 times greater) and risk consuming unsafe water. Often, these are the same people who don’t have access to the formal financial sector, due to their lack of assets (which makes them “unbankable” in the eyes of many financial providers). In addition, the billions of hours of “unproductive” time that is used to fetch water rule out income generating activities and education, which could occur if clean water was closer to home and watsan services were more reliable.
WaterCredit was designed to solve these problems. WaterCredit starts from the premise that there are many people in the developing world who can, and want to, finance safe water and sanitation if they are able to pay for these services over time, as well as have a voice in their development and operation.
WaterCredit recognizes that there are financial institutions that are interested in expanding their portfolios in scalable, sustainable ways – with watsan falling squarely within their clients’ basic needs. WaterCredit’s role is to link these stakeholders with one another, provide strategic expertise to help FIs develop and deploy watsan loans, and thereby expand the reach and impact that microfinance for water and sanitation can achieve.
The Benefits of WaterCreditThe benefits of WaterCredit are numerous, including:
- Dollar for dollar, catalytic philanthropic investment enables the water and sanitation needs of more people to be met than with traditional grants because WaterCredit is designed to leverage additional commercial and social capital. This frees up grant capital to serve the poorest of the poor (for whom microcredit is not a viable solution).
- Empowerment of female clients and their families.
- With access to water and sanitation via WaterCredit, time (which was previously spent fetching water and/or in ill health) can be spent on productive activities such as income generation and education.
- WaterCredit borrowers are able to increase their families’ discretionary, disposable income due to cost savings of having a water and/or sanitation connection (rather than paying the local “water mafia” price).
- WaterCredit borrowers and their families enjoy better health, as the spread of water-borne disease is reduced.
- FIs gain in-house water, sanitation, and hygiene expertise.
- Small water- and sanitation-based enterprises can be developed over time.
- Multiple Millennium Development Goals (MDGs) are addressed simultaneously.
WaterCredit Statistics*Updated March 2015
- WaterCredit loans made: 573,067
- Water.org has invested: $11.3 million in WaterCredit
- WaterCredit has leveraged: an additional $120 million in commercial and social capital
- People benefited directly from WaterCredit: 2.4 million
- WaterCredit partners: 53 active partners
- WaterCredit countries: 9 – Bangladesh, Cambodia, Ghana, India, Indonesia, Kenya, Peru, Philippines and Uganda
- Average WaterCredit loan size: $210
- Women WaterCredit clients: more than 90%
- WaterCredit global repayment rate (since 2003): 99%
The Future of WaterCreditTo move forward with WaterCredit and meet its strategic and expansion objectives, Water.org anticipates undertaking – and continuing to engage in – the following activities:
- Managing complex programs on the ground, partnering with organizations that can build and operate WaterCredit portfolios at a “game-changing” scale.
- Working with a diverse set of FI partners, funders and other financial institutions to attract additional capital to the WaterCredit ecosystem.
- Indentifying and prioritizing new markets and models for WaterCredit expansion, including new products and channels for deployment.
- Directing “smart subsidies” to microfinance institutions to establish WaterCredit portfolios.
- Consulting with socially-motivated and blended-value investors in search of bankable deals.
- Engaging civic organizations, such as local governments and water utilities, to foster the growth of civic, grassroots and public sector capital in watsan solutions and systems over the long-term.
- Refraining from making investments that distort credit and environmental services markets.
- Playing an active role to improve knowledge and foster best practices within the watsan and microfinance sectors, recognizing the value of exchanges and partnerships.
- WaterCredit General Overview (March 2015)
- Water, Sanitation and Microfinance Toolkits -- developed by Water.org and MicroSave
- Information for Financial Institutions: WaterCredit Program Overview for FI's, Sample WaterCredit Loan Products, WaterCredit Partner Profile - Grameen Koota, WaterCredit Partner Profile - Hand in Hand, and WaterCredit Partner Profile - ECLOF Kenya
- Additional Resources -- Market Assessments, Case Studies, White Papers