About WaterCredit
Rashana and Maizabeen of Vinayakngar in Hyderabad, India.
The WaterCredit Initiative represents the creation of a new space at the intersection of water and sanitation and microfinance. By catalyzing small loans to individuals and communities in developing countries who do not have access to traditional credit markets, WaterCredit empowers people to immediately address their own water needs. As loans are repaid, they can be redeployed to additional people in need of safe water.
The Need
Current financing methods to address the world water crisis are not sufficient. Grants alone will never reach the nearly one billion people in need of safe drinking water. People often are forced to wait years for a grant that may never come. Meanwhile, they’re getting sick and dying from the unsafe water they’re drinking – not to mention the hours they are spending every day collecting it.
The Benefits of WaterCredit
Woman from Ponnusangampatti Village, India, showing her loan repayment card.
WaterCredit dollars go further than grant dollars. Investments made by Water.org leverage far more funds to meet water and sanitation needs than traditional grant-driven expenditures. After 10 years of loan cycles, five times as many people have water with WaterCredit than with a similar amount of grant funding.
Empower the poor. WaterCredit loans empower the poor to address their own water needs, on their own timetable. Also, by establishing creditworthiness, the poor are able to take out additional loans from commercial lenders for other purposes. Access to affordable credit is a key element of helping people move up the economic ladder.
Free up limited grant resources. WaterCredit frees grants to go where they are needed most – to the poorest of the poor.
Foster sustainability. As subsidies in water projects increase, sustainability decreases. With WaterCredit, users have a financial stake in their water supply solutions and a greater incentive to ensure proper operations and maintenance.
A scalable solution to the water crisis. WaterCredit works within the slipstream of natural market forces, making it inherently scalable.
Philanthropic investments in WaterCredit stimulate commercial lending. One of Water.org’s local partners in India spurred such high demand for WaterCredit loans and had such strong repayment rates, it is now able to source local commercial capital. To date it has secured loan commitments from an Indian bank of nearly $2 million to fund water and sanitation loan portfolios. This accomplishment eliminated a significant barrier that had prevented poor people from accessing capital directly.
Funding for WaterCredit
WaterCredit pilots were made possible through the financial support of the Open Square Foundation and the Michael and Susan Dell Foundation. A recent $4.1M grant from the PepsiCo Foundation is allowing Water.org to significantly expand and develop WaterCredit in India. Grants from the Skoll Foundation, OneXOne Foundation, and Only the Brave Foundation will support WaterCredit expansion in West Africa. Support of individual donors is critical to sustaining our WaterCredit efforts.
The Future of WaterCredit
Water.org does not aspire to be the water bank to the world. Instead, we see our role as accelerating natural market processes. This means fostering relationships between microfinance institutions and non-governmental organizations in the water and sanitation sector to help them understand each other better. Or, in certain cases, even creating hybrids between the two. In other places, we may provide standby letters of credit to back loans made by microfinance institutions, encouraging them to enter the sector by mitigating their risk until they understand it better. Using microfinance, Water.org is acting as a catalyst to introduce the capital markets to the water and sanitation sector. This same approach has been proven in many other sectors, and we are highly encouraged by the results we have seen.
Resources on WaterCredit
WaterCredit Statistics
- Total investment: Water.org has invested $1.4 million in WaterCredit programs.
- Commercial capital stimulated: Water.org’s partner organizations have leveraged $4 million in capital from commercial banks.
- Disbursed loans: Borrowers have taken $1.8 million in WaterCredit loans.
- WaterCredit beneficiaries: More than 151,700 people have benefited from WaterCredit.
- Number of loans: More than 16,670 loans have been made.
- Loan repayment: The overall loan repayment rate for all WaterCredit programs is 91 percent (two pilot programs were converted into grants). Programs begun in the last two years are averaging 95-98 percent repayment rates.
- Average loan size: For households, the typical loan size is USD$130.
- Average cost for a water connection: USD$116
- Average cost for a home latrine: USD$120
- Interest rates: Interest rates (including service fees) for borrowers range from 10-24 percent. This is less than the rate for a typical micro-finance loan.
- Interest rates borrowers would otherwise be forced to pay to loan sharks: 125%
- Repayment periods: Repayment periods range between 12 and 24 months.
- Demographics: Approximately 90 percent of all borrowers are women.
- Types of WaterCredit programs: Include grants for revolving loan funds; direct loans to partners; “smart subsidies” to start up credit programs; and credit enhancements/guarantees for commercial borrowing.
- Where WaterCredit is offered: Bangladesh, India, and Kenya. The pilot projects for WaterCredit began in 2003 in the urban slums of Dhaka, Bangladesh, and then in rural Tamil Nadu in southern India in 2004. In 2005, the WaterCredit Initiative was expanded to Kenya, where the focus has been on community-level loans for wells and infrastructure. In 2009, WaterCredit was expanded into East Africa.
For more information, contact our WaterCredit Director via our Contact Form.
