Microfinance brings water and sanitation where people live

Microfinance brings water and sanitation where people live

Today, 2.2 billion people lack access to safely managed drinking water services.[1] The United Nations estimated that 2 billion people worldwide did not have access to basic sanitation facilities such as toilets while almost other 2 billion depend on healthcare facilities without basic water services[2] worldwide. 200 million hours are wasted each day by women and girls collecting water[3] which represents 22,800 years. The numbers are impressive, yet the water scarcity challenges are to be solved in developing countries.

The United Nations Sustainable Development Goal (SDG) 6 for water and sanitation calls for universal and equitable access to safe and affordable drinking water by 2030. The first step is providing everyone with a basic service within a 30-minute round trip, and the long-term goal is to ensure everyone has safe water available at home[4]. Other sub-targets, such as SDG 6.2 and 6.a, aim to provide access to adequate sanitation with a focus on women’s needs. The provision of water and sanitation services can be improved for communities or delivered to households. In developing countries, oftentimes, households’ investments in water facilities are not a priority, but if they happen, they can have several positive effects on household finances, health, education and social status.

Poor households spend up to 20% of their disposable income to buy water from vendors or to pay for medical expenses related to the consumption of unsafe water[5] while they cannot afford the upfront investment for a safe water facility. Appropriately designed loans can help households finance the upfront costs of water and sanitation facilities which they will repay over time. One of the main examples is the WaterCredit Initiative, a loan programme developed by Water.org[6] that helps Microfinance Institutions (MFIs) to develop water and sanitation loans and make them accessible to households at the bottom of the poverty pyramid and small enterprises in the water value chain. MFIs can also integrate WaterCredit into existing housing and home improvement loans.

Investing in water services can change the lives of entire families, especially women and girls’ lives, like for Sunita from India[7], who used to walk two kilometres to collect water, helped by her children. Despite all their efforts, the water collected was insufficient for the household’s needs, leaving almost nothing for animals. Farming is her main source of income, but she had little time left to take care of the cattle and thus struggled to make a living. The arrival of MFIs that partnered with Water.org, allowed Sunita to get access to a small and affordable loan to finance a well and taps at her home. Sunita’s financial situation has stabilised because she can concentrate on exploiting her farm given that now her family and livestock have access to clean water. In a similar way, water.org changed the lives of 52 million people thanks to safe water and sanitation.[8]

Numerous other projects around the world have proven that providing safe water (public taps, tube or borehole wells, protected dug wells and springs, and treated rainwater) and sanitation (water tank, toilet construction, sewage services enterprises) products and services can contribute to reaching the SDGs.  WaterAid[9], for instance, is an international non-profit organization, which works in partnership with local organisations in Africa, Asia, Central America and the Pacific region to help poor communities establish sustainable water supplies and toilets. Another example is GlobalWaters.org initiative supported by the USAID[10] Centre for Water Security, Sanitation, and Hygiene which works towards sustainable access to water resources and sanitation for all. The later project reached 65 million people since 2008 with sustainable drinking water services.[11]

By enabling access to protected well in their homes for poor households, the projects mentioned above improve their finances by decreasing medical expenses, saving time on collecting water, thus increasing their productivity. WaterCredit initiative also help MFIs to develop water and sanitation credit for micro, small and medium-sized Enterprises (MSMEs) that contribute to the development of the water and sanitation sector by providing related products and services. This kind of business can, for instance, build toilets in schools, preventing young girls from dropping out of school. Having access to safe water and sanitation at home and at workplaces benefits entire families from improved security, higher social status and more hygiene and privacy.

Despite all these gains, many MFIs perceive the credit risk too high because water loans are very small and do not generate direct revenues which households can use to repay the loan. A solution to mitigate the risks could be for MFIs to use the group lending scheme and educate their customers about the benefits of improved access to water and sanitation, while providing them with financial literacy. Another solution microfinance could deploy is providing the poor with saving accounts in order to build the capital needed to finance water and sanitation facilities upfront. The main advantages are improved households finances management and decreased risks for MFIs.

To conclude, the benefits of having access to safe water and sanitation at home for poor households are manifold. The WaterCredit Initiative is a good example of how small loans can have a big impact because microfinance for water and sanitation for the poor is also a strong instrument to empower women and girls. Furthermore, microfinance for water services is paramount in directly achieving SDG 6[12] and indirectly achieving SDG 1[13], alleviate poverty, by providing the poor with an income and means for agriculture. Indeed, the security of safe water and sanitation allows families to cultivate crops which can be used for self-sufficiency or can be sold to local communities and generate an income which should lead to a virtuous loop of improvements.

[1] WHO/UNICEF, 2019 https://www.un.org/en/global-issues/water

[2] WHO/UNICEF, 2020 https://www.un.org/en/global-issues/water

[3] UNICEF, 2016 https://www.unicef.org/press-releases/unicef-collecting-water-often-colossal-waste-time-women-and-girls  

[4] https://sdgs.un.org/goals/goal6

[5] Unit 8, Certified Expert In Microfinance, Frankfurt School of Finance and Management

[6] Water.org

[7] Lear more about Sunita’s story here: https://water.org/our-impact/all-stories/investing-in-water-is-an-investment-in-women/

[8] https://water.org/our-impact/

[9] https://washmatters.wateraid.org/

[10] United States Agency for International Development’s

[11] https://www.globalwaters.org/resources/assets/fy-2021-global-water-and-development-report

[12] Sustainable Development Goal 6 – Clean Water and Sanitation https://sdgs.un.org/goals/goal6

[13] Sustainable Development Goal 1 – No Poverty  https://sdgs.un.org/goals/goal1

Author: Anna Letta is Sustainability Operations Officer at LuxFLAG. This article is her insight of the Certified Expert in Microfinance executive training she attended thanks to the InFiNe.lu scholarship programme.