Microcredit for Water Supply and Sanitation: A Key to Sustainable Development

Microcredit has been proven to be a game-changer for water supply and sanitation in developing countries, where access to clean water and proper sanitation is often a luxury.

In many rural communities, microcredit has enabled women to start small businesses providing water and sanitation services, creating jobs and improving living conditions.

According to a study, 75% of microcredit borrowers in these communities reported improved access to clean water and sanitation.

This is a remarkable achievement, considering that before microcredit, these communities often lacked access to basic water and sanitation facilities.

With microcredit, entrepreneurs can access funds to invest in water treatment systems, wells, and toilets, making clean water and sanitation a reality for thousands of people.

By providing microcredit for water supply and sanitation, we can empower communities to take control of their own water and sanitation needs, fostering sustainable development.

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Microcredit for water supply and sanitation is a financial service that enables low-income communities to access safe water and sanitation facilities. It's a vital tool for improving public health and reducing poverty.

The potential market size for microcredit for water supply and sanitation is estimated to be $12 billion over the next 10 years. This is a significant opportunity for microfinance institutions and NGOs to make a positive impact.

Some nongovernmental organizations (NGOs) have successfully used micro-lending schemes to overcome financial barriers to accessing water and sanitation services. These approaches can work, but there's limited understanding about whether they present a long-term solution that could be scaled to benefit millions.

WaterCredit is an example of a successful microcredit program for water supply and sanitation. It was launched by Water.org in 2003 and has helped its 13 partner organizations make 51,000 credits.

Here are some key facts about WaterCredit:

Microcredit for water supply and sanitation is a promising solution for improving access to safe water and sanitation facilities in low-income communities.

There are three broad types of microcredit products in the water sector. Microcredits can be used to improve access to water supply and sanitation at the household level.

Credits for small and medium enterprises can be used for small water-supply investments. This type of microcredit is crucial for supporting businesses that aim to provide clean water to communities.

Credits can also be used to upgrade urban services and shared facilities in low-income areas. This type of microcredit is essential for improving the overall water and sanitation infrastructure in these areas.

Here are the three types of microcredit products in the water sector:

In Vietnam, a Sanitation Revolving Fund was created with an initial working capital of US$3 million in 1999. This fund provided small loans of US$145 to low-income households for sanitation investments.

The fund was managed by the Women's Union of Vietnam, which had experience in microfinance. Participating households had to join a savings and credit group of 12 to 20 people, who lived near each other to ensure community control.

The Sanitation Revolving Fund had a catalyst effect for household investment, with loans covering approximately two-thirds of investment costs. Households had to find complementary sources of finance from family and friends.

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In Indonesia, Bank Rakyat Indonesia partnered with the water utility PDAM to finance water connections through microcredits with support from the USAID Environmental Services Program.

The program helped PDAM increase its customer base by 40% between 2002 and 2004.

This significant boost in customers reduced PDAM's costs per cubic meter of water sold by 42%.

As a result, PDAM's non-revenue water decreased from 56.5% in 2002 to 36% by the end of 2004.

By the end of 2004, PDAM's improved efficiency had a noticeable impact on its operations.

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In Vietnam, a unique approach to sanitation was implemented in 1999 with the creation of a Sanitation Revolving Fund.

The fund was supported by the World Bank and governments of Australia, Finland, and Denmark, with an initial working capital of US$3 million.

This innovative approach provided small loans of US$145 to low-income households for targeted sanitation investments.

Households had to join a savings and credit group of 12 to 20 people to access the loans, promoting community control and cooperation.

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The loans had a catalyst effect on household investment, covering approximately two-thirds of investment costs.

Households had to find complementary sources of finance from family and friends to cover the remaining costs.

The Sanitation Revolving Fund was managed by the Women's Union of Vietnam, a microfinance-experienced organization.

Over a period of seven years, the fund gave 200,000 households the opportunity to finance and build sanitation facilities.

The fund's success was evident in its high repayment rates of almost 100 percent and a leverage effect of up to 25 times the amount of public spending.

The World Bank and the Vietnam Bank for Social Policies supported the scaling up of the fund in 2009.

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In Kenya, community-managed small-water enterprises are thriving, thanks in part to the Water and Sanitation Program's initiative to use microcredits.

The Water and Sanitation Program partnered with K-Rep Bank to provide loans to 21 community-managed water projects, with a credit of up to 80 percent of the project costs, averaging $80,000.

These projects have been pre-financed with a significant portion of the costs covered, allowing them to focus on implementation.

After an independent verification process, a 40 percent output-based aid subsidy is provided to help with loan repayments.

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Climate change is already affecting the water cycle, causing droughts, floods, and extreme weather events that compromise access to clean water and sanitation services.

2.3 billion people live in water-stressed countries, and those at the base of the economic pyramid feel the consequences first and hardest.

Water infrastructure is accountable for 1.8% of global carbon and 4.7% of methane emissions, making it a key area for decarbonization.

Improving water infrastructure is crucial for mitigating climate change, especially in growing cities.

One effective solution to climate-induced water stress is available through the power of capital markets.

We've proven the capacity of capital markets to deliver real change in the water sector by enabling microfinance for households to invest in water supply and sanitation solutions.

The sector has worked on the demand side of the water equation for decades by providing microfinance for households to invest in WSS solutions.

However, focusing solely on the demand side will only take us so far, and we need to mobilize capital toward the supply side to build an investment pipeline that can reach hundreds of millions of people in emerging markets.

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WaterCredit is a proven, powerful solution that has changed more than 73 million lives across 4 continents by providing access to safe water or sanitation. This solution has been in action for over 15 years, making it a reliable option for those in need.

One of the key features of WaterCredit is its market-driven and people-driven approach, which ensures that the solution is tailored to the specific needs of each community. With 171 partners worldwide, WaterCredit has catalyzed $6.4 billion in capital to support small loans that bring access to safe water and sanitation.

The majority of households borrowing these loans live on less than $6.85 a day, highlighting the impact that WaterCredit has on those living in poverty. In fact, 90% of borrowers are women, who are disproportionately affected by the water crisis.

This solution works because it recognizes people as consumers with autonomy and empowers them to define their own futures. By providing access to safe water and sanitation, women can spend more time pursuing education, work, and keeping their families safe and healthy.

As a lending partner, you'll be working with local financial institutions that understand the needs of their communities and are invested in their success. They know what their communities require and can provide small loans to people in need of water and sanitation at home.

We provide technical assistance, connections, and small grants to these partners, as needed, to help them succeed in their mission. Loan repayment rates are 98% globally, which means that every repaid loan creates another opportunity for a family to get safe water at home.

By partnering with us, you can be a part of this cycle that continues to reach more people, creating new opportunities for families around the world.

WaterCredit has made a significant impact, with more than 73 million people on 4 continents now having access to safe water or sanitation. This is a testament to the effectiveness of microcredit in addressing the water crisis.

The program has catalyzed $6.4 billion in capital to support small loans that bring access to safe water and sanitation to millions of people living in poverty. This is a remarkable achievement that demonstrates the power of microcredit.

90% of borrowers are women, who are disproportionately impacted by the water crisis. This shows that microcredit can be a game-changer for women in developing communities.

The majority of households borrowing these loans live on less than $6.85 a day, making it clear that microcredit can be a vital tool for improving the lives of the world's most vulnerable populations.