1. A Microfinance Solution for Water, Sanitation, and Health in Peri-Urban and Rural Areas Presented at the Fifth World Water ForumDr. Richard E. Thorsten Istanbul, TurkeyDirector of International Programs March 19, 2009WaterPartners

2. The Watsan Finance Challenge Estimated that between $10 and $30 billion in annual additional resources needed to meet global water and sanitation coverage objectives. Traditional subsidy-based watsan financing Often directed toward higher-income consumption Not responsive to demand for improvements or ability to finance improvements among underprivileged Incapable of handling future repairs and expansions Discourages people from developing own solutions

3. WaterPartners and WaterCredit What is WaterPartners? Non-profit organization founded in 1990 to address water and sanitation crisis Active in South Asia, East and West Africa, and Central America Work with local implementing partners to execute effective, sustainable programs Offer mix of financing models, including WaterCredit What is WaterCredit? WaterCredit enables households and communities to gain access to credit to access water and sanitation. First projects began in 2004 Current programs in Bangladesh, India, & Kenya. Other countries under consideration for expansion Invested $1.6 million in programs thus far. Partners have doubled investment from other capital sources. Over 133,000 people have benefited directly from our watsan loan programs to date.

4. Multiple WaterCredit Models Grants to support “software” aspects of watsan programs Grants to develop revolving loan funds Direct lending to non-governmental organizations (NGOs) and microfinance institutions (MFIs) Support to NGOs and communities for technical and financial capacity development Smart subsidies for MFIs to enter watsan sector Loan guarantees for commercial creditors Partnerships among NGOs, MFIs, private sector, and governments Establishment of new MFIs

6. AttributeGramalayaBASIXGUARDIAN Year Began200420072008 CustomersWomen formed self- help group federation Joint lending groups, NGOs Women formed self- help groups WP Capital$500,000$332,000$380,000 Other Capital$390,000TBD$1,200,000 Loan Size (household) $91$100 - $300Rural: $100 Urban: $200 Interest & Repayments 12-18% interest 12-24 month period 16% JLG, 24% NGO 12-18 month period 15-18% interest 12-24 month period Customers31,982 (direct) 24,000 (additional) 6,10620,000 (estimated) Repayment %78% (98% since ’06)95%TBD Sample Program Information

7. WaterCredit Innovations Social capital as substitute for individual financial collateral Recycling and leveraging end user payments Smart subsidies for microfinance institutions Partnerships among organizations that enable them to reach more people by doing what they do best WaterPartners: Program design & management, capacity development NGOs: Community mobilization and development MFIs: Financial training, investment, and management Private sector: Construction and repair services Public sector: Service provision, regulation Secondary spin-offs, including creation of new economic opportunities and clientele for deposits and other loan programs

8. Some Challenges Community-based models have not fared as well as self-help group models Partner capacity to execute pilot WaterCredit models NGOs: Financial management MFIs: Limited water/sanitation exposure Seasonal income flows require advance plans for repayments Political involvement in decisions regarding system connections and management Resistance among groups controlling existing services (i.e. “water mafias”) Sanitation program involves both demand assessment and demand generation. Perception of water as free gift or right that must be subsidized

9. Some Lessons Learned to Date Watsan loan programs differ from traditional income- generating loan products. Appreciate demand and supply sides of market Work in areas with microfinance track record Develop partnerships with effective, appropriate institutions (NGOs, MFIs, govt., private sector, etc.) Set terms according to what market will bear, not solely on prior experiences Ensure groups are sufficiently trained to manage loans and new services Prepare to subsidize non-financial program aspects, at least in the short run

10. Conclusions Evidence that substantial numbers of poor households are willing to take out and repay loans to receive water connections and toilets Micro-credit programs can work effectively in the water and sanitation sector. WaterCredit has improved people’s health, economic livelihoods, and overall well-being. WaterCredit has also empowered women by enabling them to access loan capital and improve their dignity. WaterCredit will benefit more people by recycling loan repayments and leveraging commercial capital.

11. Thank You!