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WaterCredit in Practice: Lessons Learned from Implementing an NGO- led Micro-Credit Initiative

Congress: 2008
Author(s): Rich Thorsten, Gary White, Damodaran Sait, Patrick Alubbe
Rich Thorsten serves as Manager for Partner Development for WaterPartners International, a non-profit organization dedicated to working with local NGOs to provide access to water and sanitation in developing countries. Mr. Thorsten holds a Ph.D in City a

Keyword(s): water supply, sanitation, micro-credit, developing countries
AbstractIntroduction Evidence from the glaring statistics regarding the numbers of people without access to improved water (1.1 billion) or sanitation (2.6 billion) demonstrates that the water and sanitation sector suffers from a chronic lack of investment. The high cost of services and extreme poverty are often mentioned as major reasons why “the poor” cannot afford improvements. However, several recent studies have found that in many cases, the poorest households pay more for services than wealthier groups. This suggests that a potentially large segment of impoverished households is willing to pay for improved services if financing mechanisms were available at market rates to assist in securing capital for improvements. WaterPartners International, a non-government organization focused on increasing access to water and sanitation, developed and now manages a WaterCredit InitiativeTM designed to provide credit-based financing to households, self-organized groups, and communities in conjunction with local NGO and micro-finance institutions. WPI has conducted pilot projects in India, Bangladesh, and Kenya over the last three years. This paper provides evidence to the hypothesis that credit programs can meet latent demand for water and sanitation in urban and rural areas. Objectives 1) Describe the design and implementation of the WaterCredit program. 2) Examine the outcomes and impacts of the WaterCredit program in the demonstration project areas. 3) Present information concerning disbursement and repayment of funds. 4) Review the strengths and weaknesses of different WaterCredit models from the perspectives of users, implementing organizations, and WaterPartners as the principal financier. 5) Analyze what factors enhance or inhibit the ability of micro-credit models to scale up activities and be replicated in other geographic areas. Methods This paper utilizes an ex-post, case study evaluation method. This method enables the authors to present details of actual micro-credit schemes in the water and sanitation sector – information which is not readily available in the field. The case study approach also facilitates comparison of pilot approaches and contrasts actual outcomes with initial expectations and speculative differences in full program implementation. The paper conveys quantitative data (e.g. statistics on users, loans, and repayments) and also provides anecdotal evidence to demonstrate the value of these loans to users and the challenges that each group faced during the process. Summarized Results and Conclusions 1) The WaterCredit program remains in operation in all settings, and recipients have begun to make repayments on loans. 2) Programs like WaterCredit can bridge the NGO and microfinance worlds and enhance each sector’s organizational capacities. 3) Supportive enabling environments both in the W&S and microfinance fields are essential to planning and long-term development. 4) Loan-based programs are more susceptible to problems resulting from delays than traditional grant-based programs. 5) Strategic grants are still important to fund capacity building, market research, and product development, even when project costs are financed through loans. 6) Additional work is necessary to structure appropriate financial relationships between implementing partners and the external financing agency.
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