Revolutionizing the Way Water is Supplied to the World

Rashana and Maizabeen of Vinayakngar in Hyderabad, India. WaterPartners projects are funded through grants, loans, or a combination of grants and loans. Our loan program is called WaterCredit, and is the first of its kind.

The idea of building community-based water supply projects through a combination of grants and loans is new to the water sector. Until now, almost all water projects facilitated by other organizations have been funded entirely by grants, even when the individuals served by the project have the means to share costs.

WaterPartners’ loan program, the WaterCredit Initiative, has the potential to change the way water is supplied to people in the developing world.

The WaterCredit Initiative helps more people more quickly gain access to safe water while maximizing limited resources.

Leveraging financial resources is critical, because the cost of meeting the water supply needs of the world’s poor far outstrips the donor aid available. Unless we find new resources we will only be able to meet the needs of a fraction of the more than 1 billion people in developing countries who lack ready access to safe water.

WaterPartners is a strong advocate for increased funding for grant-based programs. We believe wealthy countries should provide more financial resources to tackle this immense crisis, particularly in regions of the world that are in the greatest need and people lack even the most basic financial resources. We believe it is fundamentally unjust in a world of great wealth that so many should still lack access to one of the most basic human needs.

We also recognize that simply advocating for increased aid is not enough. WaterPartners has always been an innovator, conceiving new ways to tackle the global water supply crisis that are more impactful and efficient. It is in this spirit that we have launched our WaterCredit Initiative. WaterCredit will help millions more people achieve their dream of safe water by leveraging new financial resources from the bottom up as well as the top down.

When you consider that more than five million people die every year from water-related disease, the number-one killer of infants and children under the age of five, the sense of urgency grows.

Enter the WaterCredit Initiative

The WaterCredit Initiative is a natural next step for WaterPartners, a true social entrepreneurial organization. WaterCredit blends grants and loans to ensure maximum impact of funds invested by donors, while still meeting the needs of the world’s poor.

WaterPartners will continue applying its proven approach of working through rigorously screened local partner organizations as a channel for making loans to communities to cover the capital cost of constructing water projects.

We have recognized the ability of poor people to help pay for their own water projects since WaterPartners supported its first water project in 1990 in Honduras. The communities we help already pay a portion of the capital cost of a water system, usually up front. With WaterCredit, communities may choose to spread that payment out over time through a loan. WaterCredit will also allow WaterPartners to help communities who can afford to pay the entire amount of their project’s cost over time but not as one lump sum before construction begins.

Providing More for Less

Many people in the developing world are willing and able to pay the full or partial cost of their own water systems and sanitation facilities, if only they could finance the expenditure.

We know, for example, that many residents in urban areas spend 25 percent or more of their income on water that is often contaminated. Further, even slum dwellers have demonstrated their ability to pay for water, as they spend about 5-10 times more for water from private vendors than middle-class residents who have access to municipal water supply systems.

Even in slums, poor people are not uniformly poor – people in some slums may have 10 or 20 times the income of those in other slums, yet because almost all water projects are grant-driven, those with greater resources are not sharing in the capital costs of projects. The net result is that some communities who could afford to pay for projects get them for free, while millions of extremely poor people go unserved.

Working through our local partner organizations, WaterCredit will help communities gain access to safe, reliable water supplies and repay their loan, while still reducing their monthly household expenditure for water.

Commitment to the Poor Continues
WaterCredit will not reduce the efforts of WaterPartners to help extremely poor communities through our grant-driven work. In fact, we expect our grant program to continue growing as WaterCredit helps us identify those living under the most dire economic conditions.

Those who are too poor to utilize credit will still be eligible for support from WaterPartners. These communities, however, will still invest in the project through labor assistance. The commitment of WaterPartners is to continue working to the benefit of people living at various levels of poverty.

Why the WaterCredit Initiative will Succeed

First, WaterPartners has done its homework – in Kenya, India and Bangladesh, we convened meetings with groups ranging from the World Bank to grassroots organizations to understand how this initiative would work and to assess the demand for credit. We found no other organizations providing credit for community-based water supply projects and that the demand for loans is strong.

Also, because of the explosion of micro-lending in countries around the world, very poor people in communities where we already work understand credit and actually repay loans at a higher rate than borrowers in the United States.

Finally, we know that the greatest risk for any other organization extending credit would be that poor quality projects would fail, leading to loan defaults. Estimates of water project failure rates in the developing world exceed 50 percent. Because we have been committed throughout our 17-year history to supporting only self-sustaining projects, WaterPartners is in a unique position to ensure the success of WaterCredit. We understand why projects succeed and why they fail, and we apply our knowledge and experience to support high-quality WaterCredit projects.

As loans are repaid, funds will be loaned again for additional projects, bringing clean water to more and more people in need. Through WaterCredit, WaterPartners will create water supply solutions for years to come by giving communities access to credit for the first time – a promising new tool in the fight to end the global water crisis.

Questions - Answers

What is the WaterCredit Initiative?

Simply stated, the WaterCredit Initiative applies principles of micro-finance to the water and sanitation sector. By making small loans to individuals and communities in developing countries who do not have access to traditional credit markets, WaterCredit empowers people to address their own water needs. The repaid loans go back into a revolving fund, and are then re-loaned to the next individual or community.

Why is WaterCredit needed?

Current financing methods to address the world water crisis are not working. Grants alone will never each the 1.1 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 have to spend every day collecting it.

What are the advantages of WaterCredit over traditional grants?

WaterCredit is demand-driven, harnessing the power of people from the bottom up. Rather than depending solely on grants from the top down, WaterCredit enables people to address their water needs on their own timetables. With WaterCredit, the same dollar can be re-loaned over and over again, multiplying the number of people who can be helped. It also frees up grant resources to go where they are most needed.

Is it correct to say that WaterCredit is a new approach to an old problem?

Yes. Up to now, virtually all water and sanitation programs in developing countries have been grant-financed. WaterPartners is the first organization to bring micro-finance to the water and sanitation sector across multiple countries. With the success of our early projects, we believe that the WaterCredit approach will revolutionize the way water is supplied to the world.

Can you cite some examples of WaterCredit successes?

The pilot projects for WaterCredit began in 2004 in the urban slums of Dhaka, Bangladesh, and in rural Tamil Nadu in India. The initial results were highly encouraging, and in both cases, the repaid loans are now in their second cycle of helping people gain access to water and sanitation. In 2005, the WaterCredit Initiative was expanded to Kenya, where the focus has been on community-level loans for wells and infrastructure. The community of Boya in western Kenya took out a WaterCredit loan of $21,000 to finance a new water tank and pipes. Now that they’ve seen how the program works, they are making plans to triple the size of the project.

Will WaterCredit put poor people further into debt?

No. In fact, WaterCredit loans free people from existing burdens – high monetary investment and high time investment (time spent walking and waiting in line for water). Water subsidies are actually upside down – the poor are typically the only ones who pay full price. If the urban poor cannot connect to municipal water supply systems, for example, they are forced to pay high prices for water sold through private vendors, often referred to as “water mafia.” So, WaterCredit loans that allow them to get their water connections can actually reduce their monthly water expenditures. We’ve met people so desperate for water and sanitation facilities that they borrowed money from loan sharks at exorbitant rates—sometimes over 100%—in order to get their hook-ups. In that context, market rate loans from reputable lenders are clearly a better deal.

Where do you go from here with the WaterCredit Initiative?

WaterPartners 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 micro-finance 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 micro-finance institutions, encouraging them to enter the sector by mitigating their risk until they understand it better. Basically, we are willing to do whatever it takes to get this market jump-started. And once it does take off, we think people will be amazed by the results.

More About WaterPartners

WaterPartners is a non-profit organization that has transformed hundreds of communities in Africa, South Asia and Central America by providing access to safe water and sanitation. Founded in 1990, WaterPartners works with local partners to deliver innovative solutions for long-term success. Its microfinance-based WaterCredit Initiative is pioneering sustainable giving in the sector. For more information, visit www.water.org.