This presentation was given at WaterAid in London during a workshop on how the SHARE consortium activities can feed into future programmes and policies. As a SHARE research partner, Sophie Tremolet examined the potential role of microfinance in support of sanitation markets, including for access and transport. This presentation highlights her research's main findings and how they can be best put at use.

1. Sanitation markets
The role of microfinance to support
access to sanitation
Sophie Trémolet, WaterAid,
17th December

2. Why focus on microfinance?
Background to the research
• Demand from practitioners
• How can access to sanitation be increased?
• Typical sanitation support programmes focus
on software support but with no or limited
support for access to finance
• Gaps in research:
• Limited knowledge about existing sanitation
microfinance programmes, how they work and
how they perform
• RCT finding in Indonesia: limited “access to
credit” is key constraint preventing hh from
investing in improved sanitation

3. Research questions
• Mapping current knowledge
• What do we know about existing demand and
supply for sanitation microfinance services?
• Who are key players in the sector?
• Evaluating existing experiences
• Where has microfinance for (water) and sanitation
been used and with which impact?
• Case studies
• In India: evaluation of existing experience and lessons
• In Tanzania: evaluation of existing (very limited) experience and
market potential
• Extracting practical lessons
• What interventions could trigger MFIs to offer sanitation-focused
products? Action-research in Tanzania

4. Key findings from Mapping Study
• Limited development overall
• Difficult to track due to lack of data: MFIs do
not record what products are used for
• Documentation of existing cases very limited
(work mostly done by M.Mehta for Gates
Foundation and IRC)- no lessons learned on
reasons of successes or failures; more analysis
has been done on “housing microfinance”
• Many players are “interested” but very much in
the dark as to “what to do”
• Key players in the sector
•
•
Dutch government (via FINISH in India) or water.org are
key players in this area, promoting microfinance as a key
intervention for increasing access
Specialised agencies / consultancies involved in sector

5. Key findings from case studies
• Growing market in India
• At least 9 institutions offering “toilet loans”:
MFIs (Guardian), Cooperative Bank (SEWA
Bank) and NGOs (BISWA)
•146,000 sanitation loans identified enabling
730,000 people to build toilets
• Very high repayment rates (98%)
• Most successful if developed by existing
MFIs
• Some NGOs successful at developing
microfinance branch (Gramalaya/Guardian)
with support from water.org or Dutch funding
(FINISH project)

6. Key findings from case studies
• Guardian (as of 2011)
•
•
•
•
•
•
First “water and sanitation-focused” MFI (spun-off from an
NGO, Gramalaya) operating since 2008
Still small-scale (1 district in Tamil Nadu - India) but growing
fast (20,000 loans disbursed over 3 years, 60% for sanitation)
Operating in rural areas and urban slums
“Toilet loans”: between USD 180 to 225, over 18 months,
18% yearly interest rate (reducing) + 3% charges
Strong demand for toilet loans, 100% repayment rates
Recognize can only reach ~ 30-40% population in villages
Financial sources:
•
•
•
•
Grant support: ~ USD 165,000 (water.org) – 6% funding
Commercial funding: ~ USD 2.6 mn (local commercial
bank, social investors incl. Acumen Fund and Milaap)
High “Leverage ratio” (16)

7. • In Tanzania: sanitation microfinance
little developed but there is potential
Key constraint: MFIs / commercial banks not familiar
with sanitation markets and not willing to take on the risk
to develop these products

8. Action-research in Tanzania
• Trigger interest of MFIs in delivering microfinance products
for sanitation (workshop, meetings, setting up Working Group
“SanFin-Tz”)
• Deliver training on sanitation microfinance product
development to interested institutions, with follow-up
support during pilot stage
• Roles and responsibilities:
– WA-Tanzania acting as host institution
– Training and specialised support by MicroSave,
specialised in microfinance with experience in sanitation
– Learning and overall management: Trémolet Consulting
• Extracting lessons from pilot-testing:
– What was the uptake? How did MFIs perform? Is it
possible to scale up and under what conditions? What role
can WA have in supporting sanitation microfinance in Tz?

9. SHARE Research outputs in this area
Existing
• Sanitation microfinance - situation review and bibliography
(unpublished)
• Case studies on microfinance in India and Tanzania
• SHARE Sanitation Markets Pathfinder paper
• Small-scale finance for water and sanitation (joint publication
between SHARE and EUWI Finance Working Group)
• Blogs/ presentations on SHARE and tremolet.com websites
Planned / Upcoming
• Journal article on sanitation microfinance
• Two-day seminar on sanitation microfinance with practitioners
from WASH and microfinance (planned: May 2014 in London)

10. Implications for programme design (1)
Supporting microfinance can play an important
role as part of a broader strategy to increase
access to improved sanitation

11. Implications for programme design (2)
Microfinance is particularly relevant at a specific
step of the sanitation ladder: from ODF to
improved sanitation

12. What could WaterAid do? (1)
• Conduct further research on the functioning and
impact of existing microfinance programmes
• Play an advocacy role
• Seek to influence public financing policies to
facilitate microfinance for sanitation (e.g. provide software
support to MFIs looking to support sanitation, provide seed
funding for revolving funds or guarantees)
• Establish sanitation microfinance working groups
(gather all key actors of the sector, including public
officials) to exchange experiences and insights on
sanitation microfinance: what is local experience? Is there
appetite from MFIs to engage with the sanitation sector?
How can they best be supported for doing so?

13. What could WaterAid do? (2)
Act as a channel for “smart subsidies” to MFIs,
commercial banks or NGOs (this can involve a range of
training on microfinance product development, system
development, business skills development)
Act as technical support for MFIs on sanitation:
Provide ongoing technical assistance on sanitation
aspects to the MFIs
Act as broker between NGOs and MFIs: facilitate the
forging of partnerships between NGOs (or government
agencies) and MFIs so that microfinance interventions can
be fully integrated in broader sanitation programmes

14. For more information
See:
• http://www.shareresearch.org/Page/Det
ail/markets
• http://www.tremolet.com/focusarea/266 (sanitation financing)