Dear Christoph,
Thanks for your feedback on this. We are always excited to hear thoughts from others’ experiences in the sector. We do agree with what you say about the MDGs being misleading. In section 10.1, we write "Sanitation coverage in the seven countries ranges from 35% in Uganda and India to an estimated 80% in Guatemala (Table 10-1). However, the reality is often considerably worse as these values do not necessarily reflect functionality or use." as an attempt to clarify this we tried not to say Peru is on-track to have sanitation access for everyone, etc. with the thought that the MDG limitations are known in the sector and these are mainly just to give an idea across the countries and a basis for the cost calculations which WHO used to estimate the cost needed to meet the MDGs. These cost estimates are limited as well and were mainly just to show that we don't have those resources available and need to leverage investment from other areas, such as the higher income households themselves and private sector. We’re happy to see discussion of the MDG limitations and others' experiences with sanitation (and water) microfinance emerging from the conversation.

We will be happy to hear more thoughts once you've gone through it all.

christoph wrote: We had about the same interest rate calculated when we tried to set up a microfinancing program with a local Peruvian Private Bank. 33% interest p. year is really high and means in a financing time of 18-36 month that the people will pay 25% - 50% on top of the costs. But yes we as well came to the conclusion it is not possible to do it cheaper, especially as the managing of the loan is a headache. We dropped the idea as too expensive for the people and therefore not attractive.

Hi Christoph,

I am not an expert in this, but as far as I know, such interest rates are rather typical, if not even quite low, for microcredits. Reasons are higher management costs and higher risks of not paying back compared to conventional loans. Still it works well with these interest rates in many situations, because those interest rates are usually still much better than those offered by private loan sharks (usually the only source for loans available to poorer people), and even high interest credits still solve the problem of people not having cash at hand to do needed small investments.

Not knowing more about your idea for a credit scheme, this is just a general remark.

Best, Florian

Hello Sherina,
thanks for that fairly extensive study, I did not get through yet. I just read the part about Peru and some of the general conclusions. We had about the same interest rate calculated when we tried to set up a microfinancing program with a local Peruvian Private Bank. 33% interest p. year is really high and means in a financing time of 18-36 month that the people will pay 25% - 50% on top of the costs. But yes we as well came to the conclusion it is not possible to do it cheaper, especially as the managing of the loan is a headache. We dropped the idea as too expensive for the people and therefore not attractive.
Our conclusion was that this kind of task should be by the service provider - he has set up a whole system to get the money back, bringing down the costs significantly by this. Best would be connected to a water provision which could be cut in the case of missing payment.

Just an additional observation. You put that Peru is on track for the MDG. This is a again a problem of the MDG – The MDG do not relate to real treatment. I do not agree with the fact that the MDG are fulfilled if you have an irrigation of eatable crops in scale by raw domestic wastewater. I think a comment in regard to this is missing in your report when you say Peru is on track for the MDG.

Yours
Christoph

The SAAB program has just concluded a study on the role of Microfinance as a potential catalyst for improved sanitation: A synthesis of Water For People’s sanitation lending experiences in seven countries (Bolivia, Guatemala, India, Malawi, Peru, Rwanda, Uganda).

Drawing on experience from working through sanitation microfinance to catalyze sanitation businesses, the study captures highlights illustrating that sanitation microfinance has the potential to sustainably improve sanitation access in developing countries and summarizes key lessons learnt in the process for implementers, partners and donors.

We would love to hear your thoughts on this multi-country sanitation microfinance experience on among others, how to identify a strong microfinance partner, how best donor funds should be targeted to support sanitation microfinance, and what kind of lending schemes work best in different situations.

More information about this SAAB program is available here on the forum:
forum.susana.org/forum/categories/97-ena...bolivia-peru-ecuador

Water For People works in 10 countries but initially SAAB focused on 7 countries with the exception of our three countries in Central America (i.e. Guatemala, Nicaragua and Honduras). However, we do have SAAB operations in all the 10 now and Guatemala featured in this report because they do have some experience with sanitation microfinance under SAAB.
I hope that makes it clearer. SAAB work is currently ongoing in all 10.

Microfinance for sanitation has been termed as an effective way for increasing access to sanitation in developing countries. It has also immense benefits for the overall poverty alleviation aspect. The concept of advancing small loans to the very poor was first reported in Bangladesh in 1976, when the Grameen Bank was created by the Nobel Laureate, Muhammad Yunus.

There is also a Yunus Center at the Asian Institute of Technology (AIT), Bangkok, formally launched on 19 August 2009, the first of its kind outside of Bangladesh. While the microfinance finance market has grown over the years (see attached report by SHARE for India), there seems to be limited success elsewhere (see attached report of SHARE for Tanzania).

In Pakistan, while there are some microfinance institutions, none are specifically directed towards sanitation sector (or, at least advertized for sanitation). There seems to be no gains of microfinance in the sanitation sector in the Sindh province of Pakistan. I’m looking for solutions how can this be done to help sanitation sector in rural Sindh. The impact of microfinance in sanitation sector in Bangladesh, where it all started, is not known to me. Perhaps some colleagues from Bangladesh, or others having specific knowledge (Bangladesh, or elsewhere), can share their experience.

As usual, I’m attaching some publications (Ms. Elisabeth might be thinking of labeling me as publications-provider!!!!!!! – Please check for copyrights issues - Thanks).

Cheers,

F H Mughal


Note by moderator (EvM): I checked the publications, no problem. In general, it is only the academic journal articles or books where copyright means that one cannot share it freely on the internet.