Kicking off the discussion on microfinance for sanitation


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  • sengel
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  • I'm a lecturer at the Uni of Wollongong in Australia, with a growing interest in the politics and sociology of sanitation
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Re: Kicking off the discussion on microfinance for sanitation

Just on the issue of debt for household financing, which I think Esther rightly noted as a major ethical issues. As Goufrane argues, yes wealthier households have used debt for housing but they've done it in the context generally relatively high waged jobs. We saw what happened in the US when 'sub-prime' lending got out of hand, all it took was an interest rate spike to precipitate a crash that then most impacted the poorest.

Given average microfinance interest rates are over 25% now, I find it well, extraordinary that this should be seriously promoted as a path for the poor to improve sanitation. Yes sanitation will eventually improve well-being (with a number of provisos on quality and universality) and this 'may' improve livelihoods over the long-term (though many other factors are more influential) but there are too many ifs and buts here to encourage those surviving through daily wage labour, other informal sector work or agricultural subsistence to take on debt at high interest rates for this or indeed most things.
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  • SophieTremolet
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  • London-based water and sanitation economist. Searching for social/environmental solutions to world's woes. Trémolet Consulting Director
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Re: Kicking off the discussion on microfinance for sanitation

Dear All

Thanks to everyone for their very enlightened and rich contributions. It's really good to hear from key players in the "sanitation financing at micro level" field, such as Meera Mehta, iDE, PSI,, FINISH and many others.

As many point out, financing solutions cannot be considered in isolation from other interventions to boost access to sanitation- they are intrinsically linked to demand creation, supply-side support activities, etc. Many highlighted the importance of thinking through in detail how an NGO or a service provider can interact with financial service providers (be they MFIs, but also commercial banks, savings and loan associations or NGOs themselves) so as to reduce the costs of service provision (making the product more affordable) and bring in financing as "bridge capital". We heard from many who are playing this brokering role and are learning about the potential pitfalls, such as making sure that the loans are used for their intended purposes or ensuring that finance providers remain interested in what they might see as a "low-margin / high hassle" sector.

On the question of whether it is "ethical" or not to consider facilitated access to finance in the mix of solutions to boost access to sanitation, I would say it's a pragmatic solution. In current circumstances where access to finance is limited, households either build no toilets (defecate in the open or use public toilet blocks) or build very flimsy ones which don't last and don't provide hygienic protection, privacy and safety. Few countries have the means to massively subsidise sanitation and for those who have done so, it has often failed. So we need to explore ways to facilitate access to finance- and micro-credit is not the only solution but it is one that is growing and has the potential to grow further.

As Yi Wei from iDE and others points out, there is a need for gathering and sharing learning around these alternative solutions to facilitate access to finance. Foras such as these are great to start building a community of practice around these topics but they are limited in their reach. What are your suggestions to take this learning and sharing to the next level? Do we need to build a knowledge hub for interesting organisations? Do we need more research to document alternative financing models and if so, who is best placed to act as an anchor for this research? How can we take the results of this research to inform others who could better play this brokering role and incorporate this learning into the design of their sanitation interventions?

For a start, Trémolet Consulting with support from SHARE and in association with, CEPT, FINISH, MicroSave, and ECLOF will be holding a seminar at Stockholm World Water Week on sanitation microfinance: - We hope to keep this fascinating conversation going there and through other foras and have as many of you involved in this conversation. Do get in touch if you'd like to join this conversation by contacting This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it.
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  • Mauryvills
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Re: Kicking off the discussion on microfinance for sanitation

Hello everyone.
In Nicaragua there are many experiences that are being developed; eg The Water and Sanitation Program of the World Bank, WaterAid, Water for People and others.
The "WSP" from World Bank launched a pilot project called "Partnership for strengthening local capacities for Sanitation in Nicaragua"; the results were not as expected; however there are many lessons learned.
One of them; how can we make the government sector identify need to utilize resources better and not necessarily through subsidies that for years have not improved levels of sanitation coverage; mainly in rural areas?
Another point; It is that access to microcredit for sanitation will not be the solution; but it is a good mechanism for people with low, intermediate and high levels of incomes to improve their sanitation and high probability of being sustainable (units would not be used as warehouses).
A very interesting document on the economic impact of poor sanitation in Nicaragua
WaterAid is developing a similar model (with some variations); but it has been developed in a more complicated context on the Atlantic Coast of Nicaragua with the presence of indigenous communities and dialects; therefore very different from urban culture.
Water for People in Nicaragua (as some of you have mentioned above) has identified some lessons learned and challenges:
• Support is needed to link all participants in the supply chain of sanitation (Government, suppliers of materials, labor and financial services, civil society, sanitation users).
• To train MFI´s on technical issues about sanitation in order to make easier their promotion processes.
• To support training of construction workers who can design and build different types of sanitation units. (To taste the client).
• Do not promote standard units; therefore; designs must be developed on what the customer wants.
• Poor families who cannot access credit; they must be advised by local governments to support climbing the ladder of sanitation.
• Is necessary to identify MFI’s that not only have commercial goals; but also with a social vision.
• Can be helpful to identify local organizations working with international organizations that promote improved quality of life for residents or their customers (certification agencies, FLO-CERT, OCIA, IMO- Control, USDA organic, Rainforest Alliance, etc ).
• It is not advisable suggest to MFI's conditions for these kind of loans; it is better that they consider the conditions that can make the financial product; sustainable.

• More ownership and participation of the government sector.
• Long-term loans (24 - 36 months) to facilitate access to poorer families.
• Funds of international organizations have to be located in smart subsidies, which do not affect the creation of a favorable environment for the development of sanitation in a sustainable manner.
• How can poor families who cannot access credit conditions improve basic sanitation?

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  • Katrin
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  • I am coordinating SuSanA's thematic discussion series. Let me know if you have any questions!
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Re: Summary for our discussion on "Microfinance"

Dear Forum Members,

Thank you all for contributing to our discussion on "Microfinance"!

The summary is now available here .

Make sure to also check out and contribute to our current discussion on "City level sustainable cost recovery" here .

Thank you,
Dr. Katrin Dauenhauer
SuSanA Thematic Discussion Series Coordinator
Bonn, Germany
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