WaterCredit Q&A• What is the WaterCredit Initiative?• Why is WaterCredit needed?• What are the advantages of WaterCredit over traditional grants?• Is it correct to say that WaterCredit is a new approach to an old problem?• Can you cite some examples of WaterCredit successes?• Will WaterCredit put poor people further into debt?• Where do you go from here with the WaterCredit Initiative?What is the WaterCredit Initiative?Simply stated, the WaterCredit Initiative applies principles of microfinance tothe water and sanitation sector. By making small loans to individuals andcommunities in developing countries who do not have access to traditionalcredit markets, WaterCredit empowers people to address their own waterneeds. The repaid loans go back into a revolving fund, and are then re-loanedto 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 nearly one billion people in need of safedrinking water. People often are forced to wait years for a grant that maynever come. Meanwhile, they’re getting sick and dying from the unsafe waterthey’re drinking—not to mention the hours they have to spend every daycollecting it.What are the advantages of WaterCredit over traditionalgrants?WaterCredit is demand-driven, harnessing the power of people from thebottom up. Rather than depending solely on grants from the top down,WaterCredit enables people to address their water needs on their owntimetables. With WaterCredit, the same dollar can be re-loaned over and overagain, multiplying the number of people who can be helped. It also frees upgrant resources to go where they are most needed.
Is it correct to say that WaterCredit is a new approach to anold problem?Yes. Up to now, virtually all water and sanitation programs in developingcountries have been grant-financed. Water.org is the first organization to bringmicrofinance to the water and sanitation sector across multiple countries. Withthe success of our early projects, we believe that the WaterCredit approachwill 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 highlyencouraging, and in both cases, the repaid loans are now in their secondcycle of helping people gain access to water and sanitation. In 2005,the WaterCredit Initiative was expanded to Kenya, where the focus has beenon community-level loans for wells and infrastructure. The community of Boyain western Kenya took out a WaterCredit loan of $21,000 to finance a newwater tank and pipes. Now that they’ve seen how the program works, they aremaking 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 – highmonetary investment and high time investment (time spent walking andwaiting in line for water). Water subsidies are actually upside down – the poorare typically the only ones who pay full price. If the urban poor cannot connectto municipal water supply systems, for example, they are forced to pay highprices for water sold through private vendors, often referred to as “watermafia.” So, WaterCredit loans that allow them to get their water connectionscan actually reduce their monthly water expenditures. We’ve met peopleso desperate for water and sanitation facilities that they borrowed money fromloan sharks at exorbitant rates—sometimes over 100%—in order to get theirhook-ups. In that context, market rate loans from reputable lenders are clearlya better deal.Where do you go from here with the WaterCredit Initiative?Water.org does not aspire to be the water bank to the world. Instead, we seeour role as accelerating natural market processes. This means fosteringrelationships between microfinance institutions and non-governmentalorganizations in the water and sanitation sector to help them understand eachother better. Or, in certain cases, even creating hybrids between the two. Inother places, we may provide standby letters of credit to back loans made bymicrofinance institutions, encouraging them to enter the sector by mitigatingtheir risk until they understand it better. Basically, we are willing to dowhatever it takes to get this market jump-started. And once it does take off,we think people will be amazed by the results. visit : www.water.org