Sector practitioners are gradually recognising that combining CLTS and sanitation marketing (an approach often referred to as CLTS Plus) may not be enough to rapidly scale-up sanitation coverage, particularly in urban areas. Access to finance, whether for households seeking to improve their facilities or for developing the supply of services, appears to be a key ingredient for developing sustainable sanitation strategies. But how can sanitation practitioners use sanitation in their programmes? What do we know works? What works less well? Theses slides present a step-by-step guide for embedding microfinance into sanitation programmes.

1. EMBEDDING ACCESS TO FINANCE INTO
SANITATION PROGRAMMES
A STEP-BY-STEP APPROACH
Sophie Trémolet and Goufrane Mansour,
2nd February 2015, WaterAid, London
1
Mari

2. Objectives and process
 Is it necessary to facilitate access to finance to support access to
sanitation?
 How can the market be stimulated to offer those services?
 What role can WaterAid play in doing so?
1. Identify the need for microfinance to improve
sanitation: understand the demand side
2. Map current provision of microfinance in the
country: understand the supply side
3. Analyse potential needs for public funding:
where are the market failures?
4. Identify catalytic role WA can play: what
strategies could help trigger access to finance?
5. Define scaling up strategies
Understan
d the
market
Assess
how to
intervene

3. Understanding the demand
side3

4. Understanding the demand side
4
 Objective: Identify the need for getting access to
finance
 Key question: Are affordability and limited access to
finance key challenges that could be overcome through
facilitated access to finance?
 How?
 Existing knowledge of sanitation markets within
WaterAid
 Review of ongoing work in this area by other
organisations
 Ad-hoc research:
 Factors of demand for sanitation per sub-segment:
where are sanitation agents currently getting financing
from?

5. Understanding the demand side
5
Identified whether there is a
need for microfinance and what
they are
Map current provision of
microfinance in the country:
understand the supply side
No need:
access to
finance is
not a
constraint
Outcome: identified the need for microfinance for sanitation, or
not

6. Understanding the supply
side6

7. Understanding the supply side
7
 Objective: understand local microfinance sector:
 Who are the key players: commercial banks, MFIs, SACCOs, ROSCAs,
NGOs?
 What is their current involvement in the WASH sector?
 Key question: is there a need to trigger a market response from
financial institutions to offer sanitation microfinance products? Do
these actors need to be incentivised to provide financial services for
sanitation?
 How?
 Consult publicly available information, e.g. mixmarket.org
 Consult microfinance consultants (e.g. MicroSave), microfinance
associations (e.g. TAMFI in Tanzania) on the regulatory environment
 Conduct exploratory research (like the SHARE-funded research in
Kenya, Tanzania and India)

8. What sanitation microfinance exists?
8
 Who is providing financial services for sanitation?
 In India: found MFIs involved in sanitation, with support from NGOs.
Some of these MFIs have spun off from NGOs
 In Tanzania, the SHARE research in Tanzania found:
 Limited experiences of microfinance for sanitation, only via small
NGOs with no established systems or credit officers,
 Identified that smaller and more “socially-minded” MFIs (e.g.
Tujijenge, ECLOF) had a strong interest in the market
 Less interest from commercial banks and large MFIs (eg. FINCA or
Accion) – who fail to see sanitation as a “business area” – might be
worth contacting them at later stage, through the SanFin-Tz working
group
 Who are the other key players supporting microfinance service
development in the country/international level?
 Supporting NGOs / channels for funds: Water.org, WASTE, FINISH,
Homeless International (e.g. CLIFF programme)
 Research and advocacy: WSP

9. Understand the regulatory
framework9
 How is the microfinance sector regulated?
 In Tanzania, microfinance institutions are tightly
regulated: stringent conditions on savings taking
institutions – many MFIs do not offer saving products
 In Kenya: conditions are less stringent
 Do financial policies/regulations support the
social sector?
 In India, in the late 1990s, Reserve Bank of India (RBI)
issued a circular making lending to MFIs and SHGs part
of the priority sector lending for banks
 Relying exclusively on “smart subsidies” is easier when
overall financial infrastructure provide adequate support
to finance “social sectors”

10. 10
Outcome: The provision of financial services for sanitation
is mapped. Now, where are the gaps and how should
public funds be provided to address market failures?
Map current provision of
microfinance in the country:
understand the supply side
Analyse potential needs
for public funding: where
are the market failures?

11. Understanding sanitation microfinance
market failures
11
 Objective: understand which aspect of the microfinance for sanitation
market public intervention should target
 Key questions: what are the barriers to sanitation microfinance
development?
 Not enough demand for sanitation?
 Lack of knowledge by FIs about sanitation sector?
 Lack of understanding of financial sector by WASH sector?
 Lack of liquidity in the market, limited financial inclusion, over-indebtedness?
 How?
 Through existing knowledge of the sanitation sector: is there demand
for improved sanitation?
 Through basic research and interviews with key actors (MFIs, LGs): are
the FIs aware of the financial needs in the sanitation sector? Are they
prepared to take the risk to lend for sanitation?

12. 12
 Outcome: understanding main reasons why
microfinance for sanitation is not developed. Which
strategy can be adopted to address the issues?
Analyse potential needs for
public funding: where are the
market failures?
Identify catalytic role for
public interventions: what
strategies could help
trigger access to finance?

13. Potential roles for public
intervention
13
Conduct research
Play an advocacy
role to influence
public policy
Provide technical
assistance to FIs
on sanitation-
related issues
Act as a channel
for funding through
guarantees and
revolving funds
Act as a channel
for smart subsidies
for FI capacity
building
These approaches are not exclusive
and can complement each other

14. Conduct further research
14
 Objective: better understand the context for
microfinance for sanitation and the potential impact of
public intervention
 Build evidence on what works (case studies); RCTs to
assess the impact of interventions that include a
microfinance component
 Studies to assess affordability: what the market will bear
 Studies to map out the existing microfinance markets and
their interest in sanitation
 Studies that enable a better linkage with housing
microfinance (can we “piggy back” on housing loans?)
 How: commissioning studies, setting up learning

15. Advocate to influence public
policy15
 Objective: Seek to influence public policies so
that microfinance interventions can be fully
integrated in broader sanitation programmes
 How?
 Identify needs for reforming the regulatory
environment (both for finance and for sanitation)
 Lobby for sanitation policy changes (e.g. market
approaches for sanitation in Malawi)
 Lobby local governments so that they are better at
enforcement – consolidate demand for sanitation
 Set up working groups to gather government
representatives and MFIs to enable ongoing
exchanges

16. Provide technical assistance to FIs
on sanitation-related issues
16
 Objective: create “sanitation
champions” amongst FI and build
their capacity to deal with sanitation
issues
 How?
 Design and conduct training on
technical aspects of sanitation,
primarily aimed at credit officers (to
help them market these products):
 Building demand for sanitation
 Technical sanitation solutions (costs and
service levels, maintenance needs)
 Assessing sanitation businesses
 Other courses or special
communication needed for FIs
management
SHARE-funded action research in
Tanzania fall within this type of activity

17. Provide technical assistance on
sanitation-related issues (2)
17
 Support FI in carrying out market research:
o Identify the pertinent problems/questions that will feed into questionnaire
o Identify the areas with high demand for sanitation-related financial
services
 Clarify the regulatory framework for sanitation services and map
out key actors: Policies, government acts, funding flows
 Identify current donor programmes: identify potential areas of
collaboration and potential sources of funding (grant funds for smart
subsidies, soft loans)
 Outcome: “sanitation champion”: he/she will (1) have a good
knowledge of sanitation, (2) sell the product to senior management, be
able to lead sanitation microfinance activities

18. Act as a channel for funding
through guarantees and revolving
funds18
 Objective: Facilitate access to finance through
direct intervention in the market
 How?
 Support the development of revolving funds (e.g.
WaterAid in Tanzania for the gulpers)
 Provide guarantees to FIs (W4P in Malawi)
 Outcome: Loans are more likely to be disbursed;
can be useful to pilot an approach. However
these approaches usually fail to scale up +
questions about their sustainability

19. Act as a channel for smart
subsidies for FI capacity building
19
 Objective: help FI with the design of financial
products that will be attractive for the customers
(households and sanitation businesses) and
generate enough revenues for the FI to carry on
these services
 How?
 Training of FI on market research for sanitation
 Advice on the design of the financial product
 Assist with financial projections for FIs to estimate
break-even point
 Estimate the impact on customers (affordability) and

20. Take home messages
20
 Give priority to strategies where the FI or communities are in the lead
 Better chance of success when the NGO is less visible and there is a
sense of ownership
 Help them develop new products that meet the needs of their borrowers
 Expect a lengthy process:
 Partnerships have to be forged (“courtship” period)
 Training of FI staff or communities is needed
 Products have to be pilot-tested before being rolled-out to allow
revisions
 Develop advocacy strategies so that governments and LGs become
real partners
 To provide an effective regulatory framework and favorable policies
 So that laws are enforced (particularly at Local government level)

21. Further contact
Goufrane@tremolet.com
Sophie@tremolet.com
21