George Muruka, senior microfinance consultant at MicroSave, takes us through the microfinance context in the East Africa region (Ethiopia, Rwanda, Uganda and Tanzania), including regulation and future policy trends for promoting financial inclusion.

1. MicroSaveMarket-led solutions for financial services
MicroSaveMarket-led solutions for financial services
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Microfinance in East Africa
WaterAid Regional Workshop
Embedding Microfinance in Sanitation Programs
Ledger Bahari Beach Hotel,
Dar es Salaam
16th
May 2014
By George Muruka,
Senior Specialist: Microfinance and Livelihoods at MicroSave

2. MicroSaveMarket-led solutions for financial services
Sanitation Situation
There is an urgent need to facilitate access to
improved sanitation facilities!
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3. MicroSaveMarket-led solutions for financial services
Types of Sanitation Facilites
Sanitation Facilities Continuum
Unimproved Facilities Improved Facilities
Moving people from using …
•No facilities,
• bush or field (open
defecation)
• Buckets
To using improved facilities such as…
•Facility
• Pit latrine
• Open pit
• Hanging toilet or hanging latrine
• Pit latrine without slab,
• Shared or public facilities of any
type
• Pit latrine with slab
• Ventilated improved pit (VIP)
latrine
• Composting toilet
• Pour-flush
• Flush
i.e. not to piped sewer system/
• Flush or pour-flush to:
• Septic tank
• Piped sewer system

4. MicroSaveMarket-led solutions for financial services
Microfinance as a development tool
• Microfinance is the provision of a broad range of financial services to
poor/low income people to manage their livelihoods.
• From microcredit to microfinance: Microcredit refers to credit only. But the
poor also need all financial services and therefore microfinance.
• Microfinance services include: savings, loans, micro-insurance, livelihoods
financing, money transfer and payments etc.
• Deployment and access is usually through multiple delivery channels e.g.
branches, ATM, mobile phones,
• Currently theme, financial inclusion, focuses on banking the unbanked.
Regional Context:
Low access to formal
financial services
(About 25% of adults accessing
formal financial services. 6 EA
countries , pop. est. 345 million)

5. MicroSaveMarket-led solutions for financial services
Financial Sector Overview
East Africa Region
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6. MicroSaveMarket-led solutions for financial services
Microfinance: Country Context 1/5 (Info. 2010 to date)
TANZANIA (pop. est. 49 million)
Banks
BoT (www.bot-
tz.org)
29 Few mass market banks e.g.
NMB
MFIs 40+ mf service providers
2 Regulated MFIs
Focus on meeting prudential
requirements
Member Based 7+ Community Banks
Several SACCOs/SACAs
Great potential but yet to
diversify offerings
Network TAMFI (www.tamfi.co.tz) Potential partner to access MFIs
Access to formal
financial
Services
17% • Mobile money yet to change
situation
• Rural livelihoods and low
population density hinders
growth
Sanitation
promoters
• Government projects
• NGO projects
• CBOs members own
financing
• Limited private sector
financing
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7. MicroSaveMarket-led solutions for financial services
Microfinance: Country Context 2/5
KENYA (pop. est. 44 million)
Banks
CBK
(www.centralbank
.go.ke )
43 Some mass banks e.g. Equity, K-
Rep, Cooperatives, Jamii etc
Others have mf units/depts
MFIs 50 Multiple national & regional
credit only MFIs, 6+ regulated
Member Based 5,000+ SACCOs Strengthening of regulations e.g.
200 SACCOs with FOSA
Network AMFI
(www.amfikenya.co
m)
Strengthened by efforts on MFI
regulations and microfinance
banks membership
Access to formal
financial Services
32% Mobile money changing the
dynamics
Sanitation
promoters
Largely Government,
NGOs, CBOs support
Substantial private sector
financing being experienced
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8. MicroSaveMarket-led solutions for financial services
Microfinance: Country Context 3/5
UGANDA (pop. est. 35 million)
Banks
BoU (www.bou.or.ug )
23 Few mass banks e.g.
Centenary
MFIs 124
(10+regulated deposit
taking )
Focus on rural and per-
urban traders
Member Based Multiple & unregulated
rural SACCOs, weakened by
government funding
Weak control system
and low staff capacity
Network AMFIU
(www.amfiu.org.ug)
Strong network
Access to formal
financial Services
32% Growing access to
mobile money services
(MTN, Airtel etc)
Sanitation promoters Government,
NGOs,
CBOs
Limited private sector
financing
More efforts required
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9. MicroSaveMarket-led solutions for financial services
Microfinance: Country Context 4/5
ETHIOPIA (pop. est. 91 million)
Banks 17 3 state, 70% of assets, high liquidity,
low interbank lending, CBE largest
branches
MFIs 30 23 regulated, 1+ million clients, 3-5%
interest on savings, except from income
tax. Largest 4 = 88% of savings, 83% of
credit
Member Based Limited SACCOs Farm produce cooperatives,
Network AEMFI
(www.aemfi-
ethiopia.org)
Strong network, sector training and
publication
Access to formal
financial Services
?? ??
Sanitation
promoters
Government
housings
program
Limited private commercial sector
driven sanitation financing 9

10. MicroSaveMarket-led solutions for financial services
Microfinance: Country Context 5/5
RWANDA (Pop. 13 million)
Banks 9 3 National, 6 Foreign
MFIs 62+ MFI organisations
(multiple legal forms)
• Concentration around Kigali
• 65 branches, 27% of total outlets
Member Based Umerenge SACCOs • A central bank fin. access
program reach rural areas
• Mobile bank linkage
Network AMIR
(http://amir.org.rw)
62 members, FE and value chain
financing projects
Access to
formal services
30%
Highest around Kigali
Mid income by 2020, and 80%
access by 2017
Sanitation
promoters
Largely driven by public
and NGOs
SACCO program and MFIs are
highly potential
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11. MicroSaveMarket-led solutions for financial services
Microfinance Services Suppliers vs legal status
1. Members based institutions e.g. SACCOs, Self help groups (SHGs) and
Community Banks. Typically represent communal efforts to pool and
access financial services amongst a defined membership.
2. Credit only MFIs: often registered as NGOs
3. Deposit Taking MFIs/Microfinance banks: Regulated by central bank
in respective countries
4. Retail Commercial Banks targeting mass market/bottom of the
pyramid/the low income market segment. Fully regulated by central
bank

12. MicroSaveMarket-led solutions for financial services
Sanitation-finance approaches /Products
Household level:
1. Toilet/sanitation facilities construction from own funds
2. Village solidarity & participatory toilet construction financing (in kind
contributions + loans e.g. SEDIT VICOBA program, traditional NGOs
programs
3. MFIs loans through solidarity groups for construction, repairs, sewage
connections.
Community level (Sanfin for scaling up sanitation):
1. Co-financing: NGOs grants and CBOs cash and in-kind contribution
e.g. Maji na Ufanisi in Kenya.
2. Sanitation Fund: Mix of savings groups table banking (savings/loans)
+ external grants/loans e.g. CCI Jenga fund
3. Sanitation Enterprises e.g. Cash flow based loans by banks and MFIs
to individual entrepreneurs/registered CBOs

13. MicroSaveMarket-led solutions for financial services
Embedding & Scaling Up
Sanitation Microfinance
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14. MicroSaveMarket-led solutions for financial services
Why the slow approach to financing sanitation?
1.Limited understanding of the sanitation sector/Market
o FIs are familiar with business and trading sectors
o Lack of strategy on sanitation financing
o Low staff capacity
1.Unclear regulatory environment
o Unclear policy especially on private systems
o However, public actors slowly appreciating role of private operators
due to limited public funds
1.Sanitation service operators slowly commercializing their activities
o Weak legal structure e.g. CBOs, FBOs, individuals etc
o Government funding expectation
o Excessive focus on advocacy, capacity building/training
o NGOs are not familiar with the demands of FIs e.g. Financial
proposal
o Limited commercialization of WATSAN activities

15. MicroSaveMarket-led solutions for financial services
Scaling up Sanitation financing
1. Integrating sanitation and Housing schemes
o Targeted sanitation/housing programs by NGOs/CBOs
o Funding CBOs to manage public sanitation facilities e.g. UN
Habitat, TAFSUS & Municipal Council, Tanzania.
o Need for capacity building to CBOs
1. Smart subsidy schemes with commercial banks & MFIs
o Output based financing for community water/Sanitation projects
e.g. WSP and K-Rep Bank in 2005. Program invested US$ 1.1. m,
Community water projects received development loans from US$
75,000 –170,000), K-Rep committed US$ 4 million to scale up the
program.
o Direct financing of sanitation facilities to reduce capital cost.
Leading to reduction of loans amounts required by the borrowers
1. Loan guarantee schemes for community project
o Collaboration between Bank and Sanitation NGO e.g. Family Bank
& Practical Action (Kenya), US$ 65,000 guarantee fund.

16. MicroSaveMarket-led solutions for financial services
Embedding Sanitation Microfinance Process
Product
Roll out
Product
Roll out
Processes still under development _Sanfin project in Tanzania
Review of
Strategy &
Products
Review of
Strategy &
Products
Product
Development/
Refinement
(6 months)
Product
Development/
Refinement
(6 months)
Sanfin Team
(MFIs & San NGOs)
Pilot Test
6 – 12 months
Pilot Test
6 – 12 months
• MFI/NGOs buy-
In,
• Staff Training ,
• Demand mapping
& creation
(continuous)
• MFI/NGOs buy-
In,
• Staff Training ,
• Demand mapping
& creation
(continuous)

17. MicroSaveMarket-led solutions for financial services
CBO Managed Public Toilet Enterprise

18. MicroSaveMarket-led solutions for financial services
CBOs Receipts and Transaction Records

19. MicroSaveMarket-led solutions for financial services
Sanitation Infrastructure Development
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20. MicroSaveMarket-led solutions for financial services
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