The WaterCredit Initiative applies principles of microfinance to provide small loans to individuals and communities in developing countries for water and sanitation access. Loans are repaid and recycled to help others, as grants alone cannot meet the needs of the nearly 1 billion people lacking safe drinking water. WaterCredit empowers people to address their own water needs on their own timelines in a sustainable way. Early projects in Bangladesh, India, and Kenya have shown encouraging results, with repayments launching second cycles of assistance and communities like Boya in Kenya expanding their projects. Rather than increasing debt burdens, WaterCredit loans can actually reduce monthly water costs for the poor compared to alternatives like private vendors. Going forward, the initiative aims to foster relationships between

1. 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 to
the water and sanitation sector. By making small loans to individuals and
communities in developing countries who do not have access to traditional
credit markets, WaterCredit empowers people to address their own water
needs. The repaid loans go back into a revolving fund, and are then re-loaned
to 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 safe
drinking water. People often are forced to wait years for a grant that may
never come. Meanwhile, they’re getting sick and dying from the unsafe water
they’re drinking—not to mention the hours they have to spend every day
collecting it.
What are the advantages of WaterCredit over traditional
grants?
WaterCredit is demand-driven, harnessing the power of people from the
bottom up. Rather than depending solely on grants from the top down,
WaterCredit enables people to address their water needs on their own
timetables. With WaterCredit, the same dollar can be re-loaned over and over
again, multiplying the number of people who can be helped. It also frees up
grant resources to go where they are most needed.

2. Is it correct to say that WaterCredit is a new approach to an
old problem?
Yes. Up to now, virtually all water and sanitation programs in developing
countries have been grant-financed. Water.org is the first organization to bring
microfinance to the water and sanitation sector across multiple countries. With
the success of our early projects, we believe that the WaterCredit approach
will 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 highly
encouraging, and in both cases, the repaid loans are now in their second
cycle of helping people gain access to water and sanitation. In 2005,
the WaterCredit Initiative was expanded to Kenya, where the focus has been
on community-level loans for wells and infrastructure. The community of Boya
in western Kenya took out a WaterCredit loan of $21,000 to finance a new
water tank and pipes. Now that they’ve seen how the program works, they are
making 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 – high
monetary investment and high time investment (time spent walking and
waiting in line for water). Water subsidies are actually upside down – the poor
are typically the only ones who pay full price. If the urban poor cannot connect
to municipal water supply systems, for example, they are forced to pay high
prices for water sold through private vendors, often referred to as “water
mafia.” So, WaterCredit loans that allow them to get their water connections
can actually reduce their monthly water expenditures. We’ve met people
so desperate for water and sanitation facilities that they borrowed money from
loan sharks at exorbitant rates—sometimes over 100%—in order to get their
hook-ups. In that context, market rate loans from reputable lenders are clearly
a 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 see
our role as accelerating natural market processes. This means fostering
relationships between microfinance institutions and non-governmental
organizations in the water and sanitation sector to help them understand each
other better. Or, in certain cases, even creating hybrids between the two. In
other places, we may provide standby letters of credit to back loans made by
microfinance institutions, encouraging them to enter the sector by mitigating
their risk until they understand it better. Basically, we are willing to do
whatever 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