How to pay for water – new ideas in microcredit


Everybody needs access to clean drinking water and decent sanitation facilities. But how to pay for it all? Akvo volunteer Winona Azure reports from a conference call with April Rinne, director of the WaterCredit initiative at

Director of WaterCredit, April Rinne. Photo courtesy of

The numbers are known – there are about 0.9 billion people without access to clean drinking water, and 2.6 billion people without access to adequate sanitation (Joint Monitoring Report, WHO & UNICEF). Although great strides are being taken towards improving this situation, a lot of investments go to large-scale water and sanitation infrastructure, which mainly benefits people in the middle and upper classes. To reach the poor is much harder, and what is worse, poor people pay up to 10 times more for their water as middle class people pay, as a percentage of income. Basically, buying water per bucket from a water vendor is more expensive per litre than having a house connection.

So who is going to pay for water and sanitation services for the poor? In the sector, there is great interest in finding smart ways of giving poor people access to the necessary capital to fund water and sanitation projects. A really interesting development program is WaterCredit.

The WaterCredit initiative, started by the people at, is putting microfinance tools and partnerships with micro-finance institutions (MFIs) to use in helping people get safe water and a toilet. The goal is to assist micro-finance institutions to develop micro-loan products and services that meet the needs of the water and sanitation sector.

WaterCredit does not provide loans directly – their main role is to link financial institutions with one another, to encourage exchange of ideas and experiences. WaterCredit educates the institutions on the water and sanitation sector, and on ways to decrease risk in their lending portfolio.

Smart money

To ensure sustainability, WaterCredit does not subsidize interest rates or provide loan capital. Instead, it may provide no-loss guarantees or letters of credit (a document in which a financial institution promises to pay a sum according to a set of circumstances). In effect, by decreasing the risk of MFIs, by covering part of their risk, local money is unlocked, which can be put to use in water and sanitation projects.

Providing no-loss guarantees is especially important for items which are seen as risky. For example: a rainwater catchment tank provides obvious collateral, which can be reclaimed if there is a default on a loan. But in the case of a water connection, collection is more difficult: a water connection to a house does not exactly have a lot of second-hand value. Without someone covering the risk, the MFI would not provide the loan, and the connection would simply not get built.

Guaranteeing risk has a wonderful leveraging effect. Say you guarantee the risk of 50 loans, of which one defaults. Then for the price of one loan, 50 people get the opportunity to get the systems they need. Over time, when MFIs get more experience with water and sanitation, the MFI will see that this is good business as well, and take over the risk themselves.

What it buys

The stuff paid for by the loans is very varied: water and sewage connections, toilets, pit-latrines, pumps, wells, rainwater harvesting tanks, and drip-irrigation. Many of these are clearly income-generating, such as drip irrigation. Others, such as water and sewage connections, are seen as income-enhancing, i.e. they can free up time for the client (time that would normally be spent collecting water) so that they can be more productive.

WaterCredit currently works within India, Bangladesh, Kenya, and Uganda. More than 90% of their clients are women, and the average global repayment rate since 2007 is 97%.

Winona Azure is an Akvo volunteer, at the moment based in South Korea.