Microfinance is a simple but innovative solution, empowering the poor as well as vulnerable groups by providing small amounts of credit. This creates an opportunity for individuals and families to improve their quality of life through their own initiative. It is especially significant for women who cannot access traditional forms of credit in many regions of the world. The first large-scale example is the Grameen Bank which started in Bangladesh and provided the poorest people with group-based credit and fair lending conditions (and won a Nobel Peace prize).
Microfinance has traditionally been used to fund small businesses and agricultural needs that require initial capital. For example, Juhudi Microfinance in Kenya has recently provided microloans for giant rabbit farming due to a growing demand for rabbit meat in the region (perhaps not the most common example). Flemish rabbits can grow up to 7-9 kilos so they are a worthy investment compared with smaller breeds.
However, the realm of water and sanitation is one area where there is significant potential for microfinance instruments. Safe water is generally not recognized as an income-generating activity, but in fact safe water and sanitation means healthy and productive workers and healthy school children. However, it also comes at a cost. A report from the Gates foundation estimated that the potential market size for WASH microfinance to be $12 billion over the next 10 years.
Kiva Microfunds (kiva.org) is a NGO which allows individuals across to the globe to lend to borrowers in many low and middle income countries over the internet. While most loans are for small businesses, searching ‘toilet’ did unearth a loan for someone constructing a toilet in their home. However, out of 860 loans currently being filled on Kiva today, none turned up for ‘Water Distribution.’ This is only one example, but it demonstrates the current lack of popularity for WASH microfinance. I think this is a critical area for WASH based organizations and NGOs to work on, bridging the gap from solely donor or government funded ‘water projects’, to empowering individuals and communities to gain more ownership of their water and sanitation services through microfinance. In this way microfinance provides an important tool towards sustainably achieving the lagging sanitation MDG target – but what kind of creative microfinancing ideas could motivate more people to invest in water or sanitation improvements?
-Sarah Dickin