Non-grant Sanitation Financing- Sharing 20 years of financial innovations in the sustainable development sector
In March 2021, FINISH Mondial founding partner, WASTE, was invited to share successes and lessons learned from its experiences in innovative financing in the sustainable development sector, namely in waste management and sanitation. Hosted by the Directorate-General for International Cooperation (DGIS) of the Ministry of Foreign Affairs of the Netherlands, the lunchtime learning session provided a roundtable platform where an exchange of ideas could happen, with DGIS being a long-time supporter of WASTE’s work, including providing the first grant that catalysed the first FINISH project in India in 2008. WASTE shared its expertise and lessons from working with financial institutions in low- and middle-income countries as well as plans for further innovation in 2021 and beyond.
The session emphasised the importance of unlocking additional finance for the water/sanitation/hygiene (WASH) sector as crucial for being able to address the Sustainable Development Goals (SDGs). SDG 6 (clean water and sanitation) is especially underfunded, with €25 million available yet €12 billion required annually to achieve. Further distressing, this is amount does not include operation & maintenance or repair costs for existing sanitation infrastructure.
DGIS Director General, Kitty van der Heijden, noted that the efforts and lessons learnt with business, local governments and civil society organisations to create better prospects for sanitation are crucial to reach the SDGs, particularly regarding water and sanitation, which are linked to every other development area. “It is about our health, global environment, and dignity as human beings. We are going to need all the innovation to deliver safe drinking water to 30 million and safe sanitation to 50 million people.”
Valentin Post (CEO FINISH Mondial, seconded by WASTE) and Ranna Abdulhadi (Junior Programme Officer, WASTE) presented the evolution of WASTE’s nearly 2 decades of working on innovative financing. Most significantly, the duo highlighted the issues in financing and some ideas as to how they can be addressed, including:
- Affordability and high interest rates: based on an example in the Kenyan context with partnering microfinance institutions (MFIs), where the programme has reduced the costs of sanitation (remarkably, by 40-60%), people save a considerable amount (as the principal of the loan becomes lower, sanitation loan borrowers save on the interest).
- The base issue: MFIs did not regard sanitation loans as income-generating loans but rather as consumption loans. We were able to make the case that people save so much time and money (e.g., on health expenditures) due to safe sanitation, that improved sanitation will lead to better quality of life outcomes and healthier communities overall.
- Previously, MFIs knew little of sanitation: So, our programmes partnered with them in a process of handholding to make the case for sanitation investability. MFIs have since recognised sanitation as an opportunity for job creation, increasing their market share, engaging social investors. Moreover, the repayment rates are excellent, similar to income-generating loans or even better, causing partnering financial institutions to develop the WASH market further, independent of programme support or intervention.
Figure 1 Timeline: 2 decades of financial innovations (WASTE).
The session concluded with the presentation of WASTE’s big ambitions for the future. The team presented a selection of three case studies which are aiming to unlock significant commercial finance for sanitation (2018-30) under (a) the utilities pilot collaboration with WaterWorX in Kenya and Tanzania; (b) the Take-a-Stake Fund; and (c) the Sanitation Impact Bond pilot & bond series.