Financing Small Water Supply and Sanitation Service Providers - Exploring the Microfinance Option in Sub-Saharan Africa

Recognizing the vital role of the small service providers (SSPs) in the provision of water and sanitation services in Sub-Saharan Africa, this paper discusses the possible role of microfinance in financing small water supply and sanitation (WSS) service providers.

The paper explores three central questions:

• How does the level of development of the microfinance sector in Sub-Saharan Africa affect the potential for financing small WSS service providers?
• What is the nature of latent demand for finance from small WSS service providers?
• What role can governments and development partners play?

Further, the paper lists the key aspects to be addressed by governments and development partners:

• Ensure financing space through policy and programs;
• Provide appropriate regulatory framework and partnerships with SSPs;
• Enable appropriate regulatory framework for microfinance;
• Support communities and microfinance providers for articulating demand for finance;
• Encourage action research through pilots;
• Strengthen knowledge management.

The authors observe that there is:

• Existence of a latent demand for finance among the SSPs in the WSS sector;
• Requirement of technical support and demand promotion;
• Need for appropriate changes in government policy and regulatory environments;
• Need to extend the outreach and sustainability of the microfinance sector in Africa to enable its support for financial services and credit;
• Necessity to support appropriate partnerships between the WSS and microfinance sectors in order to reduce or overcome policy and regulatory risks.