Microfinance Lending for Small Water Projects and Output-Based Aid: The Experience So Far from Kenya

This presentation guides MFIs through the process of making transactions and achieving scale in water and sanitation projects (WSPs) in Kenya. It discusses how microfinance can help Kenya meet the millennium development goals on water and sanitation. It makes recommendations for MFIs, government institutions, and the Water and Sanitation Programme Africa (WSP Af) to move forward in this area.The presentation states that factors such as supportive government policy, are driving the possibility of market based financing for WSPs in Kenya. MFIs should enhance their assessment capacity, develop business development services (BDS) and internal processes to move forward in the sector. Government institutions should implement sector reforms. Recommendations for WSP Af comprise assisting in sector reform, developing assessment tools, and developing the BDS sector. Key messages include:

• Microfinance can be used to leverage resources and enhance sector sustainability;
• Microfinance can help to achieve aid effectiveness in terms of efficiency and targeting for both government and donor resources;
• Aids and grants can be used to facilitate transactions, develop BDS markets, and provide credit enhancements.