Financing WASH: Key Considerations for MFIs

This briefing note explores some key strategic issues that determine the potential for a water, sanitation, and hygiene (WASH) finance portfolio. The note does so as MFIs have to consider these issues carefully before embarking on a WASH product development exercise so that it can play a catalytic role in increasing the uptake of WASH improvements by poor households. Issues considered include ecological factors, the public good nature of WASH, usage level of existing WASH infrastructure, capital for WASH financing, collaborations with WASH product/service providers, and awareness amongst potential WASH financing customers. Key suggestions include:

• MFIs must choose only those regions that exhibit favorable hydro-ecological conditions for rolling out WASH finance leaving other less favorable regions, which may require much higher investments, to local governments;
• MFIs must look to build WASH portfolio in areas that have an existing backbone of public WASH infrastructure and where the proverbial 'last-mile' needs to be addressed;
• In several geographies there are existing WASH product manufacturers and service providers who are unable to tap into the low income segments due to high upfront costs. MFIs can enter into collaborations with such entities and leverage the existing market demand for these services.