199154 Innovative Financing Brings Clean Water to Low-income Households

Wednesday, November 11, 2009: 10:50 AM

Colleen Green , Global Health, DAI, Bethesda, MD
Allen Hollenbach , Natural Resource Managment Sector, DAI, Bethesda, MD
Gusril Bahar , Natural Resource Managment Sector, DAI, Bethesda, MD
BACKGROUND: DAI implements the Indonesia Environmental Services Program (ESP) with funding from the United States Agency for International Development (USAID). ESP works for the Government of Indonesia and regional stakeholders to promote better health through improved and expanded access to clean water and sanitation services. OBJECTIVE: Examine and implement a micro credit program for financing water connections. METHODS: In collaboration with Bank Rakyat Indonesia (BRI), ESP is providing micro-credit to new customers for financing connections to the water company's supply lines. ESP brokered a cooperation agreement between BRI and PDAM Tanah Datar to provide financing for water connections using innovative loan programs. The average Kupedes loan size to new PDAM customers is Rp 800,000 ($80). Every new water connection borrower must deposit an agreed part of the Kupedes loan in a compulsory savings account. The deposit covers three monthly loan repayments. New customers can access credit without collateral, an important opportunity for low income borrowers, who can prove their creditworthiness and gain access to additional Kupedes credit when their water connection loans are fully repaid. RESULTS: 2,000 new PDAM customers were granted Kupedes investment loans. The water supply company increased its customer base by around 10 percent annually since it started its financial cooperation with BRI. Total water sales increased by around 40 % from 2002 to 2005, leading to a decrease in the average water production cost, which declined from Rp 2,500 per m3 in 2002 to a present level of Rp 1,450 per m3 in 2005. The new customers enabled PDAM Tanah Datar to reduce its non revenue water (NRW) production ratio from 56.5 % at the end 2002 to 36 % at the end of 2004. Relative water losses remained at the same level of around 22 % during the last three years. CONCLUSIONS: Providing clean water to low-income households can be a win-win situation for banks, utilities, and families. By taking advantage of affordable, low-risk loan mechanisms to finance capital expenditure, an increased number of households are able to access clean water, improving overall health and sanitation. In addition, utilities can increase their customer base and total sales, while banks can attract new customers.

Learning Objectives:
By the end of my presentation, participants will be able to explain how innovative financing mechanisms help extend the reach of clean water to low-income households.

Keywords: Water, Access

Presenting author's disclosure statement:

Qualified on the content I am responsible for because: Colleen Green is a microenterprise and financial services specialist with experience in providing technical assistance to development finance organizations, community organizations, donors, and host governments. Ms. Green has worked with micro and small enterprise institutions to identify a wide variety of operational, policy, and financial constraints to the microenterprise development and more recently has focused her work on most at risk populations affected by HIV/AIDS. She has worked extensively with development organizations in Africa, Latin America, Eastern Europe, and the New Independent States, providing technical assistance in strategic planning, program evaluations, standardization, transformation, market research, HIV/AIDS mitigation strategies, and financial management. Ms. Green is also an adjunct faculty member at the Johns Hopkins School of Advanced International Studies, where she co-teaches a course on microfinance and development. Before joining DAI, Ms. Green worked as a small business advisor with USAIDís Bureau for Europe and the New Independent States. For USAID she conducted designs, evaluations, assessments, and financial analyses of SME development projects. Ms. Green has a masterís degree in economic development from the Fletcher School of Law and Diplomacy at Tufts University, and speaks Spanish, Russian, and German.
Any relevant financial relationships? No

I agree to comply with the American Public Health Association Conflict of Interest and Commercial Support Guidelines, and to disclose to the participants any off-label or experimental uses of a commercial product or service discussed in my presentation.