Microfinance for Water and Sanitation: Lofty Dream or Wave of the Future?

Wednesday, June 1, 2011

The microfinance sector is certainly not short of innovative thinkers, who should be applauded for their determination to use microfinance as a diverse tool that can do more than just increase a household’s income. The latest craze in the creative use of microfinance as a generator of positive externalities is the use of microcredit for the provision of clean water.

The idea is to provide individuals and households in the developing world with microcredit services that would allow them to access desperately needed clean water and safe sanitation, while simultaneously providing them with an opportunity to increase income generation. These microloans are generally deemed to be non-productive “consumption” loans, not unlike microloans for housing; however, in some cases the potential exists to finance clean water microenterprises, in which clients could, for example, launch micro businesses to sell clean water to fellow poor villagers.

WaterCredit, an initiative of Water.org, recently launched the new WaterCredit.org website, which presents a tempting vision of the answers to all the world’s problems wrapped up in a neat little package. This certainly wouldn’t be the first time that the microfinance sector birthed an ingenious idea that was able to wield microfinance as a tool to alleviate a poverty-stricken community from ills from which it has suffered for centuries. But before we invest our life savings in this nascent idea, one question remains to be asked: is microfinance for water and sanitation just too idealistic?

Source: Microfinance Focus (link opens in a new window)