Sparked by the Covid-19 crisis, Aqua for All, a Netherlands Water Partnership (NWP) member, has partnered with Sidian Bank to develop an innovative finance instrument to overcome the challenges faced by water and sanitation micro, small, and medium enterprises (MSMEs) in Kenya. “With the Covid-19 WASH Loan Facility, we can continue providing short-term loans to water and sanitation MSMEs, whilst at the same time setting the example for other financial institutions. Water and sanitation loan repayment rates are high on average. This shows that investing in water and sanitation initiatives is good business even in times of Covid-19,” says Marlies Batterink, Regional Programme Manager at Aqua for All. “With initiatives like this, we hope to facilitate other financial institutions to start investing in water and sanitation solutions.”
‘The water and sanitation sector in Kenya has been hit very hard by Covid-19. The demand for safe water for frequent handwashing and lockdown measures, has increased immensely, especially at household level. But by staying at home, people could not generate an income to pay for water. Instead of shutting down the water supply, the Government asked water providers to keep on providing water to everyone. The outcome is that water and sanitation MSMEs are suffering revenue loss and are facing increasing costs. At the same time, they are being asked to meet the higher demand. This is a serious problem that threatens their survival. And their services are critical in the fight against the spread of Covid-19.
Traditionally, water and sanitation enterprises have been perceived as high-risk, which usually makes financial institutions reluctant to invest in the sector. And compared to other areas such as sustainable agriculture or renewable energy, the business case for water and sanitation is less straightforward. Water and sanitation are still public services in many low-income countries, but many cannot sustainably serve the entire population, especially in rural areas.
Sidian Bank has built up a solid track record of financing water and sanitation MSMEs over the years. The average loan repayment rate of its water, sanitation and hygiene (WASH) portfolio is similar to the repayment rate of other sectors. Sidian Bank is a financial institution that is proactively contributing to combatting Covid-19 in Kenya by continuing to provide financial services to WASH enterprises. Through the Covid-19 WASH Loan Facility, the Bank facilitates access to credit for water and sanitation MSMEs. Even small loans can make the difference for MSMEs to continue serving their populations and survive. They can also help the MSMEs to make the transition to renewable energy sources that can improve their financial situation. The investments need not be large. Smaller loans of between EUR 5,000 and EUR 25,000, can enable MSMEs to stay in business and even develop new solutions.
Facilitating access to clean water and good sanitation for all (SDG 6) is Aqua for All’s priority. We aim to bridge the gap between services and the funds required by service providers. We use existing solutions, but we are also strong supporters of innovative ideas for cheaper and better services.
The Covid-19 WASH Loan Facility is optimised and can provide loans at short notice, which is necessary for an effective Covid-19 response. The Loan Facility can use Aqua for All’s funds as lendable funds. However, we prefer using our funds to de-risk investments in water and sanitation to attract private investors to become part of a structural solution for the sector’s challenges. This innovative approach to water and sanitation financing has a twofold result: bridging the finance gap through unlocking financing, and ensuring that investment-ready enterprises have access to funds to finance their sustainable scale up. Looking forward, we intend to replicate this innovative finance solution, not only in Kenya, but in other countries that are interesting to the Dutch water sector.
The Covid-19 WASH Loan Facility and our alternative financial approach can be game-changers for the Dutch water and sanitation sector. There are quite a few Dutch companies working in Kenya and others are considering entering this market. But their potential clients are often interested in things like new water storage tanks or new water pipelines for which they lack funds. In these cases, a local loan facility can provide the much-needed capital.
We would like to encourage financial institutions or sector players that are interested in the Kenyan water and sanitation market, or in other regions where Aqua for All operates, to contact us through: email@example.com. We welcome ideas on water and sanitation entrepreneurship and finance. In fact, we are continuously exploring innovative ways to bridge the service and finance gap to achieve water and sanitation for all.’
Aqua for All is part of NWP’s NGO Water Platform which keeps its members up-to-date and connected with other development organisations working in the field of WASH. The platform enables its members to present themselves to other organisations interested in WASH related activities in country platform meetings and other networking activities. For more information, please contact Vincent Cornelissen, Secretary of the NGO Water Platform at firstname.lastname@example.org.