The fundamental premise of this concept note is that households are typically willing to spend on sanitation facility and finance is often the limiting factor. However, the gap cannot be met through credit as microfinancing institutions (MFIs) that can bridge the financing gap also face challenges. They include the non-productive nature of the loan, the small ticket size and high transaction costs, high capital costs, high perceived risks, the longer repayment schedule compared to agricultural credit, compliance and monitoring requirements that are commercially unviable, and regulations like interest rate ceiling. It highlights the strategic role donor organisations can play in addressing these bottlenecks by funding MFIs and/or service providers. The note uses real-world examples of donors working with MFIs and businesses from all across the world to demonstrate the same.
Who is this for and why?
The brief is most useful for donor organisations looking to work with MFIs and businesses to accelerate coverage of household sanitation facilities. It provides useful ways in which they could support MFIs to cover the risks and unlock working capital for businesses. Local MFIs and businesses will also find the examples cities in the note useful in seeking support from donor organisations.