It is mind boggling to me that in a day and age where innovation, medical breakthroughs and technologies have revolutionized our world, 750 million people still lack access to safe drinking water and 2.5 billion are without basic sanitation services. Today, more people have access to a cell phone than a toilet. Worldwide, women waste 180 million hours a day scavenging for safe water, while 443 million school days are lost each year due to water-related illnesses. According to a recent article by the New York Times, an increasing body of research has shown “that many of the 162 million children under the age of 5 in the world who are malnourished are suffering less from a lack of food and more from poor sanitation.” This means that in densely populated areas with generally poor sanitation, even well-fed children are at risk of malnutrition.
And while the global water and sanitation crisis is not one of the sexiest topics of the 21st century, it is an important challenge that will play a tremendous role in shaping a more stable and healthy future for generations to come. In 2014, half of hospital beds worldwide are occupied by patients suffering from diseases caused by this issue. More specifically, the global water crisis leads to more than 3.4 million deaths per year, including 1.5 million children under the age of five who succumb to diarrhea, something that could be easily treated with Pepto-Bismol in the United States.
Some of you may be familiar with these statistics; some of you may not. For those of us who are lucky enough to take these services for granted on a daily basis, it’s challenging to wrap our heads around this issue or even begin to conceptualize what this harsh reality means for the billions of women, children and families who confront this crisis every day. For a mother living under these conditions, this often means making life saving decisions for her children, deciding whether drinking dirty water or having no water at all is the best option for her kids. And this is not just a problem in a distant land – this is a reality and global tragedy unfolding right before our own eyes.
It’s also hard not to get frustrated with the rate of progress or results to date. According to the World Health Organization (WHO)/UNICEF Joint Monitoring Programme, 30 to 60 percent of water points still fail within the first two years after construction in the developing world. David Rothschild, Principal at the Skoll Foundation, wrote a great piece on this called “Dilemmas of a Water Funder.”The WHO estimates that it would cost US$200 billion in capital per year to solve this global challenge over the next five years and maintain the infrastructure. Currently, annual contributions by the international aid community amount to roughly US$9 billion, far short of what is needed to solve this crisis through direct intervention.
While my passion for the global water and sanitation crisis emerged years ago when I was working with the World Bank in Southeast Asia, it is through my work and experiences with Water.org that I’ve had the chance to completely immerse myself in this issue and think creatively about how I could contribute. Water.org is an international non-profit dedicated to increasing access to safe water and sanitation among communities worldwide, with a strong focus on financial innovation and accelerating progress.
I’ve wanted to write a blog for quite some time now, a place where I could share more ideas and thoughts about my experiences with you, and as someone who is passionate about the role philanthropy and impact investing can play in addressing this issue. Having traveled extensively to Asia and Africa in the past, and more recently to Haiti and India with Water.org, I thought now would be the perfect time to get this project going.
As a strategic philanthropy guru and a long-time admirer of social entrepreneurship, I couldn’t have landed in a better place than Water.org. Over the past four years, I’ve had the opportunity to work with an amazing and dedicated team, including Water.org’s CEO and co-founders (Gary White and Matt Damon), to build a portfolio of creative, strategic funding partnerships that have scaled the organization’s signature model – WaterCredit – worldwide. Starting in India and Bangladesh in 2003, Water.org now has active WaterCredit programs worldwide in additional countries including: Peru, Kenya, Uganda, Indonesia, the Philippines and Cambodia. And we’re currently laying the groundwork for new WaterCredit programs in Ethiopia, Ghana and Brazil. That’s pretty exciting!
Introduction to WaterCredit
WaterCredit is a market-based initiative that empowers families at the Base of Economic Pyramid (BOP), who earn between $1.25 to $5.00 a day, to gain access to small and affordable loans to meet their water and sanitation needs. For instance, this could include paying for the construction of a water connection or toilet in their home. The ultimate focus of this approach is to remove barriers preventing those living in poverty from choosing and purchasing the water and sanitation solutions that work best for them. In other words, it’s one step toward ensuring the system that we all benefit from is more inclusive and fair for the poor.
Through this initiative, Water.org and its local partners (mostly including local water and sanitation NGOs and microfinance institutions – MFIs) strive to ensure those living in poverty can participate as customers, and have a voice and role in shaping their own future. Many generous strategic funding partners have helped us expand WaterCredit. You can read more about these partnerships in a recent article by Interbrand that includes an interview with Gary White.
And, while the global water crisis may seem like an insurmountable challenge, it is actually completely solvable – which is the good news. While we know today there will never be enough charity to address the magnitude of this issue, there are ways in which we can get smarter, more creative and more efficient about how use and leverage philanthropic dollars to tackle this challenge. In terms of infrastructure, we’ve known how to build toilets in homes and develop sustainable safe drinking water systems for decades. An article written by our co-founders (Gary White and Matt Damon) highlights this: “In the developed world, most of us are enjoying the outcomes of long-forgotten innovations in engineering that have provided us with constant, daily access to safe water. The contrast for the nearly one billion people on the planet who don’t have affordable access to this basic necessity is stark. They walk for miles, wait for hours and pay extortive prices to meet this fundamental need.”
While addressing macro-level water infrastructure needs in developing countries remains incredibly important; on the flip side, empowering those living in poverty with access to affordable financing (such as micro-loans) to help them meet their water and sanitation needs represents a great opportunity to achieve large-scale impact.
Let me explain this a bit more. Many of those living at the BOP have demonstrated the willingness to pay for access to safe water and sanitation. In fact, many are often paying more for their water (from water vendors or illegal money lenders) than their middle-income neighbors (including five star hotels) who have connections at home that tap into the local water pipes ran by utilities. And yet, most families at the BOP are not considered as viable customers by local banks and utilities.
However, studies have shown that households at the BOP can pay for water and sanitation improvements themselves with the help of affordable financial products that will help them pay for the up-front costs of installing a water connection or toilet at home. A study supported by the Bill and Melinda Gates Foundation estimates that there is a $12 billion demand among the BOP for microfinance for water and sanitation needs. This is a huge market, waiting to be discovered.
These findings, along with more than 20 years of experience in the sector, inspired Water.org to launch WaterCredit. Through this initiative, Water.org and its local MFI partners have reached more than 1.6 million people with safe water and/or sanitation.
Another interesting and “cool” feature of this market-based approach is that it enables philanthropic dollars to have a much greater and efficient reach. While those living in absolute poverty will continue to require full subsidies (grant funding), it is estimated that at least 60 percent of people worldwide without access to improved water and sanitation earn enough income to invest in their own solutions by obtaining a loan via WaterCredit.
Here’s some additional information on how this model works. Water.org provides smart subsidies (philanthropic funds) and technical assistance to carefully selected local partners over a three to five year period. As mentioned above, these partners primarily include local MFIs and water and sanitation NGOs. Through this assistance, Water.org helps these partners lay the groundwork to develop a WaterCredit financial product portfolio, covering start-up costs such as client market research, financial product development, and community mobilization and hygiene education. Water.org’s local partners leverage these philanthropic funds to attract and mobilize other sources of capital (e.g. commercial and social investment capital), which in turn are used to provide WaterCredit loans.
To date, Water.org has directed $9.7 million in philanthropic funds towards WaterCredit. As a result, our local partners have been able mobilize more than $70 million in commercial and social investment capital to disburse WaterCredit loans. In addition, WaterCredit loans have a global repayment rate of 99 percent, allowing financial institutions to redeploy those repaid funds to reach more people in need, creating a long-term cycle of change. Philanthropic dollars supporting WaterCredit can reach five to ten times as many people as a traditional grant over a 10-year period. You can read more about this model at www.WaterCredit.org. Or check out this video highlighting the story of Rajamma, a woman in India who took out a WaterCredit loan.
And if you want to learn more about this issue at large, there are also a number of other terrific water and sanitation organizations out there you may want to check out such as Water for People, WSUP, Charity: Water and WaterAid.