In June 2016, I had the opportunity to join a panel of some of the world’s most inspiring social entrepreneurs at the Global Entrepreneurship Summit (GES) at Stanford University. GES is an innovative conference led by US President Barack Obama. My talk on the video above starts at 00:59. I’m including an additional video here which gives a broader view of the conference. My talk starts at 2:44.
Moderated by Sally Osberg (the President and CEO of the Skoll Foundation), this panel included Willy Foote (Founder and CEO of Root Capital) and Premal Shah (President of Kiva) – two remarkable social entrepreneurs also referred to as “phenomenal disruptors”. Focusing on the urgency to create ecosystems that can unleash sustainable and large-scale social change, I shared Water.org’s story and our blueprint for addressing the global water crisis at scale. Having traveled across the world and seen first-hand how far too many families, children, and communities are affected by this crisis, it was truly an honor to share our story.
Challenging the conventional thinking that we can only solve the water crisis through charity alone, I discussed Water.org’s strong appetite for innovation which led to the development and scaling of WaterCredit. Leveraging limited philanthropic resources, the WaterCredit model has unlocked more than half a billion dollars in local commercial investment capital to meet the water and sanitation needs of 8 million people. Given lack of financing remains the biggest obstacle to solving this global challenge, it’s vital we find ways to attract other sources of capital to match the scale of the problem. Private capital’s scale and global reach presents a tremendous opportunity to accelerate progress against the water crisis.
So why take this approach? And after 14 years of implementing the WaterCredit model, what have we learned and where are we going next? How have we shifted gears when things stalled or failed? These are many of the points I discussed during this panel. Research and our experience to date shows that at least a fourth of the billions of people who lack access to safe water and sanitation would pay for those services if they just had access to affordable financing in the form of a small loan? This is the $12 billon market demand WaterCredit aims to respond to.
Partnering with 70 local microfinance partners worldwide, Water.org has provided more than $20 million in philanthropic resources to these financial institutions to help them undertake market research and build water and sanitation loan portfolios for the world’s poor (WaterCredit). With this support, these partners have attracted $602 million in local commercial investment capital to provide 2 million loans to families living in poverty. While the average philanthropic cost per person of a traditional water project can range from $35-$60, many WaterCredit programs have reduced that cost to $3-7 per person. This presents great potential to use philanthropic resources in a more efficient manner.
Overall, the results of WaterCredit are deeply encouraging: more than 50% of WaterCredit loans reach families earning below $2 a day, WaterCredit loans have a global 97-99% repayment rate, 91% of WaterCredit loan recipients are women, the average size of a WaterCredit loan is $311, and more than 8 million people have gained access to safe drinking water and/or sanitation thanks to these loans. Meanwhile, the Water.org team has built partnerships with a wide spectrum of key institutional, policy-making, and government organizations to help others integrate the WaterCredit model in their efforts, and create a policy environment that is conducive to helping the world’s poor gain access to the financial tools they need to meet their water and sanitation needs.
However, while the prospects for growth globally are inspiring, we are still far from bringing an end to this global crisis. For instance, many of our microfinance partners still face capital constraints, and need access to investment capital in a more reliable and affordable manner to provide more WaterCredit loans to underserved families – at a level that will truly put a dent in this crisis.
With the impact investing market growing at a fast pace and set to reach $1 trillion by 2020, the Water.org team saw a unique opportunity. A chance to connect the immense wealth in the US, Europe, and also Asia with the capital needs of both microfinance institutions providing WaterCredit loans and local businesses serving the water and sanitation needs of the poor. With this in mind, Water.org launched its inaugural $11 million impact investment fund in 2015, along with its impact investing manager – WaterEquity. Investing in a pool of high-performing microfinance institutions in India, this Fund is performing well and on its way to impacting one million lives over its seven-year term. This Fund has already returned capital to owners in 2017 with a higher-than-expected annual distribution payment of 3.6%.
Building on this, WaterEquity went to market in April 2017 with a $50 million Fund that will invest in water and sanitation businesses, including microfinance institutions, in India, Indonesia, Cambodia, and the Philippines. With commitments already totaling $32 million from institutional investors and foundations including Bank of America, the Overseas Private Investment Corporation, and the Hilton and Skoll Foundations, this Fund will impact the lives of 4.6 million people in Asia while also generating a 3.5% financial return for investors. With a blended capital structure, this Fund also includes a $5 million first-loss guarantee that covers both investment returns and principal.
As WaterEquity executes these Funds, the team is already undertaking critical analysis and developing a roadmap for a potential $100 million Fund. This Fund will invest in water and sanitation businesses in Asia, Africa, and potentially Latin America. This includes targeting a broader variety of water and sanitation businesses servicing low-income communities, as well as schools and hospitals. With a deep understanding of this market and complementing the work for Water.org, WaterEquity sees a unique opportunity for market-level impact; a chance to help at least 100 million people get access to safe water and sanitation, and develop a more financially inclusive ecosystem. Time will tell but we are excited……