SUSTAINABLE WASH FINANCE SERIES: Customers, Not Beneficiaries: Shifting Our perception of the Urban Poor and their Ability to Participate Financially in Water and Sanitation Service Delivery

DSK staff member collects monthly payment from a property owner in the Demra area of Dhaka city.

By Kirk Anderson

With nearly 1 billion people worldwide lacking access to clean water and more than 2 billion lacking access to a toilet, achieving Sustainable Development Goal 6 (Access to clean water and sanitation for all people) is a monumental task. The world needs strategies and mechanisms that move us forward quickly and sustainably. One mechanism to expand the purchasing power of every philanthropic dollar invested is the revolving loan fund approach. This requires a subtle shift in mindset. We need to view those for whom services are being built more as customers and less as beneficiaries.

A customer is the most valued person in a healthy business relationship. Good businesses value their customers, some so far as to say, “the customer is always right.” Being a customer means you are respected. There is a growing movement that is changing the world’s perception of the extreme poor (people who live on less than $1/day). For many, the term extreme poverty implies a drain on society’s resources. But some people recognize that the poor participate vigorously in local economies and can be loyal and valued customers. Because water and toilets are critical services for all people, this sector is one area where the poor operate as good customers and there is ample data to prove it.

Since 2006, Water1st has been implementing water, sanitation, and hygiene education projects in the urban slums of Bangladesh on a loan basis. The loan approach is at the insistence of our local partner organization, DSK. DSK firmly believes that poverty alleviation efforts are most effective if you do not give things away. Consequently, over the course of the past thirteen years, the material costs of every water system and toilet installed with Water 1st funding has been given in the form of a loan, payable in two years or less, including 10% interest per year.

Looking at thirteen years of data, Water1st can share a compelling story of the ability and willingness of poor families in urban areas to pay for access to water and toilets. From 2006-2018, roughly USD 3,326,896 was spent to construct 3829 water systems and toilets. Including the interest owed, the total recoverable amount equals $3,982,799. DSK has recovered $3,060,549 and is still collecting on hundreds of outstanding loans. They have recovered roughly 97% of the total recoverable value in the projected timeframe. If they continue to progress at that rate through the end of the loan repayment period (2020), they will recover roughly $3,850,000 against $3,326,896 loaned.

A major benefit of the loan program has been the ability to reach significantly more people as a result of the revolving loan fund. In fact, we can calculate that the loan program resulted in a 63.6% increase in number of people gaining access to water and sanitation. When hardware users make monthly loan payments, the funds go into an account that DSK designates for future Water 1st projects. DSK has been using that fund to supplement the resources Water1st sends them each year. At this point, about 55% of the annual project budget for DSK’s urban water, sanitation, and hygiene work through the Water1st contract is funded by our grant to them. The remaining 45% comes from the revolving loan fund. If DSK were not using the loan approach, we estimate that our funding would have resulted in 91,807 people gaining access to water, sanitation and hygiene education. Thanks to the loan program, DSK has constructed hardware serving over 150,000 people, an increase of 58,403 people.

Those are powerful results: consistent loan repayment rates of 97% over a 13-year period, the ability to reach an additional 63.6% people. What DSK has accomplished goes beyond the neighborhoods they are serving. These results demonstrate that poor people can and will repay loans for access to water and sanitation. Not only have DSK’s customers, who live on less than $1/day, repaid the loans for the infrastructure, they reliably pay the monthly cost of operating a water system or a pour-flush toilet. When it comes to critical services like water supply and toilets, everyone can be a good customer, regardless of their economic status. Recognizing that fact and restructuring programs to include cost recovery can dramatically increase program outcomes and aid in accomplishing Sustainable Development Goal 6.