REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

Box 6: Revolving funds for water and sanitation in Vietnam
In 2001, a Sanitation Revolving Fund (SRF) component was incorporated in the World Bank-financed
Three Cities Sanitation Project in Vietnam to provide loans to low-income households for building onsite
sanitation facilities. The SRF provided small loans (USD 145) at partially subsidized rates to lowincome
and poor households to build a septic tank, a urine diverting / composting latrine or a sewer
connection. To access the loans, households needed to join a Savings and Credit group, which bring
together 12 to 20 people who must live close to each other to ensure community control. The loans
covered approximately 65% of the average costs of a septic tank and enabled the household to
spread these costs over two years. The loans acted as a catalyst for household investment although
households needed to find other sources of finance to cover total investment costs, such as borrowing
from friends and family.
The initial working capital for the revolving funds (USD 3 million) was provided as a grant by the World
Bank, Denmark and Finland. The SRF was managed by the Women’s Union, a countrywide
organisation representing the rights and interests of women that has a long experience with running
micro-finance schemes. The initial working capital was revolved more than twice during the first phase
of the project (2001 to 2004) and was then transferred for subsequent phases to be revolved further.
Combined with demand generation and hygiene promotion activities, the SRF helped around 200 000
households build sanitation facilities over the course of seven years. The revolving fund mechanism
allowed leveraging household investment by a factor of up to 25 times the amount of public funds
spent. Repayment rates are extremely high (almost 100%).
This pilot approach has since been scaled up, via other World Bank-funded projects (with an
outstanding working capital of about USD 25 million as of March 2009) or through the Vietnam Bank
for Social Policy (VSBP). The latter offers separate products for water and sanitation, through the
Safe Water and Rural Environmental Sanitation Program (SWRESP). In 2007, the amount of loans for
SWRESP was USD 20 million.
Source: Trémolet, S. with Perez ,E. and Koslky ,P. (2010); Mehta (2008).
In India, straight “toilet loans” are offered by a growing number of MFIs to women members
of Self-Help Groups. These MFIs mobilise financing from commercial banks. For example,
BWDC in Tamil Nadu made 9,000 toilet loans in the last 3 years. Guardian, the first “water
and sanitation-focused” MFI (spun-off from an NGO) has provided with support from
water.org over 20,000 micro-loans in the last 3 years, 60% of which were for sanitation. They
are targeting rural areas and urban slums, with variable loan terms. Typically, toilet loans are
between USD 180 to 225, repayable over 12 or 18 months with an 18% yearly interest rate
(reducing) and 3% charges.
What are existing experiences in Tanzania?
There are very few experiences in Tanzania with sanitation microfinance targeted at
households. Two programmes run by NGOs have provided microfinance products to
households, i.e. the savings and loan programme run by CCI (Centre for Community
Initiatives) and the lending programme that was run by MAMADO in Dodoma. 9
Both of these experiences have been initiated with a predominant focus on water and
sanitation activities and no prior experience with running microfinance schemes or saving
programmes. Those schemes have remained at a limited scale, although they are potentially
promising. Table 4 below summarises the key characteristics of such schemes whilst Annex
A presents them in more detail, together with recommendations for scale-up.
9 Other NGO-run programmes, such as the CARE/iWASH programme, include an overall microfinance
component for economic activities at village level but no specific sanitation programme.
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