REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

Identifying the type of products that could be proposed to facilitate household
investment
There is a strong need for conducting more demand analysis and product development
activities in order to identify what are key constraints preventing households from financing,
what type of financing they might need to access and what type of microfinance products
could help them overcome these constraints. Given affordability issues, it might be
preferable to start with savings products and to introduce micro-credit only gradually and in
specific circumstances. As discussed, the potential for combining sanitation financing with
overall housing finance should also be considered in more detail.
Influencing policy to trigger a debate on sanitation financing
At the policy level, sanitation microfinance should be discussed as part of the broader
debate on sanitation sector financing. This report argues that sanitation microfinance tools
could be considered in order to overcome affordability constraints, at least for those
households that are able to repay the loans or to save towards this investment. Microfinance
is unlikely to be appropriate for the poorest and most destitute households, who may need to
receive specific assistance to invest. In urban areas where a high proportion of urban
dwellers are tenants, particularly in unplanned settlements, microfinance products and toilet
loans could be targeted at landlords at least in the first instance.
For those who may not be able to afford microfinance loans, a reorientation of subsidies,
away from expensive sewerage solutions and potentially towards hardware subsidies for
onsite sanitation investments by the most destitute should be discussed. This could be
incorporated into a broader discussion about how to finance affordable housing solutions.
Other areas that would benefit from subsidies are the construction of a network of transfer
stations and decentralised treatment plants, so as to bring down the costs of emptying
latrines (through a reduction in transport costs).
Outside the sanitation sector, it may also be necessary to influence financial sector policy, so
as to provide external stimuli for developing the sector, such as classifying sanitation (and
water) as a “preferred” or encouraged area for lending.
Influence the allocation of public funding to stimulate the market
The inclusion of a microfinance component in the National Sanitation Campaign (NSC)
should be considered as soon as possible, whilst the main components of the campaign are
still being defined. As the campaign aims to develop activities both on the demand and on
the supply side, we would recommend that some of the funding be allocated to stimulate
microfinance for sanitation. Even though the NSC is mostly targeted at rural areas,
microfinance products could be included in the mix of interventions to support demand for
sanitation in rural areas.
Funding to support the development of microfinance products for sanitation could also be
channelled in several ways:
To fund activities to support financial institutions looking to get involved in this market,
including via awareness campaigns targeted at financial institutions, market and demand
studies, product development activities;
To provide seed funding for revolving funds, guarantees or fixed-deposit receipts with the
common objective so as to provide the capital needed to scale-up these activities.
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