Progress is being made to impact the significant morbidity and mortality associated with poor water and sanitation in the developing world. In addition, lost productivity is being directly impacted by new community based water projects, freeing women for other work and children for school. Especially in the rural areas with a large percentage of subsistence farmers being women with children, the access to clean water and adequate sanitation is critical for health, safety, and economic opportunity. In many areas without adequate safe water, families are spending up to 20% of their income for water. Estimates include 663 million worldwide without access to clean water, and the impact is primarily felt by women and children. Child and maternal mortality can be directly linked to lack of access to clean water and sanitation. The UN’s Sustainability Goals for 2030 include universal and equitable access to safe and affordable water and sanitation.
In the last ten years, MFIs have adapted their models to meet both individual and community needs. But two population factors will impact the ability of microfinance institutions to continue to improve water and sanitation infrastructure with current models: the continuing move of large populations to urban areas, and the population explosion estimated globally, and especially in Sub-Saharan Africa, in the next thirty years.
In rural communities and villages, the current models include microfinance loans to community groups for water and sanitation projects that also include an education component, such as lessons in maintaining new equipment and proper sanitation practices to reduce infectious disease. These models have more oversight requirements than others, and the plans for infrastructure development may be in multiple stages. Because of this increased complexity, the repayment models have been altered to be more effective for the community.
Planning for the future for these projects will need to include water projects for agriculture, as more women farmers are moving from subsistence to market, and this increased revenue and productivity has a direct effect on the health and welfare of the children and community. In addition, burgeoning urban populations will be relying on these farmers and markets for adequate food.
With larger and more densely populated urban cities, the potential for catastrophic disease exists when there is not adequate sanitation and water infrastructure. But the way urban centers need to pay for development is not similar to rural models, where villages can come together to build and maintain a new system. In urban areas, a modern utility company usually owns access to the water and infrastructure, and there is usually an upfront cost to connect to the system. Paying for these connections can fall to either communities or single households, but is a lump-sum of money up front that many cannot manage.
In many countries, municipalities are tasked with developing adequate water and sanitation infrastructure for their citizens, but they may be restricted in how they can finance these projects. Small utility providers may also hope to provide services, but lack the capital and the ability to use the microfinance market to find the needed capital. There may be the need for changes to regulatory frameworks to allow more freedom for municipalities and small utility providers to raise capital for projects. If that comes, microfinance institutions will need to increase oversight of these types of projects.
Challenges for microfinance institutions will include the need for developing workable cost-recovery strategies and finding new ways to co-finance infrastructure development with other entities, such as government, NGO, and community organizations. The repayment models will be longer, and may include models such as equity ownership. There will be more oversight and management challenges, and careful operating risk assessments will need to be carried out throughout a project. Partnerships with both global and in-country experts will be needed to manage the costly and complex water and sanitation infrastructure development.
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