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Appraisal Tools for Sanitation Micro Finance

A toolkit to improve microfinance agencies' evaluation of risks and attractiveness of asset financing under Swachh Bharat (Rural) Mission

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Appraisal Tools for Sanitation Micro Finance


The Swachh Bharat Mission (Rural), with mission to make India free of Open Defecation by October 2, 2019, aims to bridge the affordability gap for latrines and to improve sanitation coverage across rural India. The program provides incentives to households so that tangible assistance is available for creation of infrastructure in addition to extensive motivational and behavioural change interventions. As per the SBM (R) guidelines[1], the incentive amount provided for households shall be up to Rs.12,000[2] for construction of one unit of Individual Household Latrine (IHHL). The sharing pattern amongst Central Government from the SBM(R) funds is outlined in guidelines that explicitly state that beneficiaries are to be encouraged to contribute additional funds in the construction of the IHHL to promote ownership. The SQUAT Survey[3] estimates the average cost of private toilets desired by rural citizens in India to be greater than Rs. 21,000, which brings the average individual contribution to Rs. 9,000. For Community Sanitary Complexes (CSC), the guidelines state that the maximum support prescribed per unit is Rs.2,00,000. Sharing pattern amongst Central Government, State Government and the Community shall be in the ratio of 60:30:10 – the contribution from the beneficiary or community is to the tune of Rs. 20,000, for a facility that can be assumed to serve 15 – 20 households.

The targeting schema for IHHL incentive funding includes all Below Poverty Line (BPL) Households and certain Above Poverty Line (APL) Households from marginalized groups. Per household contributions for CSCs come out to be lower than that for IHHLs, making them a lucrative option for poorer households or even local Self-Help Groups. However,CSCs require community-level mobilization, or some level of support from the Gram Panchayat, as the ongoing maintenance of such a complex is critical to its functionality.


Assistance with this last-mile funding throughmicrocreditinstruments hold the potential to play a significant role in amplifying the effect of the SBM(R) objectives, enabling households in the bottom of the pyramid gain access to critical sanitation infrastructure. Our hypothesis is that in cases where a pre-existing felt-need for sanitation services exists, microcredit schemes for the ownership or creation of sanitation assets would have an immense impact. Microfinance lending could provide the delivery of last-mile support to the poorest of the poor in Rural India, in the form of credit to invest in this important infrastructure, designed with their needs in mind, with the financial instruments catering to their conditions. While a number of micro finance entities have started looking at toilets (more commonly IHHLs and less so, CSCs) as an asset category, there are several gaps in this space, particularly around a 360 degree risk and viability assessment approach to guide portfolio creation. Given that such risk and viability decisions are a function of multiple factors (technological, hydrological, socio – economic, behavioural and cultural), there is a strong need for a decision support system to help MFIs and other financing agencies


We propose the development of an Augmented Risk Framework for the MFIs that work in partnership with, to expand their access into these markets to supplement the reach of the SBM (R) program. At the outset, this Risk Framework will include both risks associated with lending and those associated with asset utilization and maintenance. This framework will build atop the existing expertise and deep knowledge MFIs have on individual and group lending, incorporating hard technical elements of sanitation infrastructure and soft elements of societal norms and the social dimension of sanitation behaviour. This is aimed at addressing the problems traditional microfinance ventures have faced in the field of (indirectly) income-enhancing assets like toilets, in comparison to direct income-generating assets or purely consumption financing. The augmentation of existing risk models should help MFIs differentiate among different asset models across the value chain, fine tuned for the local, sectoral and program context.

Fitment with

The current call for challenges focuses on “market based approaches to address water and sanitation challenges”. In this context, we believe that this idea fits in well into the overall theme, as it focuses on putting decision making tools in the hands of key market agents (microfinance agencies) to help them improve their penetration and risk management. Given that toilet financing is a relatively nascent market, tools for better risk assessment and management can significantly improve the growth prospects of the segment.

We also believe that the integration of’s existing work on WaterCredit[4] meshes well with the aims, ambition, and capacity of the Swachh Bharat Mission, and presents a valuable opportunity to improve the delivery of sanitation assets to households in the bottom of the pyramid, a section traditional microfinance approaches have found little success with.  The common goals of asset creation and improved uptake of usage of toilets and associated behavioural changes aid the integration of and synergies between’s WaterCredit program and the Swachh Bharat Mission (Rural).

Approach and Methodology – Augmented Risk Assessment Framework

The assessment framework aims to augment the existing risk appraisal models of MFIs, which are traditionally geared towards minimizing lending risks. In such a model, the key variable of interest ends up being the probability of repayment of the loan. By designing instruments on demographic parameters and not including asset characteristics or project lifecycle costs, the process is - by design - not attuned to risks of non-deliverance on outcomes.

In our proposed framework, the evaluation process begins with an identification of the asset in consideration, with IHHLs and CSCs presenting different sets of risks. Asset Risks are defined for each of these as parameters which are either linked to the sanitation infrastructure being built (Infrastructure risks), or those which affect usage, operations and management of the asset (Utilization risks). These are both risk categories which significantly impact the outcomes linked with the creation of the infrastructure. Lending risks, which fall into the existing domain expertise of the MFI firms, form the base layer which this framework integrates with.

Infrastructure Risks

Similar to the conjunctive elimination criteria used by sanitation decision support frameworks, a set of criteria, largely based on “hard” constraints such as hydrological and climatic conditions will be created. This will serve as a first filter to examine feasibility of options. Across the three stages of collection & storage/ primary treatment; desludging & transportation; and treatment & disposal, a comprehensive set of asset options will be identified. This will also include asset options for handling of grey water. There are existing tools and frameworks (e.g. SANEX), which detail out such infrastructure options. These frameworks will be augmented, keeping the SBM(R) contours in mind, and assets will be examined on these parameters.

Utilization Risks

This category pertains to risks of continued and sustained usage of the sanitation asset created, to achieve the goal of Open Defecation Free villages, a core goal of the SBM (R) program. It deals with societal perceptions of open defecation and that on the use of latrines, socioeconomic characteristics, and other parameters to identify potential uptake or even triggering of the creation of assets in the village. It also seeks to incorporate the presence of allied water and sanitation services, levers critical to the continued use and viability of latrines. In addition to this, for CSCs, estimates of utilization and per-day usage become vital in understanding the viability of such an asset. If the operation model of the CSC includes a user charge, the willingness to pay of the target audience has proven to be a critical determinant of success as indicated in the literature.

The SBM(R) guidelines for CSCs state that they can be run on a Public-Private Partnership model, with the requisite support from the Gram Panchayat authorities, which form the base unit for the program. Self-help Groups could also be viable targets for microcredit lending to build and operate CSCs, given the importance of community-based systems.  This is particularly the case if those groups would also manage the CSCs and generate revenue from them.  There is evidence that giving groups ownership of community water and/or sanitation infrastructure often incentivizes them to maintain the facilities in order to ensure future income.  That being said, this is dependent on the groups getting training on both management and O&M.  They need to be able to track income, and build in costs for maintenance

Management and governance structures for CSCs also have been shown to be important determinants of sustainability. These parameters all impact the Utilization Risk of the asset, and have a bearing on the outcomes of improved and continued sanitation access for all in rural India. This additional focus on utilization seeks to address concerns around abandoned or ill-maintained toilets and latrines strewn all over India. This iterative monitoring framework, which can be tied into the credit repayment schedule to the MFIs, serves to keep tabs on maintenance of the asset and thus plug in the gaps of follow-up in the system. This may have greater significance for CSCs designed for a pay-and-use model.

Plan of Action

We propose a study of select districts across select states to understand the role of the prescribed enablers in the risk framework and try to estimate how they impacted the operationalization and success of a variety of sanitation asset creation models.

Step 1: Preparation (Commencement – Month 2)

A set of blocks (tentatively covering ~ 80 – 100 GPs) will be identified for creation of case studies, covering the span of success and failure stories for individual and community toilets, across hard asset limitations highlighted. This data will be drawn from the database of participating Microfinance agencies (in network), as well as through independent outreach to the Districts. The aim here will be to get a wide enough spread of cases to enable comparability, to understand the causal factors of attribution, to understand what contributes to the propensity of success or failure for a particular model of sanitation services. Review reports of the Total Sanitation Campaign[5] shall provide a starting point of examination here. In addition, we will also anchor consultations with existing microfinance players who have a portfolio/ interest in this space, to understand current appraisal frameworks and identify key gaps in the same.

Step 2: Field Data Collection (Month 3 – Month 6)

Data will be collected across the value chain of sanitation for the identified blocks and GPs, beginning from environmental conditions and socioeconomic profile, to demand and supply of sanitation assets, data on the functionality and usage of said assets, to data on the estimated O&M costs for them and the willingness to pay for these services. This will be centred on the headers identified in the Augmented Risk Framework across the Infrastructure and Utilization risk categories. The field data collection exercise will follow a case study approach to integrate both quantitative and qualitative aspects of the experience (across failure and success stories), as this will be key to understanding causal factors impacting outcomes

 Step 3: Analysis of Data and Identification of Enablers (Month 7 – Month 8)

After the collection of data, we’ll employ the Qualitative Comparative Analysis (QCA) tool[6] to identify enablers critical to the uptake and operationalization of successful sanitation assets. A statistical tool, QCA allows us to assess causation that is very complex, involving different combinations of causal conditions capable of generating the same outcome. A variant of logistic regression, QCA will be able to help us gain insights into the causal chain between the inputs (perceptions, attitudes, knowledge) and outcomes (sanitation) involved. This will result in an ordering of various risk factors (by level of impact on manifestation), and mapping of the said risk factors to observable indicators at the time of appraisal (spanning technical, economic, socio cultural and attitudinal dimensions). This will translate to data mining of the existing portfolio of MFI sanitation asset data, for lowering risk profile of future investments

Step 4: Creation of Augmented Risk Framework (Month 9 – Month 12)

With enablers identified, a portfolio of key decision metrics will be drafted. These metrics are those that should have the greatest impact on the success or failure of the sanitation assets. Coupled with the lending philosophy of individual WaterCredit MFI partners and their own risk appraisal models, this risk framework will incorporate elements across the value chain of sanitation asset building and presents risk metrics across usage and repayment, providing a monetary and outcome-centric risk management approach.This will be validated through consultations with microfinance partner group (facilitated by watercredit). The output will be an easy to use sanitation asset appraisal decision support tool (along with a user manual), which will act as a simple support to lending decision making. This tool will be disseminated to microfinance agencies (again drawing from watercredit partners) through a workshop. Additionally, State Governments (where pilots are anchored) will be sensitized on the benefits of the tool (in supporting Districts and Gram Panchayats in optimally utilizing the SBM(R) programme).

[1] ‘Guidelines FOR SWACHH BHARAT MISSION (GRAMIN)’, Ministry of Drinking Water and Sanitation, 2014. []

[2]While State Governments can choose to provide a greater incentive (in addition to their minimum mandated 3,000 per IHHL, along with Central Governments’ contribution of 9,000, most States do not provide more than INR 5,000, which still leaves a gap of around INR 10,000 to be filled in by the households

[3]‘Revealed preference for open defecation: Evidence from a new survey in rural north India’, SQUAT Working Paper No. 1, 2014. []


[5]‘Evaluation Study on Total Sanitation Campaign’; PLANNING COMMISSION, GOVERNMENT OF INDIA, 2013. []


How would you describe the stage of development of your idea?

  • Conceptual Development

How big or scalable is the potential of your idea?

The Swachh Bharat Mission (Rural) has an envisaged coverage of all Gram Panchayats for complete elimination of open defecation. There are a total of ~ 250,000 GPs in India, of which an estimated 60% do not have access to sanitation facilities. This translates to about 8.2 Crore households, and over 40 Crore citizens Even if microfinance agencies are able to address a small share of the above market, that will translate into millions of households impacted, through sustainable sanitation, leading to better health and productivity

Explain the sustainability aspect of your idea

The idea is anchored around "viability" of sanitation investments, which will be ultimately repaid by the asset users themselves. We believe that our idea ingrains viability and support in two aspects First, the idea is centered around the Swachh Bharat Mission (Rural) - an ambitious multi year programme anchored by the Govt. of India, and implemented by State governments across the country, which envisages zero open defecation by 2019. Creating infrastructure of this scale and sustainably maintaining it requires strong support from citizens, and other private sector players, particularly micro finance agencies. Our idea seeks to play this facilitative role Second, given that the tool we are constructing seeks to assess a village/ community/ household context, and identify the optimal sanitation options in view of a risk - feasibility calculus, viability is at the core of out construct. Hence, this will help de-risk the portfolios of finance providers (microfinance agencies), and help a faster growth of the sanitation based asset portfolio

What types of financing would be required for your idea to be successful?

The financing for asset creation itself will be supported by the Swachh Bharat Mission (Rural), from the Central and State Governments. The gap (for both household toilets and community toilets) is to be financed by the household or community organizations, which could in turn look at financing through microfinance providers. The programme funding window is open till September 2019 As for financing of the proposed tool, we look forward to support from this challenge. We envisage a one year programme of ~ $180,000, encompassing tool development, testing, capacity building and implementation support.

If you are proposing to partner with other organizations, please explain their role and reason for partnership.

Athena Infonomics will be partnering with Development Innovations Group (DIG) to execute this concept. DIG is a private, international firm committed to expanding the frontiers of finance and development. DIG strives to improve the lives of the poor in developing and transitioning economies by enhancing the inherent strengths of national and local governments, communities, and the private sector. DIG has been fostering innovative, locally-driven solutions in the fields of financial services for the poor; urban, water, and infrastructure services; as well as fund management. DIG has worked in over 35 countries, spanning a variety of development contexts, including post-disaster and post-conflict settings, and freely disseminating findings to enrich the practices of development stakeholders worldwide.

In-country experience

  • Yes, for two or more years

If you have been operating in India, what has been your focus?

Athena Infonomics, over the past four years has been actively working in the public policy advisory and development consulting space. One of the key focus areas of the firm has been around Water and Sanitation (WATSAN) Within WATSAN, Athena Infonomics has worked on mandates around assessment of need gaps, identification and testing of most optimal options, and creation of data driven decision support tools to empower decision makers at multiple levels (local bodies, State Governments and Central Government) on asset creation, maintenance and market development decisions. Some examples of our recent work include development of a performance management framework for Urban Local Bodies in Tamil Nadu, development of sanitation decision support tools for GIZ, assessment of behavioural drivers for open defecation and toilet use in rural Uttar Pradesh for World Bank, and development of city plans for the Smart Cities Challenge by the Ministry of Urban Development

Is your organization currently legally registered in India?

  • Yes

What states or districts will you target/are you targeting within India?

We are targeting 80 - 100 Gram Panchayats, across 4 States. The tentative set of States are - Uttar Pradesh, Madhya Pradesh, Tamil Nadu and Andhra Pradesh. Regions where MFIs have a Single Liability exposure to sanitation finance will also be considered (estimated at 5% of the portfolio)

Tell us a bit about yourself.

The team to execute the above concept will be headed by Deepa Karthykeyan (Director - Athena Infonomics and Head - Water and Sanitation practice). Deepa has seven years of experience on programmes in the water and sanitation space, and has worked closely with governments, multilateral and bilateral agencies in developing, testing and disseminating interventions in the WATSAN space. The team will consist of researchers, implementation partners (for field evaluation and testing), and liaison partners (with Governments). The team will be advised by Tara Panek Bringle - Director of Global Program Management at Development Innovations Group, who specializes in the design, management and implementation of programs focused on innovative financing for water and sanitation

Is this a new or recent idea for your organization? How does it differ from what you are already doing?

Our idea stems from the work we have been doing around viability of various sanitation models - both from the demand side (for example, understanding of behavioral triggers to sanitation and open defecation in Uttar Pradesh for the World Bank) and the supply side (creation of sanitation decision support toolkits for urban local bodies for GIZ and ADB) over the past 2 - 3 years. We believe that while government interventions such as the Swachh Bharat Mission can provide a strong fillip to adoption, participation by the households and the private sector is the more sustainable mechanism for moving forward. Towards this, we have developed our concept (decision support to MFIs for conducting a feasibility and risk assessment of sanitation financing in different settings). We believe that this is distinct from what we are doing in that it keeps the private sector and demand-driven commercial approaches at the heart of the concept, while leveraging our understanding of the space

What are the two or three biggest risks for your idea and how will you manage the risks?

The first key risk in development and implementation of such an idea is getting support and buy in from MFIs. Given that the solution is very MFI centric, it is important to be integrative of the existing wisdom and practices already in use, while filling in specific gaps. Additionally, the case study methodology we propose (to identify key causal factors for success/ failure in portfolio, particularly for the single liability model) is contingent on support and data from MFIs. We believe that this risk can be mitigated by's unique partnership with MFIs (through watercredit) The second risk we envisage is on the government interface (on aspects of SBM compatibility, MFI integration etc.). Given our past experience in working with Governments at multiple levels (Centre, State and Local Body), we believe we are well placed to address this risk through already identified support centres and touch points through the project duration

How would you propose to track or record the households or customers reached?

A significant advantage of our proposed concept is that the tracking and monitoring of effectiveness of our support can be easily integrated with the MFI credit database. Given that the augmentation is through the risk assessment tool, various outcomes can be measured by MFIs on their current MIS (e.g. how many HHs which would have been rejected in legacy assessment (to be conducted in parallel) were given credit, how many cases were terms of credit changed, and how did the portfolio perform)

If you had two years and $250,000 USD in funding, how many households or customers would you reach?

Based on Census 2011, under half of Indian households have access to improved sanitation. As of 2015 end, MFIs had a client base of ~ 29 million (MFIN Micrometer Dec 2015). Adjusting for potential multiple accounts, let us assume that this number is ~ 24 million. This (conservatively, as the MFI client group is expected to have even lower toilet penetration), translates to ~ 12 million households who do not have access to improved sanitation. This is the potential market we can reach through MFIs Specific to our project, assuming that we work closely with 5 MFIs, accounting for 20% of the market, this translates to a ~ 1.2 million household target market. Given that the risk assessment tool is quite scalable, even if this results in a very modest 10% increase in positive appraisal rates (reduction of rejections), we will be impacting over 120,000 households. This is our estimated floor for the incremental households who can be reached through our intervention

How would you propose to invest $250,000 USD if you received philanthropic/grant funding support from

There will be five key activity streams (1) Interface with MFIs to understand existing assessment models and agree on a "base", which can be built on (2) Creation of a technical assessment module which will integrate an evaluation of the "most optimal toilet model" in view of techno-economic feasibility constraints (at village/ community level) (3) Mining of credit data from MFIs to identify key factors associated with positive or negative credit performance (especially among single liability borrowers) for integration into the assessment tool (4) Interactions with Government and SBM agents to identify potential mechanisms for MFI integration (5) Wrap up of all 4 above into an integrated assessment toolkit, demonstration to MFI partners The grant will go towards these activities, and be distributed across research and analytics team, field investigations, dissemination etc.

What type of support beyond grant funding are you most interested in?

Working closely with MFIs is very central to our concept. We look forward to's facilitation on this front by putting us in close collaboration with its MFI partners, to share data, practices and consultations for joint creation of the assessment tool. We also look forward to interacting with industry experts, from's global initiatives. Additionally, any government support facilitation (in addition to our already established networks) which could be provided will be a plus.

Does your organization have Foreign Contribution Regulation Act (FCRA) approval?

Being a "for profit private sector firm", we do not require FCRA to receive funding from abroad. We will be happy to clarify on any procedural aspects if required
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Attachments (3)

Technical Option - Decision Support Tool - SBM rural - Concept.pdf

Concept note on a decision support tool for Gram Panchayats (GPs) for implementing the Swachh Bharat Mission. The proposed appraisal toolkit will contain three layers (technical feasibility evaluation, borrower evaluation and GP evaluation). This concept note provides a snapshot of the detailed approach for the first layer. The methodology for the second (data mining of the accounts from MFIs) and third layers have been described in the notes

New Questions Response 8 Apr.docx

Response to additional questions and aspects from team

OpenIdeo waterorg Concept Note.docx

Concept Note outlining the need, our proposed innovation, approach and outcomes


Join the conversation:

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Congrats on moving into the Refinement phase Praveen and team! Here's a tip from our experts. Looking forward to your response. is a big believer and supporter of small loans (microfinance) to enable households to invest in their own water and sanitation solutions especially in support of Bharat. In fact, has 17 active partners in India who have collectively reached 2.6 million people through WASH lending. And your ideas about risk, product design, viability and more are things we work on regularly. We have developed some open resources with the aim to help further the industry's understanding of these issues and they can be downloaded at Take a look if you haven't already!

We’d also love for you to reach out engage with some of the other ideas in the Refinement phase of this challenge. Collaboration is the name of the game here at OpenIDEO. We’re looking forward to how you’ll work together to grow each other’s initiatives.

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To answer the new questions, hit the Edit Contribution button at the top of your post. Scroll down to the entry fields of the new Refinement questions. Hit Save when you are done editing.

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Hi! Thank you for identifying our idea for the next phase, and for your comments. Over the past few days, we have taken a detailed look at the watercredit toolkits, as well as other resources currently available from multiple agencies, to ensure that what we propose builds on existing knowledge for better additivity. Our responses to the additional questions raised are intended to mirror the same and lay out a clear set of objectives and approaches for what we are proposing to do

We are also in the process of getting deeper into some of the other ideas, which we believe are quite promising, particularly as we are quite excited about overall ecosystem development in the WASH asset creation space.

If there are any specific aspects of our concept which the team has comments on, we would be happy to address the same. In particular, we look forward to inputs from the review team on the key questions we have highlighted, as they will be central to the structuring and focus of the proposed decision support tool.

Excited, and look forward to more!