What problem does the idea solve?
Our idea links the supply and demand sides of providing access to Water and Sanitation (or WatSan) facilities among poor households in India in a scalable and sustainable manner.
Why is it worth solving?
Unicef estimates that over 595 million Indians do not have access to toilets and the poor access to WatSan has disastrous consequences for India. This impacts every aspect of public policy in India ranging from public health, gender equality, social discrimination to the loss of human capital and GDP. The fact that approx. 188,000 children under the age of five die every year due to poor WatSan access makes it a humanitarian crisis that needs urgent attention.
How is this being addressed today?
The mainstream approach sees open defecation as a simplistic funding problem where a certain amount of money is spent, and its impact is measured by the number of toilets built. The intended beneficiaries often have little or no say in this process. This approach does not also provide an opportunity for civic engagement that stems from the increased civic awareness.
The public toilets built using this approach often fail to address the issue because:
- the processes for maintaining these facilities aren’t effective.
- The toilets are constructed in a desolate location that is not safe for women or children to access
- The buildings have been constructed without provision for water, lighting, etc.
Even when such programmes construct toilets for individual households, they don’t reduce open defecation because:
- the households are not educated on the topic of sanitation, how the fecal matter is processed or decomposed, the methods of maintaining the toilets, etc.
- the toilets that are constructed by a third party do not address the needs of the family in question. For e.g. many households place a slab of concrete over the toilet floor and use the structure as a bathroom because women prefer bathrooms over toilets.
Also, the choice of fecal sludge collection technology is taken in unscientific manner. A central government funding is often contracted to a contractor who opts to construct a single toilet technology type across the district without customizing solutions by understanding ground water table, soil & subsoil conditions of every locality.
The deficiency of the conventional approach is demonstrated by the fact that the Indian govt has spent at least $300 million per annum for constructing toilets since 2010 without much success in reducing open defecation.
What's our idea?
The crux of the idea is to create a social-funding platform where those who are willing to loan funds for the construction of toilets are linked to households who seek short term credit for installing WatSan facilities that address their needs. We are building a curated crowd funding platform that extends loans for WatSan under an umbrella of demand driven, de-centralized, financially & technologically sustainable, scalabe, transparent, community driven model.
How is our approach different?
This difference between our platform and the conventional models of microfinance, the charitable sector, govt. projects, crowdsourced funding, etc. stems from our guiding principles:
- Demand generation - We emphasise on bottom up demand for change as the first step for any funding and work towards creating demand if it is absent. This involves instilling the need for basic sanitation among children, focussing on educating men on the necessity of sanitation as they hold a disproportionate say on the family’s decision making, and empowering women with the road map to achieving better WatSan facilities.
- De-centralized implementation - We have seen that one size does not fit all and that it’s best if each household decides what works best for them. Making decision for oneself and being involved in one's decisions has the desired side effect of increasing the sense of ownership. It is widely accepted that the greater the sense of ownership towards the WatSan facilities, the greater the chances of its usage and maintenance. To ensure informed decision making, we ensure that the beneficiaries have access to expertise in a variety of areas, such as technology options, government policies and subsidies, construction options, etc.
- Financial inclusion and responsibility - Self-reliance is probably the only proven scalable and sustainable solution to provide better WatSan access to millions of citizens of a developing country. We focus on providing financial independence from welfare payments, charity, loan sharks etc. for those without a credit history. Simultaneously, we tie this with the individual responsibility using lessons from community based lending models which ensure low default rates. This also creates the virtuous cycle of inculcating the habit of saving and investing in self-improvement, offering a dignified and credible alternative to the dependence on an inefficient and poorly funded government welfare system.
- Impact Investment for citizens - It is about time the social sector had a curated Kickstarter platform specialising on social entrepreneuship projects, isn't it? We certainly think so. We view our platform as a much needed means for ordinary citizens to get involved in social projects in a sustainable manner, where they are able to increase their impact by making a medium term investment instead of making a smaller one-off contribution. The funds are returned to the investors after a fixed period when the project is implemented. A small rate of interest may be offered to the investors depending on the scale of the project, however the main returns on offer is a clear demonstration of the social impact the funds have had. As the funds are loaned to beneficiaries rather than provided as one-off grants, the impact of the funds is multiplied with every subsequent reinvestment of the funds. To illustrate, a one-off $200 grant would help to build only one toilet. If $200 is extended as a loan through the platform, it would help to build a toilet every 10 months because the funds are available after a 10 month repayment cycle.
- Sustainable Technology: Though several technological recommendations have been suggested by the Government of India (Ministry of Urban Development - CPHEEO Norms & Bureau Indian Standards), we understand that we are morally responsible for educating the households the right technological solution customized to their locality. We closely work with grassroot organizations and encourage them to study the soil and subsoil conditions in the locations were demand is generated. This data is analysed with several secondary literature and Swacch Bharat Mission Data to understand the appropriate technological recommendation suitable for the location and is suggested to the households.
- Transparency and Impact Measurement: The social sector could immensely benefit from a mature approach to data. Firstly, we believe in the importance of opening our datasets to public scrutiny and for the community to benefit from our experiments. We also believe in a data-driven approach to evaluate the impact of the projects that we fund. We will assimilate a variety of data such as self-reported usage statistics, school attendance records and draw out inferences on impact on the beneficiaries, the community and the environment. Lastly, we aim to provide an exact account of how every last dollar of an investor was spent. For example, someone who invests $200 (the typically amount loaned to a household for constructing one toilet) will be able to track the repayments and the process of constructing the toilet. Nothing beats the satisfaction of knowing exactly how one has had a positive impact on someone else’s life!
We put this approach to action through a pilot project in April 2015 after many months of research and planning. To summarise,
- Leaf Society, one of the partners in this idea, created a demand for toilets in many hamlets in the Namakkal district, Tamil Nadu.
- The households that were willing to construct toilets were incentivised by an offer of a fixed loan of $200, which was to be repaid in monthly instalments across 10 months at an interest rate of 12% per annum. One of the key conditions of the loan was that each beneficiary must use the funds for constructing toilets.
- We used a seed fund of $4000 and disbursed loans to 20 households.
- Leaf Society's staff engaged with the beneficiaries in providing technical support for constructing the toilets, collecting the repayments, and encouraging the usage of the toilets.
- Leaf Society invested resources to process the loans, collect repayments, etc. with the understanding that the interest from the repayments would cover some of the costs, and the remainder would be managed by Leaf Society through other external grants and spare capacity.
Impact of the Pilot:
As of Feb 2016, we can report that
- 16 households out of 20 have completed building the toilets that addressed their needs and have started using them. The remaining 4 households are in various stages of construction, and we are confident of the completion and subsequent usage because the Indian govt. provides a post-construction subsidy of $240 per household.
- Leaf Society's expertise ensured that the toilets were environmentally and financially sustainable. For example, many of the toilets used single leech pits to deal with the fecal matter rather than use septic tanks, with a provision to add a second leech pit in the future.
- 17 out of 20 households completed their payment cycle and the remaining 3 households have partially completed the repayment with interest, and have committed to completing the repayment. We recovered approx. $3950.6 in principal and interest, for an investment of $4000, with a further $269 still to be recovered from the households that have partially repaid.
- The interest, approx. $200, would compensate some of Leaf Society's efforts to create demand, process loan applications, collect payments, book keeping, etc. The original funds would be available for reinvestment in a similar project or to return to the investors.
- We are also considering providing loans to households who have stopped open defecation, to help them invest in their access to Water. For e.g. they may invest the funds in building a water storage or purification facility. This approach sends the signal that the NGO is invested in the community on a long term basis rather than a one-off game. Further, this underscores our view that the solution is not a simple challenge of building toilets.
Takeaways from the project:
- The pilot has showed us that the model of creating demand, offering loans as an incentive, supplementing with technical support, and following up is a scalable and sustainable solution.
- The pilot, combined with the experience of Leaf Society in delivering hundreds of similar loans through other projects with a low default rate reinforces the credibility of this model.
- It is evident that when the scale of the project increases, the costs of the NGOs can be met by the interest from the repayments.
- We also see that this creates a self perpetuating cycle of creating demand because toilets now become the shiny toy that everyone else in the community wants.
- Despite minimal efforts to market the project, we have attracted attention from fellow citizens who are willing to loan funds for similar projects. This clearly highlights the need for the idea of a social investing platform.
[Question from Comments] How important is marketing or getting the word out to potential donors/lenders and how will you tackle this issue?
Marketing is a vital element to enable scalability in our idea. Our work on the pilot project has shown us the value of working on demand generation ahead of actually enabling toilet construction. We are keen to apply these lessons by generating interest on the supply side prior to seeking funds. We intend to do this by using word-of-mouth promotions, networking and social media assets (blogs, Facebook, Twitter, Youtube, Google Ad Words, SEO) to get the word out to potential donors.
Website and Social Media Assets:
- Website - http://www.microkarma.in
- Facebook page https://www.facebook.com/MicroKarma/
- Google Plus Page https://plus.google.com/100926198188006099247/about
- Quora account and blog - https://microkarma.quora.com
- Twitter Account – https://twitter.com/micro_karma
As a start, we have registered a website for our platform idea which we are calling Microkarma (Microkarma.in). We plan to run our platform under a new charitable incorporated company in the UK. The website will be a repository of details of the past, present and future projects run through the platform. Potential donors would be able to see the objectives of the project at initiation, the progress of the projects, transparent financial records and the outcomes of a completed project. We would also publish metrics on our performance and the impact we are making in the communities we serve.
Part of increasing visibility around both our platform and the idea behind it is ensuring that we have a strong online presence. We plan to spread the idea by blogging about implementation track record and learning from our project alongside regular updates about the progress of implementation. We are also considering using advertising in the early stages (through Google AdWords) to increase visibility with potential investors. Being part of the OpenIDEO challenge is a great boost for our platform’s presence and we hope to continue engaging with the OpenIDEO community to learn more about attracting people to our platform.
In addition to building a strong digital presence, we would invest in traditional networking avenues to get word out to as many potential lenders as possible. By establishing MicroKarma as a charitable incorporated company in the UK initially, we would like to tap into the vast Indian diaspora.
We would also extend our networking to work with UK companies and individuals interested in contributing to the cause of Water and Sanitation. In parallel, we would also explore the possibility of attracting CSR funds from Indian companies that are mandated by law to spend on CSR. For reference, please refer to PWC’s handbook on Indian CSR requirements here: https://www.pwc.in/assets/pdfs/publications/2013/handbook-on-corporate-social-responsibility-in-india.pdf
[Question from Comments] Which market (UK/US/India) would you target first to raise funds for the loans?
We plan to operate our micro lending platform, microkarma.in, using our UK based Charitable Incorporated Organization (CIO). We would attract funds from NRIs in the UK and also work with companies interested in contributing to the charitable sector in India. In parallel, we would try to attract CSR funds from Indian companies using our networks in India. Based on our learning from working in the UK market, we would target the US market subsequently.
Please share the details of your financing model. We would like to understand more about the costs of lending (finding borrowers, assessing, repayment, data tracking, etc.) and also the costs of providing support for toilet information/education and construction.
The attached spreadsheet describes three scenarios of our financing model, along with assumptions, risks and predicted outcomes.
[Question from Comments] Is your plan to start a new organization or work through Leaf Society?
We plan to run our UK funds through a Charitable Incorporated Organization. We would initially fund the work in India through Leaf Society. We are also actively looking for other FCRA compliant NGOs who can implement a similar model.
BDO (based in Nilgiris, Tamil Nadu) is one of the NGOs we came across, who apparently implement a similar loans-for-toilet model. I was told by Gramalaya (Trichy, Tamil Nadu) in June 2015, that they would be interested in collaborating in projects of this nature and we would explore this engagement more seriously.
Our main criteria for partnership are:
- Community engagement for demand generation, follow up, technical support, etc. Additionally, co-operations and sharing information/learning with other NGOs in this sector would be desirable.
- De-centralized implementation - i.e. provide loans and technical knowhow, and empowering the beneficiaries.
- Transparency - Provide regular updates of progress of the project, and transparency of the project’s finances.
Working on this OpenIDEO challenge has allowed us to look at a variety of partner organizations whose motivations are aligned with our own.
From the Refinement phase of the OpenIDEO challenge, we have looked at the following submissions and are in the process of learning more about them and exploring the potential for collaboration.