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Microfinance support for Sanitation

Providing the seed money to poor women to buy material to build a toilet

Photo of Sanjay Joshi

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Please see - Build Bhavnagar Toilet _PDF as the full description of the process.  This was the precursor to the current phase of work.

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

  • Scaling phase

How big or scalable is the potential of your idea?

Our organization Shanti Life India Foundation, which is based in Ahmedabad, Gujarat strongly feels that the potential of this idea - micro finance for sanitation can be scaled up across the country. However, it would be virtually impossible to this by a single organisation such as ours. However, there are two parts to this idea - one that the idea can be taken up in its entirety and executed by another organization in another state. Such organisations that have a savings and a credit program and who wish to add another product to their portfolio - loan for toilets and bathrooms. Else, Shanti Life India Foundation would like to begin its operations of scaling up in adjoining states of Maharashtra and Rajasthan.

Explain the sustainability aspect of your idea

The model that we are working with currently is primarily a "pay forward model". As well, the entire loaning and return of the money is being done through the current banking system - there by helping women to establish their credit "credentials" with the banks and thereby help them graduate to the banking systems.

Strategically, Shanti Life India Foundation had field level partners (women's federations or CBOs) that have been working in the area for over the last 10 to 12 years, have a savings and a credit programme and would like to add a new product - loans for sanitation. The local field level partners assess and recommend the woman who needs to be given the loan. The small paperwork too is completed and handed over to Shanti Life India Foundation who then provides a account payee cheque. The women provide 12 post dated cheques for the monthly instalments.

Women pay back on time and in our experience, the banking system is still intimidating the women but eventually they would be able to easily work through this system and graduate. Over the last 10 months, our pay back rate has been 98%.

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

The financing options could be many fold.

1. From the CSR pool in India. This would be helpful in recycling the money given by the corporates.
2. Donors - individual and trusts
3. Government subsidy linked to the loan.

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

1. Local Partner (LP) to formalise partnership with Shanti (SLIF) for loans for sanitation.
2. LP to locate needy women who qualify as SLIF loan applicants.
3. LP to explain / fill in loan application form and the MoU and its clauses.
4. LP to conduct home visit to ensure space is available to build a toilet.
6. LP to support SLIF to recheck the information or the loan applicant, as and when required.
7. LP to help women to deposit loan cheque and give SLIF the 12 Post dated cheques.
8. LP to follow up and support during construction
9. Follow and motivate women to pay back on time and problem solve as and when default occurs.
10. Support SLIF in all its trainings on sanitation, financial literacy

In-country experience

  • Yes, for two or more years

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

Initially, Shanti Life UK worked as a funding agency - supporting those NGOs who had a micro finance programme and an FCRA. However, that model did not yield the desired results and hence Shanti Life UK supported the creation of Shanti Life India Foundation to work directly with women. The focus has been micro finance support but the sanitation was crucial and was added as the focus.

Is your organization currently legally registered in India?

  • Yes

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

Currently, working in Gujarat, India targeting the districts of Ahmedabad, Surendranagar, Mobi, Dahod and Panchamahals. Would want to scale up to Maharashtra and Rajasthan.

Tell us a bit about yourself.

Common sight - women defecating along the road side who have to stand up when vehicle lights illuminate them. Specifically, we began to speak to women about this aspect. Socially - women do not have a decision making power hence they cannot prioritise the aspects on which the family income or loans accessed are to be spent. And sanitation is never priority for men. Have seen men ride their bikes 5 kms to defecate, but they do not provide such facilities to the women. Hence the bottom line is - women do not have access to money to buy material (cement, sand, bricks...) and which is not available on credit - its always cash down. In terms of health - she learns to control her bowel movements and begins to eat less and less. She has headaches, back aches, stomach aches - hence doctor fees. Security and dignity is far fetched. Giving money control to the women helps them gain confidence, and build an asset - for herself and her daughters. Team - Sheetal Mehta Walsh and Local partners.

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

Initially, Shanti Life UK provided grants to NGOs who had FCRA. Primarily focused on micro finance for business and sanitation got added later. The idea then we pondered was to launch Shanti Life in India - hence in November 2013, Shanti Life India Foundation was registered as a section25 company. Post that application was made for prior permission - which was provided in Dec 2014. However, this permission reached the bank in April end 2015 and we were then able to launch our loans by end of May 2015. This is "the" focus area that we are pursuing and would continue to pursue.

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

1. The biggest risk, is that one cannot uproot the toilet and bring it back due to non-payment of the instalments. However, as we mentioned earlier, working through federations reduces this risk because women have stated that they would comply with the instalment payment regime or end up loosing the huge support of 500 or 1000 plus women members of the federation who would back her in her other battles - be it land or government subsidy or domestic violence. In terms of the current status, we have done loans worth Rs.21,15,000.00 (Twenty-one Lakhs Fifteen Thousand) of which Rs/7,47,341.00 has been returned and will be recycled to new women seeking loans. Since the post dated cheques are already with us we can use them to put pressure (only where the men have taken charge - we 8 cases currently that we dealing with). This may sound insane - but the trust that we have with our local partners and their social pressure over the women, we feel we have a sound process and a system in place.

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

Currently, we have developed a customised software that we are using. This software too has evolved over the last six months. The software allows us to have record of each loan, track it on a monthly basis, generates loan, payment reports - for each partner which helps us to follow up women whose cheques have bounced for example - maybe because they deposited late, or there is an issue with the signature. This software is available - it is simple yet provides all the information required.

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

We would be able to reach 2000 plus households and that is our target.

The loan is Rs.15,000.00 per woman

$250,000 (USD) x Rs.65.00 = Rs.16,250,000.00 divide this by Rs.15,000.00 = 1084 loans.
Since this is a pay forward model - in year one these loans (assuming all the loans ) are paid back) which would be recycled and new 1084 loans would be provided for. This process would continue.

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

The core amount of $250,000 (USD) will be recycled over and over again. However, the interest generated at 12% would be around 19,50,000.00. Of this half Rs.9,75,000.00 goes to federations who monitor and do the follow up activities. The rest would be used for training, developing appropriate training material and federation monitoring along with some administrative costs. In terms of numbers this is a feasible idea. However, salaries of staff would still be an issue that we would need to think through. Though currently, separate funds are being generated for the core staff and office costs.

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

1. Linkages with federations who would like to expand their loan products and add sanitation as one of their new products
2. Access to financial and engineering institutes for access to funds and even innovations to make the sanitation unit productive and cost effective.
3. Government engagement to promote this idea.

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

Yes, currently, has a three year prior permission. Track record of three years would help attain the permanent account.

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Team

Excellent model to solve the problem!

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