OPPORTUNITES, ACHIEVEMENT AND LESSONS LEARNT IN SECURING PRIVATE FINANCING FOR THE WATER SECTOR A CASE FOR KENYA MICROFIANNCE TO COMMMUNITY WATER PROJECTS El Elly Aguk Aguko Head of Public Secto tor Banking Ec Ecobank Limite ted
Create alternative Financing window for the Water Sector to fill the existing financing gaps Project focus on the delivery of improved coverage ( # of Connections ) and service level outputs ( Efficiency in revenue Collection-Reduction of non revenue water) Prove that Microfinance has innovative role to play in increasing access to Domestic Water Supply for the Rural Poor
The context and current status Financing gap Urban Water Service Providers Progressive rural/peri- urban communities / Ga Gap system rehabilitation& extension Water Services Trust Fund Poorest Rural Communities GOK & Donor, NGO Funded
• Micro-finance Bank:- Established in 1999 , with 33 branches country wide • Main Bank Products: Microfinance Loans, Small and Medium Enterprises, deposit mobilisation/saving. K-Rep Perspective-Opportunity & Water Sector Community Water Projects are just bigger groups just like the microfinance groups we have lent to in the last 20 years There is demand for investment due to an absence of capital funds - despite good performance and strong cashflow s Positive strides made in water sector regulatory environment that allows private sector participation and commercialization of service provision Credible Partner –Subsidies and PDF Facilit y ( WSP, GPOBA, EU, DFID, IFC, DGIS)
In 2003, WSP-Af starting Conceptualizing on design of Output Based Aid subsidy program blending micro-credit and Output based Subsidies under Kenya Microfinance to Community Water projects 2007: Grant agreement signed between World Bank and K- Rep Bank-Microfinance As at December 2012 a total of 35 communities been funded under the program Total Investment as at June 2013 USD $3.5 in Credit Finance and 1.6 Million beneficiaries Contribution 5
BY: Elly Aguko
Proporti tion of Tota tal Project t Cost t Organization During Construction After Outputs (%) Achieved Commercial Bank 80 40 Beneficiaries Contribution 20 20 Output Based Subsidy 0 40 Total 100 100
Infrastr tructu ture Investm tment t Amount t in USD D % Contr tributi tion Total Project Cost 5,250,202 100% Loan from K-Rep Bank 3,528,483 67.2% 1,281, 542 24.4% Beneficiaries Contribution Contribution from Government Institutions 440,176 8.4% Project Audit Services 228,203 Project Development and Implementation Grants 802,927 No of Beneficiaries with increased access to safe water 209,081 331% Change No of Benefiting Households 28,399 319% change OBA Subsidies -Infrastructure 1,744,047 34% Per Capita Investment 25 Per capita Subsidy 9 Average Subsidy per household 187.5 Increase in revenue Collection 242% Average Efficiency in revenue Collection 83% 91 No of New Jobs created at CWPs
Ite tem De Descripti tion Pilot t Phase Sc Scaled up up Tota tal Phase Pha se 24 57 81 Expression of demand (EOD) received EOD Positively appraised by K-Rep 13 43 56 Bank Project Rejected 3 7 10 Project Approved for PD 10 36 46 Project withdrawn 6 3 9 Loan application received 13 35 48 Loan Application Approved 13 32 45 Loan Disbursed 10 25 35
Challenges Challenges Opportu tuniti ties Water a is seen as social good Secure increased access to larger the poor beneficiaries Limited grant financing Leverage appropriate commercial financing through Localized blending Bank rarely lend beyond 7-10 Built credit rating to support to justify years increased access to longer term commercial lending Water Assets provide only Credit rating can support investment- limited collateral grade utilities to access finance from domestic market Utilities often not conversant Utilities takes the lead in indentifying with lending criteria of and preparing viable projects for Commercial Bank appraisal by commercial lenders Investment should be sized to fit the debt capacity of CWPs
Reflect Increased and reliable coverage Reflect low NRW Higher billing efficiency Higher collection efficiency Higher debt coverage ratio
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