Expanding water supply and sanitation in Sub-Saharan Africa using microfinance

Improved access to financial services is seen as crucial to achieving the Millennium Development Goals (MDGs). One of the MDGs includes halving the number of people without access to a safe and sustainable supply of drinking water and basic sanitation by 2015. The availability of financial services is an important factor that empowers the poor to build their own way out of poverty in a sustainable way. Research has shown that increased income levels lead to higher investment in health, education, water and sanitation. In many developing countries, there is a significant credit gap for low-income people. Due to lack of collateral and high transaction costs for small loans, the poor are systematically excluded in the provision of financial services. This situation has led to development of microfinance institutions (MFI), which provide the poor with credit, savings and insurance products. This paper provides an outline of the MDGs. The interactive relationship between the goals is discussed. The gap between current levels of investment and the levels required to meet the MDGs of expanding water supply and sanitation is outlined. Principles of microfinance are briefly discussed. The areas where Microfinance can be used to support investment are briefly assessed. These include lending to support poor households, financing projects at household level, offering social services, supporting rural community projects, and lending to private service providers. Ongoing research to assess the context in which Microfinance can be developed to play a role in extending water supply and sanitation in Sub-Saharan Africa is outlined. To date, the literature reveals that this subject has not been explicitly addressed elsewhere.