Loans - credit - guarantees

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Different models are available for people, water providers and private sector to obtain funding from banks or others, including guarantees from enterprises with too little collateral.

Funding of water sector loans is not very attractive because of relatively high risk, unfair competition from grant money. Procedures are often very complex, particularly for smaller settlements. Requires support to simplify procedures, guarantees and better local credits. In Cambodia, GRET, an international NGO has a Rural Infrastructure Fund, with a public development bank. This provides medium-term loans to local commercial banks, to finance investors of piped water systems, providing a 30% guarantee in case of default. The private sector has installed 10 water systems, representing coverage of up to 85%. (http://www.lboro.ac.uk/well/resources/Publications/Briefing%20Notes/BN16%20Local%20financing.htm) High potential because people and WPs may have to take expensive loans from local money lenders

Loans made available to households

Good potential as people cannot afford paying high investment. Results of loan schemes specifically for sanitation are mixed if the demand for sanitation is low (sometimes poor repayment) but work better for broader schemes (house improvements). Instalment payments make capital investments easier for the poor. The vulnerable poor, (the poorest people) need additional support because they may not be reached (http://www.williams.edu/Economics/neudc/papers/What%20to%20Expect%20from%20Development%20NGOs%20July%209.pdf). Micro credit schemes exist in different contexts, often through local NGOs or with NGOs acting as a guarantor. Cases on sanitation loans show positive repayments in Honduras, but considerable back-logs in Ghana ( http://www.lboro.ac.uk/well//resources/fact-sheets/fact-sheets-htm/mcfs.htm ). High potential because it may be expected that attention for sanitation will create larger market

Loans made available to municipalities

Many municipalities are indebted by loans for water and sanitation facilities for which they pay from regular budget and too a much lesser extent from users contributions. Potential relates to changing this practice to a sound repayment on basis of users fee.