Microfinance For Sanitation

According to the WaterAid report published in 2017, Pakistan is the world’s 7th worst country when it comes to sanitation, with more than 78 million people without access to basic sanitation (Jalil, 2017). An estimated 70% of the household drink contaminated water (“Ensuring a safe and clean, n.d.”), and despite some improving figures over the past few years, the universal access of water, sanitation and hygiene remains a big problem for Pakistan. The country also has the 5th highest number of people practicing open defecation with a massive rural-urban disparity (Mulugeta, 2019). In spite of significant achievements in the reduction of poverty, improvement in dietary diversity, and reduction of open defecation, recently, rates of diarrhea and stunted growth appear to be stagnant and as far as hygiene inequality is concerned, Pakistan tops the chart with the gap between poorest and richest of the country being at a staggering 77% (Pritchard, 2019).

Before we delve into proposed solutions to combat the aforementioned alarming numbers, first let’s go over why access to water, sanitation and hygiene is a pressing issue. As mentioned above, some of the problems that are caused by the lack of infrastructure for the provision of the basic needs in question concern health, namely vulnerability to water-borne diseases (dysentery, cholera, giardiasis, and hepatitis A and E, diarrhea, etc.) and stunting of child growth. However, access to sanitation is as much a social problem as it is a health problem, and it disproportionately affects certain marginalized groups over the other. As far as the health aspect of the issue is concerned, every year more than 53000 children under the age of 5 die at the hands of diarrhea and around 44% of the children suffer from stunted growth due to lack of these basic facilities (“Ensuring a safe and clean, n.d.”). The effects of health problems from lack of proper sanitation in childhood continue throughout life. Stunting of growth and brain development hinders a person’s ability to perform cognitive tasks, which translates to a permanent disadvantage in professional life, resulting in an endless self-perpetuating poverty cycle. The issue is not limited to the deprived areas either. Since rural areas are disproportionately affected by poor sanitation and waste disposal, the contaminated soil and water pollute the crops too, poisoning the food supply to urban centers as well (“When Water Becomes a Hazard”, 2018). Poor sanitation also has a negative effect on women specifically as they are made vulnerable to assault and abuse in rural areas since they have to go outside to relieve themselves due to a lack of toilets in their houses (Mulugeta, 2019). Additionally, the lack of sanitation facilities serves as a deterrent to enrollment at school, which also disproportionately affects girls since their menstrual hygiene needs are not accommodated (Mulugeta, 2019). Finally, poor sanitation costs the country a lot of money annually in the form of high healthcare costs, premature deaths, and lower productivity. The costs are so massive that every dollar spent on sanitation has a return on investment (ROI) of 5.5 dollars (Mulugeta, 2019).

UNICEF proposes the following four remedies to combat the problems caused by poor sanitation. Firstly, the country must end open defecation, which would require the construction of toilets and awareness-raising campaigns on the importance of using toilets as a regular habit. The WaterAid organization defines a decent toilet as the “one that is private and built in a way that will keep contents separate from water sources, and within a household”. Secondly, there needs to be the availability of safe drinking water services which would require filtration, either at a household level or a community level. Thirdly, there needs to be an awareness-raising campaign at a school level that promotes healthy hygiene habits such as handwashing and availability of WASH (water, sanitation and hygiene) services in school. Finally, there need to be mechanisms in place that can ensure the availability of WASH services during natural disasters and that can assist affected communities.

Despite the extensive research on the problems of sanitation and numerous creative solutions to counter it, the one obvious hurdle that remains to be overcome is that of the lack of funding. The United Nations estimates that there are 2.4 billion people who do not have access to advanced sanitation facilities and 663 million do not have access to safe drinking water. According to World Bank, to meet the Sustainable Development Goal (SDG) 6 set by UN (“Ensure availability and sustainable management of water and sanitation for all by 2030”), the estimated cost is an astronomical figure of $1.7 trillion which means that public finance is simply not enough and private investment is necessary to meet the exorbitant cost of providing everyone clean drinking water and access to sanitation.

One solution to tap into private investment is to use microfinancing. Microfinancing, in its modern form, originates from Bangladesh dating back to the 1970s (Durrans, 2017). Microcredit is a small loan, usually ranging from $50 to $400, used to finance small businesses and other income-generating activities at a lower interest rate. They differ from traditional loans in the sense that they are easier to access (less paperwork and bureaucracy) and require minimum collaterals (Mamadgazanova, 2019). Since its beginning, microfinance has transformed into a global movement that aims to provide financial services specifically targeted at lower- and middle-income households (Durrans, 2017).

Although microfinance is usually associated with income-generating activities, recently, some organizations have launched pilot projects, applying the same principle and loaning money to households for the purchase of sanitation products. Even though the purchase of sanitation products doesn’t raise income directly, it does, however, save money in the long run in terms of reduced healthcare expenses and improved productivity (Mulugeta, 2019). Microfinancing helps improve sanitation by facilitating households with the costs of purchasing latrines and septic tanks, and by helping businesses develop a variety of sanitation services/products for instance toiled block operators and pit latrine emptiers (Durrans, 2017). Since the rural and improvised areas remain deprived of modern infrastructure for sanitation and drinking water, on-site water and sanitation investment becomes the responsibility of the household, and microfinance provides a means to afford these services to those who can’t afford them.

As far as the business end of this proposal is concerned, the market potential for sanitation microfinance is huge, according to some estimates, it’s a $12 billion market (Durrans, 2017). Yet, the investors seem reluctant to provide this service leading to a market failure. The reluctance of investors stems from certain necessary conditions for microfinance sanitation markets to operate properly. These conditions include an already present awareness amongst the population regarding the importance of sanitation and clean drinking water, existing infrastructure and ecological conditions like the presence of a water source and invulnerability to natural disasters and finally the presence of suppliers and manufacturers of sanitation products (KUMAR & NATU, 2019).

Despite certain shortcomings of the approach, and given the financial constraints of the governments and NGOs, microfinancing is a promising area to explore to reach the last quarter of the world population deprived of proper sanitation and clean drinking water. If the entry barriers are removed, and the infrastructure made compatible with existing sanitation technology, Microfinance Institutions will more than willingly provide their services in these areas given the huge demand for the product. Microfinance sanitation is a sustainable and cost-effective approach, provided certain measures are taken on part of the governments, and not for profit organizations and can help achieve sanitation and clean water for all.


Poor Sanitation is Stunting Children in Pakistan – new World Bank Report. (2018, November 12). Retrieved July 13, 2020, from https://www.worldbank.org/en/news/press-release/2018/11/13/poor-sanitation-is-stunting-children-in-pakistan---new-world-bank-report

Mulugeta, T. (2019, January 14). The Cost of Poor Sanitation in Pakistan. Daily Times. Retrieved July 13, 2020, from https://dailytimes.com.pk/343821/the-cost-of-poor-sanitation-in-pakistan/

Pritchard, E. (2019, June 18). Universal access to even basic water, sanitation and hygiene services will not be achieved by 2030 at current rates of progress: New data from UNICEF and WHO. Retrieved July 13, 2020, from https://www.wateraid.org/uk/Over-2-billion-people-still-without-decent-toilets-according-to-new-JMP-data

WASH: Water, sanitation and hygiene. (n.d.). Retrieved July 13, 2020, from https://www.unicef.org/pakistan/wash-water-sanitation-and-hygiene-0

Mamadgazanova, M. (2019, June 22). Microfinance: SSWM - Find tools for sustainable sanitation and water management! Retrieved July 13, 2020, from https://sswm.info/sswm-solutions-bop-markets/affordable-wash-services-and-products/financial-marketing-and-sales/microfinance

KUMAR, T. R., & NATU, A. J. (2019, April 01). Microfinance for Water and Sanitation: Opportunities and Challenges for MFIs. Retrieved July 13, 2020, from https://nextbillion.net/microfinance-for-water-and-sanitation-opportunities-and-challenges-for-mfis/

Durrans, S. (2017). Microfinance for Sanitation Policy Brief. SHARE

Jalil, X. (2017, November 23). Pakistan 7th worst country in access to sanitation. Dawn. Retrieved July 13, 2020, from https://www.dawn.com/news/1372293/pakistan-7th-worst-country-in-access-to-sanitation


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