How has your organization’s strategy and use of partnerships changed over the years?
Jennifer Schorsch: Gary White founded Water Partners in 1990. The organization started with the very straightforward approach of underwriting the full cost of communal water and sanitation projects. With this strategy, the organization reached one million people after 22 years in operation. Which is wonderful.
But then in 2012, we shifted our approach to deploy philanthropy catalytically, using donated funds to mobilize commercial capital and thus reach more people faster and more efficiently. We now reach two million people each quarter. With this experience base, we see our role very much as a “dot connector”— connecting insights and partners for impact. As Matt and Gary explain in their article, we work with governments to help shape policies and practices that will bring more services to people living on less than US$ 6 per day. We work with a wide range of financial institutions to make the case for small loans to people living in poverty that allow them to purchase and install their own improved water and sanitation infrastructure. And we work with utilities to improve and expand services to the poor. Through this more networked approach we have been able to reach more people more quickly and sustainably — 24 million people in just seven years.
Which other sectors and partners are needed to solve the water crisis?
Financial institutions globally and locally are critical partners. We are working to increase the engagement of banks, micro-lending groups, governments, multi- and bilateral institutions, and development finance institutions. Those who can mobilize large-scale capital. And, of course, we need social investors to enter this space. Anyone with deployable capital should consider using it to address one of the greatest challenges we face — the water crisis. The two billion people without access are a market to be served.
Finally, we need philanthropists to consider how they can extend the impact of their philanthropy, directing it to high-performing NGOs with a track record of success, supporting sustainable market-driven solutions, and using philanthropy more catalytically to mobilize additional capital.
Why aren’t banks and micro-finance organizations meeting these needs? Why doesn’t the market recognize the need and respond to the opportunity to serve people living in poverty?
There are a few reasons for this failure. Water is viewed as a human right and that has led to assumptions that water and sanitation services are delivered solely by government.
Further, when people see the absence of water and sanitation or other basic services, they think the solution is aid — building wells or toilets for communities for free, which can seem like an endless and expensive undertaking.
The market also operates with certain assumptions about what people living in poverty will and will not invest in. As a result, markets in general tend not to respond to the needs of people in poverty. That is because no one realizes that people living in poverty can participate in their own solutions.
Many micro-finance institutions and banks think of loans only for income-generating opportunities. What they may not appreciate is that access to water and improved sanitation is income-enhancing. People in poverty already pay enormous costs as a result of their lack of access. Waiting, walking and illness due to the absence of safe water and sanitation translate into higher costs, lost income and lost time — globally it’s a US$ 260 billion annual economic impact. These costs can be redirected to sustainable solutions. Once clear on the costs presently incurred, it is easier to see the opportunity in water solutions.
What does this say about the role of NGOs? Is there a case to be made that one underappreciated role is to make the business case for serving the poor?
NGOs can indeed shine a light on market opportunities and engage the private sector in sustainable solutions. As a social enterprise with market-driven solutions, we at Water.org work to demonstrate that enterprises can achieve both social good and economic good — not just one or the other. We believe that we can have a transformative effect on our sector by making the case for market-driven solutions to increase water and sanitation access for people living in poverty.
And we believe that other NGOs working in other sectors may magnify their impact if they likewise look to involve the private sector to close gaps. So is there an opportunity to increase impact by harnessing the market? Absolutely.
We can address market failures and nudge the market to get it to self-correct. To do this, we need data, pilots, and patient capital to build this evidence base and advocacy case. And we need partners to join us.
Is it possible to mend the market, and if so, how?
NGOs bring local market knowledge. We know the customers and their needs, and we can pilot innovations to demonstrate the business case. This can change the behavior of the market in important ways. For example, One Acre Fund can demonstrate the business case for providing agricultural services to smallholder farmers. Water.org demonstrates the business case for affordable finance and investments in water and sanitation. NGOs can bring valuable customer insights that can turn a “problem” into a potential business solution.
But this requires a mind-shift both for NGOs and their funders.
We must see NGOs not as emissaries of aid, but as solution-seekers and drivers.
Water.org is trying to share these insights widely with potential partners to deliver solutions. We need more actors of influence to come into these spaces.
Water.org has had success increasing the flow of micro-loans to the poor to improve sanitation and access to clean water. Likewise, One Acre Fund has increased the flow of micro-loans to the poor to improve agricultural production. What other opportunities do you see for providing loans for income-enhancing investments?
Renewable energy is a big opportunity in this area. Consider what access to electricity does for income generation and for education. Innovative financing in this area could be transformative.
Identifying areas where this approach could be adopted is about examining the coping costs. In the case of water, what are the incremental costs for not having access? Girls don’t attend school and women can’t work because they are spending too much time gathering water.
If the coping costs are high — as they are in the case of water and sanitation — people living in poverty will engage in solving the problem if given the opportunity.