Impact Financing for Sanitation in India
The Sanitation Story of India
Access to improved sanitation is intricately connected to health and well-being of a nation and India struggled to provide this until very recently. Being the 2nd most populous country of the world, India has a huge share of the SDG 6 target to ensure equitable and sustainable access of water and sanitation for all. With impetus from Swachh Bharat Mission (SBM), one of the largest flagship sanitation programs by Govt. of India, sanitation in India witnessed a huge progress in sanitation coverage since 2014.
Prior to the launch of SBM, the sanitation coverage in India was merely 38% which subsequently rose to 100% by 2019. With more than 100 million toilets reported to have been constructed across, all cities and villages declared themselves Open Defecation Free (ODF). The success of SBM is attributed to focus on behaviour change, attractive incentive scheme, strong political will and mission mode of delivery. However, while the numbers are questionable as per many reports from the ground level, the rapid transformation faces a daunting task of sustaining the change and ensuring that no one is left behind.
Various challenges and gaps have been reported including the following:
- Incomplete structures, dysfunctional toilets
- Technically faulty designs, unsafe toilets
- Households left out of the baseline-families without toilets, migrants, displaced communities
- Household wanting upgradation and renovation of toilets (aspirational need)
Although there is no clear assessment on the size and volume of gaps, a few studies clearly indicate a huge need. Taking this in cognizance, Department of Drinking Water and Sanitation (now Jal Shakti) has laid out guidelines for ODF++ and ODF-S reinforcing the need to ensure that toilets are available and used by all, solid and liquid waste management, operations and maintenance, and retrofitting of toilets with community participation.
Creating new and maintaining old sanitation infrastructure will need investments and financial assistance for poor families. This becomes more critical as the Government is shifting investments to water in the next phase of SBM. Creating safe sanitation infrastructure also presents a huge opportunity in the sanitation market space.
Hence, there is a need to focus on interventions in the sanitation market that include buyers and sellers, supporting institutions like financial organisations and others associated within the supply chain. It requires multiple stakeholders, government, private sector (supply side), non-government organizations and financial sector to work together. sanitation financing presents a huge opportunity for all these players in many ways.
Sanitation Impact Bond- Leveraging Impact Finance for Sanitation
Impact Bonds or Social Impact Investments are relatively new type of investment instruments which are results-based or outcome-based financing. The scale achieved under FINISH in India allows for unique opportunities to develop new technical, financial and social tools and methods to strengthen the programme.
ACTIAM, together with international and local financial institution partners and programme founder WASTE, have developed the proof of concept for an innovative financial tool, the Sanitation Impact Bond (SIB). Thisprovides liquidity to partner financial institutions. SIB is currently piloted for 3 years in India (Feb. 2019 to March 2022) with multiple stakeholders for integrating financial inclusion with demand generation and enhanced capacities at local level to meet the needs. In the proof of concept, ACTIAM has provided a loan of US$ 3M to Cashpor Micro Credit. WASTE Foundation has orchestrated the proof of concept and footed an outcome-based incentive. FINISH Society (non-profit) is the facilitating agency. The complete loan amount is dedicated to a sanitation loan portfolio which enables households to borrow money for the construction of toilets. CASHPOR provided finance for 35,000 household sanitation systems. So far over 24,000 sanitation loans have been disbursed under this innovative Sanitation Impact Bond proof of concept.
Stories of Change