Susan Davis

By Susan Davis, Executive Director

This blog is based on a presentation I gave at the WEDC Ghana conference in July 2016. We appreciate charity:water for letting us know about this interesting approach, and Water For People Malawi for giving us details. All currency reported as US dollars (USD) for ease of comparison.

For the past few years, we have been researching the methods and results of a variety of post-intervention support activities for water services.  I recently learned about borehole banking and I hope you will find it as interesting as I did.

But first, why do we need to talk about borehole banking?  Because water services are not meeting even basic levels in many countries, for a multitude of reasons.  One very common barrier around the world is insufficient finance.  There never seems to be enough money for preventive maintenance and even small repairs.  Water service delivery costs in rural Africa are expected to exceed 1 billion USD per year; 485 million USD of that is for handpumps. According to several country’s policies, these millions of dollars are supposed to come primarily from rural water users (see map).

This financial barrier is only exacerbated by the big mismatch between policy and reality. In an Afrobarometer survey across several African countries, the majority of rural households reported not paying for water services.  In Malawi, for example, 73% reported not paying. This finance barrier results in poor water services in many countries.  Afrobarometer asked 2400 Malawians, “Over the past year, how often has your family gone without enough clean water for home use?”  29% said they had gone without sometimes or many times, and 9% said they always went without enough clean water.  This lines up with the estimate that 30% of Malawi’s water points are not functional at any given time.

What is all this money needed for?  Water For People Malawi found the average borehole/handpump repair cost was 12 USD per breakdown.  Breakdowns happen 3 to 4 times per year.  That adds up to 36 to 48 USD per year.  However, the average balance of water fees collected in a community was 7.80 USD.  This means the average community didn’t have enough for to pay for fixing even one breakdown.

What if a borehole could create money instead of just sucking it in?

Water For People learned about borehole banking from Concern Malawi, and decided to try it with 14 communities in Chikwawa, Malawi in 2014.  This builds on the common village savings and loan approach and is also called Yahura Yehoza (YY), or “save and borrow”. Interested communities had to have an existing borehole and a financial commitment of at least 70 USD.  The water committee received no financial seeding, but they do receive three days of training.  After this, they decide what interest to charge and who gets loans, and oversee management of the bank funds.

Committees are encouraged to give loans for income-generating activities instead of consumption (buying food for example), so the borrower will have a way to pay the loan back. So far, most borrowers have been women. Initial data shows a significant difference between communities with borehole banks and those without.  The government standard for a minimum balance is about 7.50 USD per committee. But the 14 communities with borehole banks in the pilot had an average of 75 USD, and this is just the savings left at the borehole. There is also the expected repayment of loans plus interest. That is, 10 times the standard was being saved, more than enough to pay the average repair costs of 48 USD per year.  This in turn is leading to better water services, with functionality of about 90%.

Challenges are similar to any village savings and loan plan:

• General economic insecurity: This is a very poor area, with an expected food shortage. If communities make loans for consumption vs. productive us. They could have lower repayment percentages.
• Security: One community bank has more than 100 USD, which is just kept in a locked box in someone’s home. Many communities try to keep little cash on hand by making loans or purchasing spare parts in advance, but this can also be risky.
• Community changeover: The knowledge from training and skills from practice might not be passed on.

Communities are talking to each other about the process. The 14 original communities are going strong and 25 new communities have joined in. To build the power of the banks, Water For People developed two networks of community borehole banks. Each community pays a small fee to the network, which can provide a sort of microinsurance for major repairs. One network has 70 communities.

Interested in learning more?  A recent presentation at Stockholm World Water Week by Kate Harawa of Water For People Malawi mentions borehole banking results. Other organizations are trying this approach, such as WE Consult Uganda, KALI and SNV and ACF (page 93).  Please let us know if you have descriptions and especially results from innovative financing approaches for water services.