European Microfinance Week 2021

Due to the strong demand for working capital and financing by MSMEs and WASH SMEs in the Kenyan market, Aqua for All and the Sidian Bank created the Covid 19 WASH Loan Financing Facility. The main goal of the facility is to cushion customers against the effects of the pandemic while safeguarding access to WASH services.

During this session, Álvaro MA, Impact Finance Manager from Aqua for All, and Louise MWANGI, Branch Manager of the Sidian Bank, showcased the progress of the Covid 19 WASH Loan Financing Facility, including its next steps and the opportunity it offers for investing in WASH lending.

Ma started the session by introducing both partners behind the Covid 19 Loan WASH facility. Aqua for All is a non-profit organization that aims to mobilise private capital towards the WASH sector. Their goal is to have a positive impact in terms of WASH lending. In this context, it was key to partner with Sidian Bank, a Kenyan bank with a strong focus on SME lending. Established in 1984, this now fully-fledged commercial bank has 42 branches across 23 counties in Kenya. The Sidian bank is also powered by a highly robust digital offering that includes mobile and online banking, cards, and digital payment solutions. In August 2020, both entities decided to partner to cover the strong demand for working capital and financing by MSMEs and WASH SMEs in the Kenyan market. In its original design, the loan facility was meant to be a debt facility of €4,000,000 to support around 200 MSMEs with loans between €780 and €39,000 with a tenor of up to 24 months.

After the introduction of both partners and the characteristics of the facility, Mwangi shared the key lessons that they learned in the first year of this facility. According to Ms. Mwangi, the results have been extraordinary; more than 2,900,000 people have benefited directly from the facility thanks to the provision of €4,125,803 in loans to more than 500 MSMEs. These figures are way above the initial goals. 

In terms of the portfolio characteristics, the median loan size ranges between €3,612 and €4,270, with a mean between €4,838 and €7,166 depending on the reporting period. The results are also strongly aligned with the SDG 6 goal, ‘Ensure availability and sustainable management of water and sanitation for all’. As of September 2021, 51.7% of the loans were provided for sanitation and hygiene, 32.4% for clean drinking water, and 15.9% for water resources. Most of the beneficiaries of these loans correspond to product distribution and retailers that were required to address Covid 19 safety rules to continue the operations of their businesses. The main use was handwashing stations (50%) followed by water supply and distribution providers (12%). The performance of this portfolio has been really good as the guarantee has remained unused to date.

This partnership has unlocked many opportunities to scale up WASH financing in Kenya. Some of the potential areas that arise for deepening the penetration of the Sidian Bank and its partners on the WASH sector include digitalisation, automation, technology investment (smart meters, billing systems, revenue collection), transition to alternative/green energies, climate change impact projects, de-risking instruments & models and technical assistance & capacity building.

Blended finance can be successfully used for financing WASH SMEs. In addition, lending to this critical sector during the Covid-19 pandemic has led to both a great financial return, but also a positive socio-economic impact on the borrowers.

As the objectives of this facility have been met, both partners are now currently discussing an increase of 100 million Kenyan Shillings. Both partners are also looking to focus on Water Service Providers, Community Based Organisations, technology, transition to alternative energy, climate change impact projects.