Should the poor pay for water?

Our water portfolio team recently held a series of meetings in Mumbai, Hyderabad, Bangalore and West Bengal to explore the role that microfinance organizations could play in providing credit for water products and services.

One group in West Bengal asked us why the poor in their state should pay to treat their own water, when in the developed world safe water is made available for free. This question underscored the misperception that water can be made available on a sustainable basis at no cost. The reality is that where water is managed most effectively is where there is a price associated with it - which promotes more judicious use of the resource and a revenue stream to assure that investments are made and maintained over time. These misperceptions have plagued efforts to introduce water treatment and delivery models that require users to pay.

What is encouraging is that Acumen Fund is seeing more and more cases where consumers are showing themselves willing to pay for clean water. Furthermore, access to water and sanitation, which have been conveniently melded into the term Watsan, are emerging as issues where microfinance can play a major role. In West Bengal we spoke with microfinance institutions (MFIs) that are seeing their borrowers access credit for sanitation at the household level. It will be only a small leap to accessing credit for safe drinking water. While access to safe water may not increase incomes directly, it will dramatically reduce health costs, making it a sound investment for small-scale borrowers. In discussions with various groups serving communities affected by surface water problems like bacterial contamination and groundwater problems like arsenic and fluoride, we felt there was significant interest in experimenting with the introduction of financial products to address these issues.

In a state like West Bengal, where as many as 40% of bore wells are contaminated with toxic levels of arsenic, there is an acute need for treatment options that are appropriate, affordable, and sustainable. Since Acumen Fund’s work is driven by the philosophy that the poor are willing to pay for a product if it is appropriately designed and the price is right (acknowledging that this may require some subsidies), we are looking at several technologies, and will work closely with the local microfinance groups to determine a financing model that can make these products affordable to residents.

Institutions in the public, private and citizen sectors all need to work together much more effectively to make safe reliable water available at a much lower cost, and one that does not penalize the poor, who are almost always asked to pay more than their wealthier counterparts for water. And at the same time, we must avoid the promise of free water, which has held back efforts to deliver solutions that are sustainable in the long run and that give low-income customers a real voice.