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Microfinance institutions encourage toilet construction with loans at low interest rates

Microfinance institutions encourage toilet construction with loans at low interest rates
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First Published: Sun, Apr 18 2010. 09 05 PM IST

Teaching hygiene: Selvi V. in front of the toilet that was constructed with the help of a micro loan. The state of India’s sanitation infrastructure is very poor with more than half of its population
Teaching hygiene: Selvi V. in front of the toilet that was constructed with the help of a micro loan. The state of India’s sanitation infrastructure is very poor with more than half of its population
Updated: Sun, Apr 18 2010. 09 05 PM IST
Chennai: For nearly three decades, Selvi V. has lived in a village in the Kanchipuram district of Tamil Nadu, 75km from Chennai, without a toilet. And there really wasn’t any need felt to have one in this family of daily wage farm labourers. Selvi and her now-married daughter would wake up either early every morning or wait until dark to relieve themselves in a thicket of thorny shrubs a little distance from their home.
Teaching hygiene: Selvi V. in front of the toilet that was constructed with the help of a micro loan. The state of India’s sanitation infrastructure is very poor with more than half of its population defecating in the open. Ganesh Muthu/Mint
But last year, Selvi’s family built a Rs10,000 toilet with an attached bath area. The catalyst: a micro loan from not-for-profit Hand in Hand.
“It would take me at least half an hour to one hour to walk to the shrubs finish my job and get back home,” says Selvi in Tamil. “We would be scared to go there in the darkness, fearing snakes and then there’s always the worry that there’s a peeping Tom. Now, I don’t have to puff and pant if I urgently need?to?use the toilet.”
The dismal state of India’s sanitation infrastructure is best described by the fact that India has more cellphones than toilets, as revealed in a recent report by UN University, a Canadian think tank. There are nearly 545 million mobile phones in India, but just 366 million toilets. More than half of India’s population defecates in the open.
Microfinance, or small loans that don’t require collateral and are offered largely to women, could spur more low-cost toilets in the country. But some funding agencies warn that only those groups which generate community health awareness and understand toilet construction related to the source of water supply and toilet waste disposal methods should step in. Risks include pollution of already depleting ground water tables and also, in some cases, unused toilets.
“Conventional toilets use a lot of water and that cost is not factored in. Then there’s the pollution stream created by it. So the quest for low-cost results in this kind of slight mismatch,” says Vishwanath Shrikantaih of Bangalore-based Arghyam, a public charitable foundation that was set up with a Rs150 crore endowment from Rohini Nilekani, a major shareholder in Infosys Technologies Ltd and wife of its former chief executive officer Nandan Nilekani. “Microfinance, sometimes, avoids all these issues and reduces sanitation to whether you have money or not.”
Arghyam, which offers a total funding of around Rs10 crore every year in the water sanitation space, works largely with not-for-profit organizations such as Tamil Nadu-based Gramalaya that offers water and sanitation loans of between Rs10,000 and Rs20,000 at an 18% rate of interest to villagers around the Trichy district via its microfinance institution (MFI) Gramalaya urban and rural development initiatives and network, or Guardian.
Guardian’s focus has been to fund toilets where the waste is flushed into underground pits that allow the liquid parts to seep out leaving just the solid material to decompose into compost. It also advises on leach pits being at a distance of at least 15ft from any water source to prevent contamination. But, before offering a loan the group educates residents about health and sanitation to make sure that the people feel the need to have a toilet and use it.
“A lot of the success rests on long-term behavioural change,” says Uma Hemachandran, a portfolio associate with Acumen Fund, a venture capital firm that funds social entrepreneurs. “I might want a toilet, but I’d rather build a house and rent it out. Sometimes even if the toilets are built people go out to the fields to relieve themselves.”
For the last five months, Hemachandran has been travelling across the country to scan investment possibilities in the water sanitation area for Acumen and is struggling to find a business that provides an easily scalable solution.
Most toilets cost upwards of Rs10,000. But MFIs may be willing to lend just part of the amount, as was in the case of Selvi who received just Rs6,000 from Hand in Hand and covered the remaining with a loan from a money lender at a higher rate of interest.
For Hand in Hand itself, this consumption loan generates just 15% interest versus 18% it earns on income generating loans. While interest rates were kept low to generate demand, it doesn’t help cover the 12% cost of capital and other overhead costs. And it is likely that the group will charge a higher rate of interest if it seeks to scale up.
Moreover, if the microfinance agency that offers toilet loans to women overlooks property documents, it risks resistance for repayment from the male members of the family who own the land.
Urvashi Prasad of the Michael and Susan Dell Foundation is also seeking a solution that could be adopted extensively. Prasad is convinced that trigger for hygienic habits is ownership.
“Our research showed that toilets are provided by governments or NGOs (non-governmental organization), but when the structure stops functioning or gets into disrepair, people don’t know who the onus of repair falls on,” says Prasad. For the last two years, she’s been monitoring the impact of new toilets partly financed or monitored by four organizations that the foundation supports, on the health of family members.
One of the toughest problems to crack for most groups entering this sphere is there is no one-stop-shop for building, running and managing the waste of a toilet, thereby increasing the cost. Rajeev Kher is confident he has an answer—toilets costing between Rs6,000 and Rs12,000 that his company, Saraplast Pvt. Ltd. will build, clean and even replace.
Kher’s Pune-based company with sales of Rs12 crore last year has provided portable toilet solutions for workers in construction sites as well as tourist hot spots for over a decade. The company, in which Aavishkaar India Micro Venture Capital Fund has a 21% stake, will finalize an end-to-end toilet service model for slums and even public schools by next month.
“We are working on a system where we will fit our toilet made of recyclable plastic in a semi-urban or rural area, clean it regularly and take away the waste. Even if the toilet gets broken, we can just wash them and recycle them into a new piece,” says 35-year-old Kher, a management graduate. “Sanitation is an ungrateful space and everybody is waiting for someone else to take the first step.”
anupama.c@livemint.com
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First Published: Sun, Apr 18 2010. 09 05 PM IST