USAID MuniWASH in collaboration with the National Microfinance Fund (Fonds National de Microfinance, FNM), is strengthening sanitation services in Benin. The partnership aims to create financial products tailored to sanitation companies and households seeking to acquire sanitation products. This approach is serving as a potential model for improved access to finance in the sanitation sector in Benin.

In 2021, the USAID Municipal Water, Sanitation and Hygiene (MuniWASH) Activity conducted a study in Benin to understand the water and sanitation sector. The study revealed significant gaps in the organizational and financial performance, such as low capacity to develop the business and increase market share, poor access to financing of local companies providing sanitation products and services, such as latrine construction, improvement, and emptying. These companies face challenges in accessing traditional financing, including Micro-Finance Institutions (MFIs) that offer unfavorable conditions and are unfamiliar with the sector’s investment potential.

Due to limited funding options, sanitation service providers struggle to acquire necessary equipment, hindering business growth and limiting the availability and quality of sanitation products and services for households. In addition, households themselves face financial constraints in investing in basic sanitation services to improve their living environment. While MFIs offer various financial products, they are not suitable for the sanitation sector due to the low income of the target population and high interest rates on loans. To address these challenges, USAID MuniWASH has focused on enhancing both supply and demand for sanitation products and services by facilitating increased access to finance. The Activity held collaborative meetings with the National Microfinance Fund (Fonds National de Microfinance or FNM) to develop a finance mobilization strategy that promotes accessible and sustainable financial products for the sanitation sector. The Director General of FNM expressed interest in the initiative and committed to mobilizing the necessary financial resources, pending validation by the Board of Directors. The FNM recognizes the potential investment opportunity of this initiative and has agreed to finance the two partner MFIs (PEBCo and AFRICA FINANCES) at a lower interest rate than that offered by local commercial banks. Discussions are underway with these two partner MFIs to explore potential avenues for reducing and aligning credit access conditions for low-income populations, including interest rate, fees, and financial guarantees.

Following this initial exploration phase, the FNM plans to expand the sanitation credit products to other MFIs, with ongoing monitoring and support from USAID MuniWASH. The collaboration aims to identify additional MFIs and financing at the national level, while exploring digitization possibilities to improve access for low-income populations. This partnership between USAID MuniWASH and the National Microfinance Fund has the potential to enhance financing opportunities in the sanitation sector, creating a sustainable and accessible financial ecosystem that contributes to improved sanitation practices and living conditions in Benin.

An Innovative Approach to Bridge the Gap

Following an extensive review process, USAID MuniWASH engaged in discussions with two Beninese MFIs, PeBCo-Bethesda, and AFRICA FINANCES, to gain insights into the existing barriers to financing businesses and households and explore the opportunities in the sanitation sector. As a result, USAID MuniWASH decided to establish partnerships with these MFIs, leveraging their expertise in financing sanitation activities and their dedication to supporting other MFIs.

The collaboration between USAID MuniWASH and the two MFIs will involve the development of two types of credit facilities. The first is a sanitation credit designed to provide households with financing options for investing in sanitation products. The MFIs, with their easy accessibility to the population, will play a crucial role in developing and implementing this credit scheme. The second is a credit facility tailored to the needs of companies that provide sanitation products and services, such as latrine emptying and construction/improvement of latrines, to bolster their market presence. The MFIs will extend their support to these companies based on their specific financing requirements.

The availability of financing through these initiatives will empower sanitation products and service providers to better meet the demand for affordable and high-quality products and services. Simultaneously, households will be able to acquire sanitation products and services that contribute to the improvement of their living environments, particularly in the municipalities where USAID MuniWASH is actively engaged.

By bridging the financing gap in the sanitation sector, this partnership aims to enhance the availability and affordability of sanitation solutions for both businesses and households in Benin. The innovative credit programs developed through this collaboration will pave the way for improved sanitation practices and contribute to the overall well-being of communities in USAID MuniWASH’ s intervention areas.

About the FNM

The National Microfinance Fund, a government institution, contributes to strengthening the financial and technical capacities of actors in the microfinance sector to meet the needs for financial and non-financial services expressed by low-income populations. As part of its mission, the FNM sets up small loans for vulnerable segments of the population through the decentralized financial systems.

About MFIs

PEBCo-BETHESDA is a microfinance institution whose mission is to improve the living conditions of poor populations by offering them quality financial and non-financial services.

AFRICA FINANCES is a microfinance institution whose mission is to contribute to the economic and social development of vulnerable populations, especially women, by offering quality financial and non-financial services at lower cost for better living conditions.

PROJECT DETAILS

The Municipal Water, Sanitation and Hygiene (MuniWASH) is a five-year project funded by the United States Agency for International Development (USAID). Started in September 2019, it is implemented by Tetra Tech with support from Population Services International (PSI) and SEGURA Consulting LLC.

USAID MuniWASH works with municipal governments, national agencies, water and sanitation service providers and civil society organizations to improve and expand water and sanitation services in West Africa. The project focuses on four intermediate results: financial sustainability and investment, operational reliability, governance, and municipal management, and learning and knowledge sharing. In Benin, USAID MuniWASH is implemented in eight municipalities: Abomey-Calavi, Ouidah, Allada, Cotonou, Avrankou, Bohicon, Aplahoué and So-Ava.

The USAID MuniWASH Activity is implemented by Tetra Tech in Benin and Côte d'Ivoire in collaboration with its learning partner, the African Water and Sanitation Association (AfWASA).

Initial target countries: Côte d'Ivoire and Benin. Contacts: Jules, Hountondji, Contracting Office Representative, This email address is being protected from spambots. You need JavaScript enabled to view it. or Safaa Fakorede, Chief of Party, This email address is being protected from spambots. You need JavaScript enabled to view it.

Keywords: USAID, sanitation, credit, Benin, FNM, household, MSME, MFI

Author: Tossounon Alain, François AZIMBLIGBO

Copyright: USAID MuniWASH.