The challenges of working with micro-financing institutions

Tom Wildman Water, Sanitation and Hygiene (WASH)

For many, the main barrier for access to clean sanitation is money. Tom Wildman, WASH Advisor, shares the opportunities and challenges of working with micro-finance institutions in the Philippines to obtain loans for the poorest.

In the Philippines, it’s not a lack of knowledge or desire that prevents people from owning a toilet, it’s money.  Most have little left over for savings.  Several micro-finance institutions (MFIs) exist which do offer small loans to low-income people, but most don’t offer one to build a toilet.  Oxfam’s research showed that many of those with only basic sanitation were willing and able to take out a loan for toilet

Our key partner to address this barrier to sanitation is Cebu People’s Multi-Purpose Cooperative (CPMPC), a MFI with a client base of over 45,000 people in Central Luzon, Philippines.  Our WASH team approached CPMPC with a business proposition to create sanitation-specific finance products. These would include loans for toilets, toilet upgrades, and for sanitation entrepreneurs. They would also waive their membership fees, which was often a barrier to the poorest.  The benefit for CPMPC was a unique finance product which would open their business to a large, untapped client base.

Creating these products and marketing them required investment from CPMPC, along with the risk that they may not recoup their investment.  They were willing to shoulder most the risk, but wanted Oxfam to absorb some as well. So, Oxfam used financial resources to underwrite approximately 20% of CPMPC’s investment costs in creating and marketing these finance products, until they could be shown to be marketable. CPMPC would then continue to own with the products.

It’s a partnership that I think we’ve sometimes struggled to understand how to grow.
It’s a partnership that I think we’ve sometimes struggled to understand how to grow.  CPMPC is not a small, local NGO looking for future grant funding to sustain projects and activities. They are a private business that is only interested in partnerships that further the needs and interests of their clients, as well as being beneficial for their growth and financial viability.  They’re also not interested in being asked to take part in a project that has already been designed by Oxfam, as they expect to be an active co-designer.

So how do we leverage these finance products to reach greater scale? Can we tap into CPMPC’s MFI network to scale this approach throughout the finance sector?  Instead of constructing water systems and training communities to operate and manage them, should we be working with CPMPC to offer affordable financing to construct and operate water systems? Or identify opportunities for them to invest in water systems, which can operate at profit while still providing water at affordable rates?  These are the questions we’re currently answering as we work on our next partnership model with CPMPC in WASH.  We’re looking forward to working through these questions and creating a model that can achieve greater scale with our sanitation program.


Tom Wildman