It’s time to unlock investments in water and sanitation entrepreneurship!

By Michael Kropac

Sooner or later most sanitation and water enterprises will need external financing – starting from grants, later also loans or equity or anything in between that is a bit more innovative such as blended finance funds or facilities, impact bonds or outcome-based funds. The interest to invest into water enterprises is picking up. The Global Impact Investing Network, in their 2020 survey, stated that WASH was the fastest growing sector in the last years and the upward trend is likely to continue in the coming years.

Although this is great news, we have to be aware that we are starting off from a pretty low level. Compared to e.g. the off-grid energy sector, where multi-million investments in enterprises with a core SDG focus are pretty standard, the examples in the water sector can be counted on one hand and the sanitation sector can for now only dream of these types of investments. There’s no shortage of reasons for this: yes, our sector is often capital-expensive, high risk and there are lots of regulations, also many governments do not provide ideal conditions for a thriving entrepreneurial ecosystem. Further, doing business at the Base of the Pyramid (BoP) is not easy. In the end, what we are talking about is a basic human right that needs to stay affordable, especially to those that are most vulnerable. Put together, we have a perfect mix of ingredients to shy commercial investors (who are looking for a reasonable return on investment) away!

But don’t despair – there is hope and even optimism! In the last 10 years, some magnificent entrepreneurs have been paving the way. They have by now demonstrated that (commercial) investments and reaching SDG 6 are not at loggerheads. Let us take water kiosks for example: we are way beyond pilot stage here – it is a proven water business model that can be scaled or copy-pasted. Jibu for example has shown us how to collect millions of investments to scale using a franchisee model. But also have a look at Yvette and Iriba in Rwanda – at the mere age of 25 she overlooks her little local water kiosk empire which provides safe and affordable drinking water to 73’000 people. Sanitation is more difficult, but with Sanergy or Safisana we now finally have something that resembles a proper investment case.

While we from the SWEP applaud and pat the shoulders of those shining water and sanitation entrepreneurs that made it, we are very aware that this is not enough to achieve SDG 6. We need thousands more entrepreneurs, at incubation and acceleration stage, so we get a good bunch of them to scaling level where they can achieve big-time impact. Finding synergies, coordinating those efforts and supporting those entrepreneurs hands-on is at the core of what we from the SWEP do.

To make it simpler for investors to understand where and how to invest in the water and sanitation sector, cewas and the Centre for Sustainable Finance and Private Wealth at the University of Zurich just published a brand-new guidebook. It aims to connect investors and water enterprises with shared goals. This new publication was developed in close collaboration with more than 30 investors. It helps entrepreneurs, investors and other ecosystem actors understand the different types of water enterprise and their characteristics. It also includes an overview of finance instruments applicable to water and sanitation, ranging from traditional equity investment to much talked-about options such as Carbon Credits, SIINCS, Performance-based- or revenue-based loans.

Yalla, let’s do it then! No more excuses not to invest in Water and Sanitation. Let us join hands, build a strong entrepreneurial pipeline and invest so we can reach this SDG 6!

Michael Kropac

Co-Director cewas