July 18, 2024

Sidian Bank, Oikocredit, and Aqua for All launch Ksh 1 Billion WASH Loan Facility For SMEs and Water Service Providers

Sidian Bank, Oikocredit, and Aqua for All launch Ksh 1 Billion WASH Loan Facility For SMEs and Water Service Providers

Sidian Bank, Oikocredit, and Aqua for All have launched a blended finance program that will integrate climate action and gender inclusion in (Water, Sanitation, and Hygiene) WASH Financing. The initiative aims to leverage Ksh 1 billion in commercial financing initiatives towards WASH infrastructure projects.

The program prioritizes WASH lending across various entities. Small-scale water service providers (WSPs), private households, and enterprises will benefit from the program’s focus on WASH infrastructure development. Notably, the initiative places a strong emphasis on promoting climate-resilient infrastructure and empowering women-led businesses within the WASH sector.

“Today, we are pleased to launch Phase III of WASH Financing in partnership with Aqua for All and Oikocredit. This program aims to catalyze access to WASH financing and provide resources to improve water and sanitation services in Kenya. Our blended finance three-year program integrates climate action and gender inclusion into WASH financing. Blended financing models, which combine revenue-based credit appraisal with individual risk-based methodology and de-risking instruments like portfolio guarantees, have proven to be financially viable. These models support viable projects even when traditional collaterals are insufficient.” Chege Thumbi, Sidian Bank CEO said.

“Our partnership aims to support SMEs and WSPs through targeted lending, technical assistance, and performance-based incentives to enhance water infrastructure, climate-resilient infrastructure, promote sustainable practices, and improve gender equity in access to finance.” he added.

Phase III of the tripartite collaboration between Sidian Bank Limited, Oikocredit, and Aqua for All is set to commence in June 2024 and run through May 2027. The facility will provide financing solutions that align with the revenue streams of small-scale water providers. This initiative will unlock the potential for growth, efficiency, and sustainability in the water sector. Ultimately, it will contribute to increasing access to clean and reliable water supply for the majority of Kenyan citizens, particularly those residing in peri-urban and rural areas.

This three-year blended finance program distinguishes itself by integrating climate action and gender inclusion into WASH financing. It utilizes a unique approach that combines revenue-based credit appraisal with individual risk assessment methods. Additionally, de-risking instruments like portfolio guarantees are employed to ensure the financial viability of projects that might lack traditional collateral.

The partnership aims to support small and medium-sized enterprises (SMEs) and WSPs through targeted lending, technical assistance, and performance-based incentives. These efforts will not only enhance water infrastructure but also promote climate-resilient practices and improve access to finance for women-owned businesses.

The program anticipates reaching approximately 3 million Kenyans and issuing loans to at least 480 MSMEs. Demonstrating a commitment to gender equality, 40% of the credit facilities will be directed towards women-led businesses. Furthermore, 60% of the funding will be allocated towards climate-resilient infrastructure projects undertaken by WASH SMEs and WSPs.

This initiative leverages the achievements of Sidian Bank’s previous WASH programs. The Covid-19 WASH Loan Facility, launched in 2020 with a €4 million allocation, provided crucial support to MSMEs and WSPs during the pandemic. This program successfully ensured continued access to essential WASH services for over 1.39 million people, created 3,266 jobs, and aided 627 enterprises, including financing for six WSPs.

Building on this success, Sidian Bank, in collaboration with Aqua for All, established the Challenge Fund in 2023 to enhance access to safe drinking water. This initiative offers loans ranging from KES 300,000 to 10,000,000, covering up to 80% of project costs, with subsidies and technical support to ensure project sustainability. With an initial focus on regions including Kajiado, Kiambu, Machakos, Makueni, Nairobi, and Nakuru, the Challenge Fund targets small-scale piped water providers serving at least 300 households.

Sidian Bank will introduce a novel revenue-based financing model to support small-scale WSPs (SSWPs). This approach eliminates the need for traditional collateral, a frequent hurdle in the WASH sector. SSWPs will be able to repay loans using the revenue generated from their water services, fostering a more sustainable financial model.

Expressing enthusiasm about the program, Josien Sluijs, Managing Director of Aqua for All, highlighted the significance of climate action and gender inclusion within their partnerships. This initiative builds upon their ongoing collaboration with Sidian Bank to enhance WASH financing in Kenya.

Mirjam ‘t Lam, Managing Director at Oikocredit, echoed similar sentiments, emphasizing their excitement about this new program and the prospect of providing greater access to WASH financing for low-income communities.