KENYA MICROFINANCE TO SMALL PIPED WATER SUPPLIES

Transcription

1 KENYA MICROFINANCE TO SMALL PIPED WATER SUPPLIES A PRESENTATION TO WATER WEEK WASHINGTON DC-TRACKING GLOBAL WATER CHALLENGES 17 TH TO 20 th FEBRUARY 2009 By K-Rep Bank Ltd-Kenya In partnership with the Minsitry of Water and Irrigation, Water Services Trust Fund, Water Services Boards, WSP-Af, GPOBA, PPIAF

2 Microfinance for Community Water Projects Structure of Presentation:- Introduction to K-Rep bank Partnership-Who is involved Implementation Process Current Status Challenges Recommendation and Way-forward

3 K-Rep Bank Overview A Commercial microfinance Bank established in 1999.Providing banking services to poor households, low income & micro entrepreneurs Banking Services: Microfinance Retail Banking Corporate Banking Services Wholesale Banking Structured facilities K-Rep Group 25.0% International Finance Corporation (IFC) 16.7% African Development Bank 15.1% Netherlands Development Finance 5.0% Co. Triodos 11.0% ICDC Investment Company 3.8% Kwa (Employee Stock Ownership 10.0% scheme) Shore cap International 8.2% Individuals 5.2%

4 Project Objectives Demonstrate that microfinance has an innovative and beneficial role to play in financing rural infrastructure (water). Demonstrate that the use of micro-finance linked combined with output based aid (OBA) will increase the sustainability of small community-managed piped water supplies by: Increased operting efficiency Stronger management capacity Enhanced accountability/ governance structures

5 K-Rep s Perspective Opportunity & Water Sector Large demand for investment but limited availability of capital funds in the form of grants. Available grants are unpredictable. But considerable liquidity in banking sector (five years ago) Good performance of many community based water suppliers with strong cash flows observed. Conducive legal and institutional environment created for private sector participation and financing through sector reforms (Water Act 2002) K-Rep Bank capacity and history of innovation: Potential to develop specialized product lines for infrastructure loans responding to demands Further strategic opportunity to increase customer outreach and expand K-Rep s financial business by lending to water suppliers

6 Key Risks and Mitigative Measures in Community Water Lending Legal Status: Facilitate supplier legalization (Public Trust, Society and/ or Company) to enable undertake contractual agreements. Service Area: Use and enforcement of Service Provision Agreements (SPAs) as required under Water Act Limited Collateral: Projects have little access to conventional collateral Character assessment based experience in the engagement of water supply management, assessment of willingness to pay, the product pricing and level of service demands Requirement of contractual savings (15% of debt service payment) Debenture and Chattel mortgage ( fixed and floating assets including those newly acquired and project cash flows Use output based subsidy as partial security/collateral - Only for those projects that promise high probability of achieving the pre-determined outputs Use of USAID Developmnet Credit Authority (DCA) partial credit guarantee to address limited availability of other collateral

7 Project Finance Structure and Outputs Project Outputs Improved coverage and service level outputs; (Number of household connections, and increased revenue) Subsidy release trigger High quality construction Cost savings Governance structures Legalization of CWPs contracting capacity Organization Community Contribution (equity) K-Rep Bank loan During construction Outputs are achieved 20% 20% 80% 40% OBA subsidy 0% 40% Total 100% 100%

8 Projecty Financing Structure Projects pre-financed with market based loans from K-Rep Bank Use of output based subsidy Reduces the total loan sizes and ensures debt service remains affordable Type of and scope of Project Supported:- Rehabilitation/augmentation of existing projects - New/greenfield projects Average Project size USD (maximum loan of Kshs 10 Million) Average population 2500 (500 households) Average number of connections 300-Approximate cost recovery threshold(pumped system) GPOBA (EU, DFID, IFC, Neths) K-Rep BANK Water Services Board Water Trust Fund PPIAF funded OBA subsidy Loan to project Small Piped Water Project Debt service Service provision agreement Project Development Grant

9 Revised Community Project Cycle 1 PROJECT STAGES Eligibility Community water project submits required documents to meet eligibility requirements for project development grant 2 Project Development Project development consultant retained by community loan application development 3 Loan Appraisal Finance institution appraises loan application 4 5 Implementation Post implementation Project construction assisted by project implementation consultant Business development services support project operations and strategic planning

10 Summary of Project Status/Achievements 13 applications received amounting Kshs 71 million (Approx USD 1 million ). 7 (Projects) loan applications approved upto USD 824,103 Million (6 under construction, -one project complete and output verification conducted over 8 months period First disbursement in March 2008 USD 503,531million Disbursed to 6 projects by with 8 months (4-12/12/2008) Average Monthly Disbursement -USD 76,000 Total Deposit USD 130,000 Million mobilized from community

11 Highlights: Project Outcomes High responsibility and accountability in financial management realized Implementation times lines /schedules have been met in 6 out of 7 projects Infrastructure construction completed, with a cost saving on the original budget in all projects despite BoQs being up to 2 years old Water provision increased from 2/7 to 7/7 Increased revenue collection through metering and accountable revenue collection (consumers love paying for a good product ). Water tariff reduced

12 Way Forward National Scaling up to finance 55 sub-projects (2009 to 2011) K-Rep bank commitment to lend USD 4 Million EU Facility of 1.5 million Euros for subsidies PPIAF Project development facility of USD 523,000 Targets Target household Connection 100,000 Affected population 500,000

13 Thank You! Q&A