A social investment is a “double-bottom line” investment. These investments aim to achieve both financial and social returns and thereby promote the development of sustainable, “bankable” solutions for the world’s poor. Water.org and our partner MFIs are committed to double-bottom line solutions which reflect our social missions and capacity for financial innovation, and seek to serve the 400+ million people lacking access to safe water and sanitation whose needs could be met if they had access to affordable finance.
Social investors are the engine of growth for WaterCredit. There are many different types of social investors — including individuals, investment funds, and commercial banks — and a variety of ways they can get involved. Investments of social capital are complementary to, and leverage the impact of, investments of smart subsidy capital for WaterCredit market assessments, product development and related “software” activities.
Social capital is required by WaterCredit partner MFIs to scale-up their WASH-focused loan portfolios. Capital for credit enhancements also helps to further attract and mobilize increasing amounts of commercially-oriented investment to the table. In addition to these key areas of loan portfolio scaling and credit enhancement, longer-term patient capital is also required for community-based solutions (which MFIs typically do not address, because the amount of investment required is larger than the “micro”-loans that MFIs customarily provide). Under certain circumstances, equity investment directly into MFIs and/or WASH enterprises may be possible.
There are roles that both domestic and international social investors can play to expand WaterCredit. Depending on the local economy, laws and regulations, in some places (like India) domestic capital represents a significant resource for scale. Typically larger amounts of capital can be provided by international investors and/or co-investment situations.
Water.org believes that the true potential of WaterCredit will be reached when civic capital is attracted to the WASH sector, alongside philanthropic and social capital. Civic capital refers to funding provided by public entities (such as local municipalities, state and national governments, and international agencies) who have a commitment to serving the public sector and society at large. By recognizing the value-add and growth potential for WaterCredit – which provides critical water and sanitation access to benefit individuals, households and thereby communities – the objectives of civic actors are also achieved. Moreover, this approach can link up with private-sector business opportunities thereby promoting sustainable public-private partnerships in the WASH sector. Over time this leads to a positive cycle of increased civic engagement, including commitment of both financial and human capital resources, and beneficial “ripple effects” within the public and private sectors alike.
