KENYA – The International Finance Corporation (IFC), an international financial institution and Water.org a non-profit organisation are raising $100 million (Sh10.3 billion) to help banks in Kenya and other markets to issue loans for water projects in low-income areas.
According to Business Daily, the money will be used offer partial guarantees to the banks, incentivising them to expand their loans for the water and sanitation ventures.
By absorbing part of the potential defaults on these loans, IFC and Water.org expect that the initiative will encourage banks in India, Kenya, Bangladesh, the Philippines and Indonesia to lend up to $1 billion (Sh103 billion).
“The facility will provide credit enhancements structured as risk sharing facilities for portfolios of water and sanitation loans made by local banks, thus mitigating credit risks and enabling local banks to introduce or scale up lending for water and sanitation assets,” IFC says in its investment disclosures.
The banks are expected to lend to more than 2.7 million borrowers, ultimately improving water access for 13 million individuals. Priority will be given to households and individuals, especially women, who do not have access to safe water and sanitation.
“The (credit facility) is designed to encourage financial institutions such as commercial banks and microfinance banks to increase the availability of water and sanitation loans to borrowers at the base of the economic pyramid still lacking basic services,” IFC said.
Water.org, cofounded by American actor Matt Damon, will support the origination and servicing of loans by way of technical support in areas of borrower identification and demand generation.
The charity group will also offer training, technical information on the water and sanitation assets, performance monitoring of the borrowers as well as impact evaluation and reporting.
IFC will offer a debt investment of $50 million (Sh5.1 billion) in the initiative and will also leverage its relationships with banks to boost the venture’s success.
The International Finance Corporation is an international financial institution that offers investment, advisory, and asset-management services to encourage private-sector development in less developed countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C. in the United States.