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Sector Lauds the RBI's Recommendation to Include Water and Sanitation in Priority Sector Lending


April 1, 2015 - Chennai, Tamil Nadu, India

Business Wire India
The recommendation of the Reserve Bank of India Working Group to include water and sanitation under priority sector lending is a significant step towards achieving Prime Minister Modi’s objectives of a ‘Swachh Bharat’. Priority Sector Lending (PSL) by banks is an integral part of India’s financial inclusion agenda. Channeling a proportion of financial institutions’ credit towards water and sanitation will uplift the credit-starved sector.
 
Mr. Uday Shankar, Country Director of Water.org, an international NGO which enables leading microfinance institutions (MFIs) and NGOs across India develop and scale water and sanitation lending portfolios, said: “The focus of the Government on sanitation has given the much needed impetus for the emergence of a new sector of its own with need for huge resources at all levels of the sanitation supply chain. The RBI’s efforts to priorities water and sanitation separately will be critical to achieving an open-defecation-free India by 2019, as outlined in the government’s Swachh Bharat Abhiyan.
 
Water and sanitation have emerged as priority areas because there is a tremendous need for credit in the space. Although under Swachh Bharat, incentives are being given to individual households for toilets, private sector participation in financing is vital to supplement government contributions.
 
Despite the government’s contribution towards toilet construction, there is a need for sanitation finance in the interim before beneficiaries can avail of the incentive and for households with dysfunctional toilets who are not eligible for the incentive. Added to all this is the need for credit to set up household water connections.
 
The current government has recognized this need in the Swachh Bharat Mission (Gramin) draft guidelines which state, “Private sector participation in development, management and financing sanitation infrastructure is a key strategy for bridging the funding gap in sanitation infrastructure under the (Swachh Bharat) mission.
 
Mr. Gary White, the CEO and co-Founder of Water.org said: “It is within this context that the RBI Working Group’s recommendation is so important. Making micro loans for toilets and/or water connections available to people living in the bottom of the economic pyramid (BoP) can help meet the immediate need that the time lag of government incentives cannot or may not fulfill and gives borrowers the option to construct better-quality facilities. We hope that the RBI will consider going one step further to ensure household-level lending through microfinance is included within the new PSL framework under sanitation and water.
 
Ms. Chevenee Reavis, Director of Global Advocacy at Water.org went on to say, “Providing a hand-up through micro financing enables households to install the permanent infrastructure that they aspire to have and inevitably frees families up to be more economically productive and save precious disposable income that would have been spent on daily access to community toilets and/or water supplies. This is particularly true for women and girls within a household. We know that real improvements in sanitation and water supply make a transformative difference—women are able to work, girls are able to stay in school, and dignity can be restored.”
 
Financial institutions also believe that including water and sanitation as a priority sector could significantly catalyse the development of the sector. Harihara Mohapatra, Associate Director at Sa-Dhan, the Association of Community Development Financial Institutions said: “The Reserve Bank of India is presently reviewing the present PSL guideline on bank lending to MFIs. We hope the RBI Working Group’s recommendation is incorporated suitably so that it will open up several channels for lending that were previously restrictive. Given the government’s focus on the sector, if dedicated lines of credit for water and sanitation facilities are instituted at the highest level, commercial banks, self-help groups (SHGs) and microfinance institutions (MFIs) could all significantly expand their water and sanitation portfolios. The new small banks could also emerge as an important vehicle because of their 75% PSL targets.
 
Both Water.org and Sa-Dhan are encouraged by the RBI’s openness to stakeholder consultation and have submitted their recommendations. “We believe that explicitly including household-level toilets and water improvements, sub-targets for the sector, and all financial institutions (such as MFIs) in the guidelines would ensure that water and sanitation portfolios can be scaled up effectively to tackle the acute need for credit,” said Mr. Uday Shankar.
 
About Water.org

For more than 20 years, Water.org has been at the forefront of developing and delivering solutions to the global water crisis. Founded by Gary White and Matt Damon, Water.org pioneers innovative, community-driven and market-based initiatives to ensure all people have access to safe water and sanitation—giving women hope, children health, and communities a future. To date, Water.org positively transformed the lives of more than three million people around the world, ensuring a better life for generations ahead. Learn more at http://water.org and www.facebook.com/water or join us at twitter.com/water

Source: Business Wire India

BusinessWireIndia

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