WASH lending has opened opportunities and also poses challenges for lending entities and financial institutions. Nabsamruddhi has also taken a giant leap. Bonani Roychoudhury, Managing Director, Nabsamruddhi, details the company’s strategy and the significance of WASH lending in an exclusive interview with Renjini Liza Varghese. This is the first of a two-part series in which WriteCanvas decodes the nitty-gritty of WASH lending.

What is WASH lending?

It is an acronym for Water, Sanitation, and Hygiene. In line with a recent WHO report, the ecosystem has a collective responsibility to ensure that we accelerate action to make safe WASH a reality for all and focused efforts on the poorest and most disadvantaged.

If we were to move at the same pace as we move today, by 2030 – 1.6 billion people will still lack safe drinking water at home, 1.9 billion people will still lack hygiene services at home, and 2.8 billion people will still have unsafe sanitation at home.

The World Health Organization and the UN studies have flagged that unsafe water supply and sanitation cause an estimated 1.6 million deaths per year worldwide; diarrhoeal diseases account for 88 percent of global deaths due to unsafe water supply and sanitation. Water-related diseases are responsible for 80% of diseases and deaths in developing countries.

We must imbibe this realisation to sustain growth. We must look at the long term, at the big picture, and WASH is central to this central to ESG.

When did Nabsamruddhi’s WASH lending journey start? What is the progress over the years?

Nabsamruddhi’s WASH lending started in 2017. Back then, we just only one loan to a society in Andhra Pradesh for lending towards household drinking water solutions. This was followed by sporadic loans to CASHPOR and FWWB in 2018 and 2019.

We launched our WASH product in 2019. On October 2, 2020, NABARD introduced the Special Refinance Scheme during the WASH awareness campaign. This entailed concessional refinance, and the product received a boost.

However, it was in FY22, when NSFL identified Green & wellness finance as a focus area, that WASH emerged as a prominent sub-segment. The share of WASH in NSFL’s Green & wellness finance portfolio is ~60%. We have drawn the highest share (>90%) of NABARD’s special refinance facility.

How do green and wellness finance fit into this strategy?

At Nabsamruddhi, our focus is on green and wellness finance. We believe that the health of the planet and the individual are interlinked. The financial sector cannot sustain if the real sector (people) does not sustain. Here most of the underlying borrowers are women, and they become very central to our dialogues, actions and strategy. However, I would like to highlight that WASH lending is not our moral responsibility, but a sustainability measure.

Factors such as squalor and pollution from wastes and landfills, open defecation, climate risk in sanitation, and non-availability of potable and running water for households and small businesses, have an adverse impact on health of the underlying borrowers. This is a major factor in inhibiting their disposable income in view of workdays lost as well as the substantial medical expenses incurred. (which can sometimes be as high as Rs 20,000 to Rs 30,000) which is not affordable for these segments. When events like large medical bills impact the disposable income, the entire budget of the family gets affected. In such a scenario, we cannot create a sustainable ecosystem in the financial sector.

If we want to see marginalized India graduate, where the ticket size of a microfinance loan can be double of what it is today, it is important to double household income in real terms. It is obvious that we need to invest in health and wellness.

How has WASH evolved as a core business focus? What were the key demand drivers?

The outstanding loan today is ~150 crore. As regards the non-financial impact, we have covered ~40k underlying borrowers, of which 90% of whom are women. Over and above improvement in health, hygiene and quality of life, and an estimated 21k beneficiaries has been an annual increase of an estimated 21k in income.

After a lot of extensive research and intensive analysis, we zeroed down on green and health wellness finance as our core business focus. WASH, which was one of the core business focuses, emerged as a key demand driver, and our numbers improved. What was most gratifying was to see increased income in underlying borrower households both in the short and the long term on account of WASH financing.

Can you elaborate?

Here I can give the examples of 2 women borrowers of an MFI. Their principal business is weaving charpoys. We met them during our monitoring visit. They had availed WASH loan to install running water solutions in their homes. The resultant infrastructure saves them approx. 2 hours daily from fetching water – and has increased monthly income by Rs 3,000.

Interestingly, the project also saw a lot of capacity building within our team and our partners. We signed an MoU with Water.org and also co-partnered with Sadhana, that helped us to reach our target segment.

You mentioned green financing. What percentage is earmarked for the same?

Out of the total disbursement last year, we disbursed nearly 42% towards on-lending for the focus segments, and more than 36% of the total AUM of Rs. 1120 cr, were under these segments as on 31 March 2023. More than 60% of our green finance is towards WASH loans. We also supported awareness generation for these segments through participation in various panel discussions and workshops. Regarding the impact at ground level, the financial interventions of NSFL have enabled the ultimate beneficiaries to contribute to a reduction in total CO2 emission, an increase in annual household income & consequently, savings, improved health and hygiene, reduced health-related expenses, gender equity & empowerment.

Other than WASH, we are aggressively pursuing opportunities in solar rooftops, solar lighting in rural and in urban areas, and solar rooftops in the MSME segment. We have also funded energy efficiency machineries that are certified under energy savings. Another area of interest is the EVs. Although there are challenges in the EV segment, these will be ironed out soon.

90% of beneficiaries are women. Is that a conscious effort from Nabsamruddhi to target women as a lending point?

No, I wouldn’t say that. Our clients in WASH are mostly microfinancing institutions, and their borrowers are predominantly women. Even the HFC partners whom we work with, their borrowers are mainly women, as women have been found to have better repayment ethics.

Women are also more susceptible to climate risk today as they are responsible for food, water, caregiving, and WASH financing is one of the most effective ways of combating this. This fact is being recognized worldwide.

In fact, the G20 New Delhi Leaders’ declaration accepted the disproportionate impact of climate change on all women and girls and decided to accelerate climate action with gender equality at its core, under Driving Gender Inclusive Climate Action and resolved to Support gender-responsive and environment-resilient solutions, including water, sanitation and hygiene (WASH) solutions, to build resilience to the impact of climate change and environmental degradation.

In Part 2, which will be published next week, WriteCanvas will discuss the collaboration and product strategy of Nabsamruddhi…