A household planning to install a water connection or improve its sanitation facilities faces an immediate financial decision. The improvement may deliver benefits over several years, but the installation or construction costs often arise at once. For households and small businesses without sufficient savings, this creates a financing challenge.

Conventional lending products may not adequately reflect these requirements. Loan amounts, repayment periods, eligibility conditions and affordability can determine whether customers can finance water, sanitation and hygiene (WASH) improvements. Financial institutions must also assess demand, repayment capacity and the viability of serving this market.

These considerations informed an assignment undertaken by Impact Africa Consulting Limited (IACL) for Kenya Women Microfinance Bank and Water.org in Kenya.

Understanding an underserved financing market

The assignment focused on WASH financing strategy research and financial product development. Its purpose was to examine market requirements, institutional readiness and opportunities for financial solutions aligned with customer needs.

For a microfinance institution, developing a specialised product requires balancing accessibility with responsible lending. Customers may have different financing needs depending on the improvement they intend to undertake, while the institution must establish suitable eligibility criteria, repayment arrangements and risk controls.

The engagement therefore examined WASH financing as both a market opportunity and a product development challenge. It considered how institutional capabilities, customer demand and operational systems could influence the design and delivery of appropriate financing solutions.

Investigating customer needs and institutional capacity

IACL reviewed existing financial strategies, product documents, market information, portfolio evidence, risk policies and operational procedures. This established a basis for understanding current financing arrangements and identifying areas requiring further assessment.

The team engaged management representatives, financial sector stakeholders, technical specialists, programme partners, market participants and intended users. These consultations explored customer expectations, financing constraints and the practical considerations affecting product suitability.

Market analysis considered demand, institutional capacity, commercial viability and implementation options. The assessment also examined relevant risk considerations and the relationship between customer requirements and existing financial products.

An important element was distinguishing an identified need for water or sanitation improvements from effective demand for a particular financing product. A household may require improved facilities but still face affordability or repayment constraints that affect its ability to borrow.

Developing financing options informed by evidence

The research provided a basis for examining financial product and programme options relevant to the WASH market.

IACL analysed product suitability alongside financing constraints, risk considerations and operational requirements. Existing institutional practices were compared with relevant standards, stakeholder expectations and realistic benchmarks.

The resulting work included diagnostic findings, financing recommendations, potential product and programme options, risk management considerations and implementation priorities.

These recommendations were intended to help Kenya Women Microfinance Bank and Water.org assess opportunities for financing solutions that reflected customer circumstances and institutional capabilities.

The process recognised that product design involves more than determining loan availability. Financial institutions must consider how products will be administered, how customers will access them and whether the proposed arrangements can operate sustainably.

Preparing financial products for implementation

Product recommendations require supporting institutional arrangements before they can be translated into operational offerings.

IACL developed guidance covering responsibilities, implementation sequencing, resource considerations, performance measures and follow up actions. These elements connected financing recommendations with the management processes necessary to assess and potentially introduce suitable products.

The work also considered institutional coordination and monitoring requirements, recognising that specialised financing solutions may involve relationships between financial institutions, technical partners and intended beneficiaries.

The project documentation records research, analysis and product development recommendations. It does not confirm subsequent product launches, loan disbursement volumes or the number of households obtaining improved WASH services.

Lessons for financial inclusion programmes

The assignment illustrates the importance of designing financial products around specific customer needs rather than assuming that existing lending models will serve every market effectively.

For WASH financing, affordability, repayment capacity, product accessibility and institutional readiness require careful consideration. Market research can help financial institutions identify demand while examining the conditions necessary for responsible product delivery.

Development organisations supporting financial inclusion can also benefit from linking sector expertise with financial market analysis. Understanding technical WASH requirements and the economics of lending provides a stronger basis for product recommendations.

Financing solutions for water and sanitation are more likely to be relevant when they reflect customer circumstances, commercial realities and the operational capabilities of the institutions expected to provide them.