Investing In the Globally Underserved
Throughout my time working in Ethiopia, I’ve consistently been asked about the most difficult part of the work getting water into the homes of rural Ethiopians.
First, people wonder if engineering is the most difficult part, usually because they’re afraid of physics and math. Nope. First, if you don’t love math, you should. In my mind, physics is the language of the universe, while math is simply the alphabet that makes up that language. But math and physics are consistent once you know them. They don’t change, at least not at the Newtonian level of physics that we deal with.
Another theory is that working with the government is the hardest part. Nope. Sometimes the bureaucracy is tough, but our goals align with the government’s and we typically work well together once we’ve understood our shared goals.
No, the single hardest aspect of our work is (drum roll please)… finance. Paying for our water systems is singularly the most difficult part of our work. We work with households living on $1.50 to $2 a day and asking them to pay for pipes, fittings, pumps, etc. that continue to dramatically rise in cost is tough, to say the least. When we first started, a two inch HDPE pipe cost 42 birr per meter, or about $1.90 at the exchange rate of the time. Now, the same pipe costs about 210 birr per meter, or about $4 at the current exchange rate. Keeping in mind that income gains have not kept pace with inflation, this is entirely too large a burden for most rural households to manage.
When we started our pilot project, our goal was to cover the entire cost of the water system through two sources: a one-time $50 connection fee and an investment from the local government.
This did not work.
First, households were slow to pay. It’s not a small amount of money for them and regardless of how they got the cash - some had savings, while most had remittances from relatives in cities or across the globe. On top of that, since it is a sizable sum for them, they were reluctant to pay up-front for something that they couldn’t guarantee was coming, even if they saw the value in it. We had not developed that level of trust with them. That said, once they saw pipes in the ground and water starting to run, the connection fees began to flow.
Second, the government budget we requested did come through, but had to push until the following fiscal year. Because, y’know, governments work on budget cycles. Which, of course, I knew, but didn’t fully appreciate. The government was willing, but really they preferred to use their budget to improve water in more vulnerable communities, which…yeah, of course that makes sense.
The delays in funding created a major problem: our budget exploded. We had set the budget from the government and the household payments based on a price that was no longer there. This did not work. Among many other lessons learned, there are two that stand out:
In every community, build a sample micro-grid to show people the possibilities of home water access, build trust, and work out any local issues that might arise. For example, build a water system for 50 homes before you build a water system for 500 homes. This is a lesson learned for another time.
Provide the entirety of the investment up-front, rather than relying on funding from other sources like connection fees and government budgets. This doesn’t mean that we need to build the entirety of the system, but that we can purchase all the materials up-front and get our investment recouped over time. This is where HomeWater Fund was born.
The name should be fairly self-explanatory: HomeWater Fund is a revolving investment fund financing rural home water connections in Ethiopia. 3BL secures the funding to get the materials for the capital expenditures (i.e. pipes, pumps, and other construction costs) before anyone starts making household payments. Then, our investment gets repaid in two ways:
Households pay a one time connection fee equal to ~40% of the overall investment cost.
The remaining 60% of the investment is paid over time through a monthly pay-as-you-go (PAYGO) charge amortized out over the course of four years. This is a fixed monthly fee paid on top of the fee paid based on the water consumption at each household. The goal is that this monthly fee is approximately $1.80 to $2 per household per month.
Through a partnership with Stone Family Foundation and Aqua for All (and a couple of other smaller funders), we raised seed funding for HomeWater Fund to get water into our next 2,000 homes, serving approximately 12,000 people in the Gurage Zone, near Butajira in the Meskane and Misrak Meskane woredas. Throughout the next 18 months, we’re going to be taking all of our lessons from our pilot project and getting water into all of these homes.
To ensure our investment gets repaid, we support the community with enhanced financial and technical management services through Flowius Sustain. This gives us the opportunity to not only build a system, but ensure that for the next four years, it will run smoothly, increasing community expectations for quality of water service. Essentially, our goal is to implement and ensure quality management practices into the future, sustaining community water access even after our investment has been repaid.
Learn more about our work at https://www.homewaterfund.com. We’re excited to share our progress with you as we continue getting water into the homes of rural Ethiopians!
- Chris