iii Microfinance in the Water Supply and Sanitation Sector in Kenya

Funded with generous support from the David and Lucile Packard Foundation EXECUTIVE SUMMARY This report analyzes the potential for using innovative financing mechanisms to sustainably improve water supply and sanitation in Kenya. The term “sustainable ” is used in the financial sense, i.e. a lack of external donor support over the long-term, and in the environmental sense, defined in terms of watershed protection, lack of surface water contamination, and protection of scarce water resources. We conducted a desk review of existing evidence on the use of microfinance in the water supply and sanitation (WS&S) sector; held a series of meetings with 168 households in 7 villages in Kericho and Nyando Districts of Western Kenya; interviewed independent and State water providers, and other key informants. Our results should not be interpreted to be representative of Kenya, although some of the main findings are supported by other evidence and by literature in the water and sanitation sector. We also conducted a more detailed analysis of one community managing the Kapekelek water system in Kericho district. Management capacity continues to be a problem in many small water systems in Kenya. Improved access to financing would undoubtedly be helpful to many of the better-managed systems, but lenders should extend these loans with an eye toward the types of management failures common in the WS&S sector