It’s great to know that people take note of the ideas we share on this blog. In April, I posted an entry introducing a paper I had recently presented in Croatia, called “Attempting the Production of Public Goods through Microfinance: The Case of Water and Sanitation“. The argument was that water and sanitation, because they have the characteristics of public goods, cannot be provided adequately via private individual credit like microfinance loans.

In a thoughtful article on Katya Jenkins recently re-iterated this point (and quoted the paper). Her basic argument: some organisations are reporting successes, but we have good reasons to be skeptical, and it might not work in every case.

Jenkins makes one very important point at the end, which is that there may be a better case for small self-financing in water and sanitation if we were talking about community systems. Agreed. But microfinance organisations would have to adapt their business models a lot, giving out much larger loans (€ millions rather than hundreds), being far more patient with repayments (slower repayment means slower turnover means lower profits), and actually bothering to “know” their clients’ business (instead of easy and cheap “no questions asked” lending). That’s a long shot from today’s microfinance, even if a select few organisations like ProCredit have taken the step into SME finance; and probably “microfinance” would be the wrong name for it.

The question still remains about the impact of microfinance models for water and sanitation. Not that a reduction in water-fetching time for a Zambian or Bangla lady from 3 hours a day to 15 minutes wouldn’t be a great thing – of course it would – but the fact remains that everyone who reads this blog (or‘s success stories) has a tap which they simply can turn on and a toilet which flushes, and they would not be succeeding in life without them.

I have grave doubts that microfinance, or private enterprise in general, could ever emulate this fantastic achievement of the public sector. So why bother with trying to make third-best solutions work? At best microfinance models could be a stopgap in lieu of something far better. To quote the wise words of Lant Pritchett (in a comment on Roodman’s blog):

I was living in India and discussing arrangements for household water supply with some development colleagues of mine. After about half an hour of pretty fruitless discussion I said, “let’s step back. tell me your long-run vision of the household water sector in India” They said “Our vision is that India meets the target that every household lives within half a kilometer of an improved water source capable of providing 40 liters of safe per person per day.” I said, “I see the problem. My vision of success is that every Indian can take a hot shower inside their own home.” The difference is that one can imagine meeting the first goal “programmatically” or with a series of “interventions” while the latter clearly requires endogenously functional systems. No one I know wants to have to go to a group meeting to take a hot shower. They want to turn the tap and it works.