Be part of the re-generation
The world is still locked in a water crisis, and it is measured in millions and billions: 771 million people lack access to safe water, while 1.7 billion get by without improved sanitation. More difficult to measure is the value of getting access. These things can seem priceless, and that is the easy answer. However, there is also power in having a serious, measured answer, and here the question is like many questions posed to impact entrepreneurs: how do you measure the value of water? The best way to answer it is to start ending the crisis, one household at a time, and see what happens next.
How I misunderstood microfinance
The stakes of the value question became clear to me in the early 2000s, before I joined forces with Matt Damon to found Water.org. It was when I started trying to open conversations about water and sanitation with microfinance institutions, which were celebrated and motivated new development actors at the time. I knew that many people living in poverty could save enormous amounts of time and money with clean water and toilets at home; that these households weren’t making the investments because they didn’t have the capital; and that capital was at the scale microfinance institutions were in the business of lending out.
How do you measure the value of water? The best way to answer it is to start ending the crisis, one household at a time, and see what happens next.
For a year, I didn’t find a microlender that would take the idea seriously. Eventually some told me why. Microloans, in the logic of the day, were investments in entrepreneurship (say, a sewing machine) and their value was calculated through projected income (say, from sewing clothes). Household water and sanitation might make life better, but they didn’t generate income.
Microlenders were also running into trouble at the time. Among other setbacks, those income-generating investments often weren’t enough for household enterprises to take off. When living in poverty there is just so much that can get in the way of success – like having to spend hours a day collecting water, or getting sick, or caring for a sick child. To microlenders, these problems showed up in stories of default, or stories where borrowers misused business loans for emergency needs. They were not yet calculating in what might be set in motion if the problems could be solved.
Facing the crisis
Getting through life without clean water and a place to go to the bathroom is a heavy burden for any household. Now multiply it by those millions and billions of people at the base of the economic pyramid. The whole world is being dragged down by these truly unfair, and unnecessary, burdens. In a time when the international order is already pushed to the brink, a pandemic has turned inequity into emergency, and climate change is triggering ever more dramatic extremes in the water cycle, the crisis can seem insurmountable.
It’s the kind of situation that impact entrepreneurs were born to take on. Nothing less than a transformation will end the crisis – and we’re working on it. Perhaps you are working on it too. But as we do, something has become very clear to me: there is a near-repetition of the capital problem that faces low-income households without taps or toilets.
It’s the kind of situation that impact entrepreneurs were born to take on. Nothing less than a transformation will end the crisis – and we’re working on it. Perhaps you are working on it too.
My house has water and sewer connections, so I’m not living in that crisis. But we have in common the difficult task of showing the value of these things to systems that haven’t been designed to see them. Those working for transformation at the global level, if hardly in the same situation, face the same constraint: capital with a narrow view of returns. Nearly all the impact entrepreneurs I talk to – leaders of some of the world’s most promising social enterprises, taking on its biggest problems at the roots – have endless difficulty raising the capital they need to operate, because the value their enterprises create is more difficult to measure than just income.=
While Matt and I haven’t solved that problem, with Water.org we have made serious progress expanding the possibilities of microfinance. It started small, when a microlender agreed to try a pilot of water supply and sanitation loans if Water.org put up the money and took on the risk. When the results came back showing a 97% on-time repayment rate, things started to move a lot faster. Today our 100+ finance partners have disbursed $3.5 billion in loans like these, changing more than 43 million lives. Nothing holds back the further scaling of the model – except that same, still fiendishly difficult, capital bottleneck.
At least the argument for value that I failed to make to all those microfinance institutions seems easy to see now. There are millions of stories that show how it works. In rural Indonesia, a loan customer named Mumina told us about how she spent her days walking and waiting in line to fill her water pot, until she was able to invest in a household connection for her family. Now she has time to make money with her sewing machine – something more valuable than the machine itself. She also has time to garden vegetables, to spend with her children, and to do all the other things that make up a life. She is able to show everyone the value of those treasures.
If there is one way to learn the value of water, it is to enable everybody who needs it to get it, and see the transformation that happens.
So, if there is one way to learn the value of water, it is to enable everybody who needs it to get it, and see the transformation that happens. It’s the kind of value that investors in impact entrepreneurs must be able to see if they are going to play any role. The difficulty of measuring the value of impact entrepreneurship is dwindling as an excuse, with organizations coming up with ways to measure it very well: the Skoll Foundation, the Schwab Foundation, Echoing Green, Ashoka, and others. Each year they put thousands of candidates through rigorous analysis and make the results publicly available.
Understanding value in more expansive terms is not easy but investors have to do it, and entrepreneurs must use every success we have to make the invisible visible to them.
- Financial Inclusion
- Impact Economy
- Scaling Solutions
- SDG 1 - No Poverty
- SDG 10 - Reduced Inequalities
- SDG 13 - Climate Action
- SDG 3 - Good Health and Well-Being
- SDG 5 - Gender Equality
- SDG 6 - Clean Water and Sanitation
- SDG 8 - Decent Work and Economic Growth
- Voices from the Field
Regina "Gina" Kline
Founder & Managing Partner, Enable Ventures
October 27 - 12:00 PM EST
Founder & CEO, Acumen
November 3 - 12:00 PM EST
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