Bangladesh OBA Sanitation Microfinance Program
To support the Government of Bangladesh’s commitment to improve sanitation, the World Bank, through GPRBA, partnered with Palli-Karma Sahayak Foundation (PKSF) to provide hygienic sanitation solutions to low-income households. The project combined output-based aid (OBA) with a blended finance approach. GPRBA contributed $3 million in the form of an OBA grant and leveraged an additional $22 million in the form of commercial sanitation loans from microfinance institutions (MFIs). The project modality sought to leverage four main actors, PKSF as the implementing agency and wholesale lender for MFIs, local non-governmental organizations (NGOs) with microfinance experience as retail MFIs, local entrepreneurs or construction firms as the service providers, and low-income households as the customers. The retail MFIs provided sanitation development loans to low-income households. These loans were set at a maximum size of 10,000 BDT ($128) in order to target low income households and were repaid over 55 weekly installments with interest set at a fixed rate of 10 percent. The OBA subsidy covered the cost of interest charged by the MFIs.
The project successfully supported the construction of 170,679 latrines, surpassing its target of 170,000. Eighty-nine percent of the loan recipients were women. Aside from the direct outputs, a significant contribution of the project was demonstrating a viable and robust market for sanitation loans to both households and businesses. The use of RBF subsidies was a key contributor in creating the right conditions to engage the MFIs and customers. The project also developed a market for new sanitation and financial products. Since completing this project, PKSF has developed a Sanitation Development Loan policy to extend hygienic sanitation to its retail MFI partner organizations. It has also allocated capital finance to support retail MFIs in five sub-districts to reach 100 percent sanitation coverage in their areas, supporting SDG target 6—to ensure safely managed water and sanitation for all.
In FY19, GPRBA reviewed this project’s impact on market development in rural Bangladesh and assessed how much additional finance was leveraged because of these activities.
A workshop on the findings was held in Dhaka, with local microfinance institutions, non-governmental organizations (NGOs), and other local sanitation actors.