Editor’s Note: This post was originally published on July 6, 2018 as the second of two blog posts for The Stone Family Foundation. Read the first blog, “Dispensers for Safe Water: Lessons learnt from operating at scale,” here.
In our first post, we discussed the lessons learned in scaling up Dispensers for Safe Water to reach millions of people. Our operational lessons have allowed us to sustain and improve the impact we achieve; similarly, we have learnt a great deal from our successes and challenges in securing ongoing financing for the programme.
As the international development arena evolves, sustainable revenue streams are seen as an important complement to more traditional donor funding.
One pathway is to charge for services provided. However, in the case of Dispensers for Safe Water, the evidence is conclusive that charging user fees for water treatment such as chlorine leads adoption rates to decline precipitously to the point that the intervention is no longer cost-effective. Thus, we have always provided dispenser infrastructure, and ongoing maintenance that ensures sustained use, for free.
Carbon credits as sustainable finance?
With the knowledge that user fees were not viable, and with our eye on sustainable financing at the programme outset, we identified a novel funding source: carbon credits.
Chlorine dispensers prevent the need for served communities to boil their water using firewood or biomass, thereby offsetting carbon emissions. The UN’s Clean Development Mechanism (CDM) allows projects such as ours to receive certified credits that can then be sold to buyers in developed countries. We believed that generating carbon revenues would ensure long-term financial sustainability of the programme.
However, we have not realised forecast revenues from carbon credits to date, largely due to delays in having credits issued and significant discounts to originally projected credit volumes.
Upon review of our applications, the CDM took issue with the survey methodology that we employed in ongoing monitoring for carbon credits. As a result, we received a fraction of the credits we had expected by 2016, and we urgently needed to raise a substantial amount of donor funding in 2017 to continue operating our full network.
We were fortunate to get support from donors such as the Stone Family Foundation, which understand the value of the intervention, allowing us to sustain our footprint.
Today, we understand how our carbon credit applications are viewed by the CDM, and we have adapted our monitoring mechanisms accordingly. While projected carbon revenues are still lower than originally forecast, we are more confident in this revenue stream’s ability to fund a substantial portion of programme budget in coming years.
Nevertheless, our experience with carbon revenues is an important lesson in requiring substantial risk buffers of both time and capital when relying upon novel financing.
Developing a long-term financing strategy
As part of our long-term strategy, we are cultivating other potentially sustainable sources of funding.
One is advocating for domestic government funding, using the lens of cost savings that result from fewer people seeking treatment for diarrhea due to clean water. This equates to millions of dollars saved in medical costs that are frequently government-funded.
We believe this argument may aid us in increasing the value governments place on preventative healthcare initiatives, given underinvestment in this area. As country economies and government budgets grow, we continue to engage local and national government in all of our districts and countries in the hope of securing contributions.
A second approach is the use of village self-help groups to generate financial contributions toward dispensers.
Self-help groups pool community savings, lend money to fellow members, and charge interest on such loans. These interest payments are then pooled together for community use and have already proven to sustainably finance water source maintenance. It is possible such a community mechanism could also fund dispenser maintenance and chlorine refills.
While we continue to rely upon the generous contributions of donors for partial programme funding in the short-run, these revenue sources may allow us to gradually scale down our reliance on donor funding.
We believe there are realistic paths to long-term sustainability of Dispensers for Safe Water, but they will require patience, perseverance, and a willingness to iterate with a variety of other stakeholders to get the mix right.