[1][2] Funding is allocated either to small-scale independent water-providers who generate an income stream from selling water, or to households in order to finance house connections, plumbing installations, or on-site sanitation such as latrines.
The time previously required to physically fetch water can be put to income-generating purposes, and investments in sanitation provide health benefits that can also translate into increased income.
Non-government organisations (NGOs) that are not microfinance institutions, such as Dustha Shasthya Kendra (DSK) in Bangladesh or Community Integrated Development Initiatives in Uganda, also provide credits for water supply and sanitation.
[citation needed] For instance, the water and sanitation portfolio of the Indian microfinance institution SEWA Bank comprised 15 percent of all loans provided in the city of Admedabad over a period of five years.
[citation needed] The US-based NGO Water.org, through its WaterCredit initiative, had since 2003 supported microfinance institutions and NGOs in India, Bangladesh, Kenya and Uganda in providing microcredit for water supply and sanitation.
Only in exceptional cases did it provide guarantees, standing letters of credit or the initial capital to establish a revolving fund managed by an NGO that was not previously engaged in microcredit.
[8] In 1999, the World Bank in cooperation with the governments of Australia, Finland and Denmark supported the creation of a Sanitation Revolving Fund with an initial working capital of US$3 million.
The aim was to provide small loans (US$145) to low-income households for targeted sanitation investments such as septic tanks, urine diverting/composting latrines or sewer connections.
[9][needs update] Small and medium enterprise (SME) loans are used for investments by community groups, for private providers in greenfield contexts, or for rehabilitation measures of water supply and sanitation.
However, the design of some recent projects using microcredits for community-based service providers in some African countries (such as those of the K-Rep Bank in Kenya and Togo) shows a sustainable expansion potential.
In Togo, CREPA (Centre Regional pour l'Eau Potable et L'Assainissement à Faible Côut) had encouraged the liberalisation of water services in 2001.