Wednesday, January 28, 2015

January KIVA Loan - Saving Lives and the Environment

Sampson & a chlorine dispenser
Samson lives in a home within Kawigawiga village in Ndhiwa sub County, Kenya with his family which includes 4 children. The community of Kawigawiga village collects their drinking water from Aora Odundu because there is no piped water supply in this part of rural Kenya. This water is easily contaminated with bacteria that can cause diarrhea and other water-borne diseases, often making Kawigawiga’s inhabitants sick and unable to work or attend school.

A new chlorine dispenser offers a solution to the burden of sickness caused by unsafe drinking water. The dispenser is installed at the local water source, where users turn a valve to add chlorine to their jerricans and then collect water as usual. The chlorine disinfects the water and provides residual protection from re-contamination. In Kawigawiga, 25 households will benefit from having access to the dispenser. Samson has volunteered to be the dispenser promoter, who is responsible for refilling the chlorine and encouraging the rest of the community to treat their water and keep themselves and their families healthy. There are 4 other volunteer promoters from the surrounding community who are part of this group loan: namely Siprose, Grace, Susan, and Maurice.

Kawigawiga village needs a loan to cover the costs of installing and maintaining the dispenser. Samson believes that the dispenser will help to alleviate water-borne diseases in his community.

The Kiva loan will be repaid by Evidence Action  on behalf of the community through the sale of carbon credits. Using the chlorine dispenser generates carbon credits by avoiding the need to boil water to make it safe to drink. Revenues from the sale of carbon credits to organizations and individuals wanting to reduce world carbon footprints will be used to repay Kiva lenders and also to make sure that Samson’s community can have access to safe water now and in the future.

About Evidence Action

This loan is part of Evidence Action’s Dispensers for Safe Water program, providing rural communities with access to safe drinking water by installing chlorine dispensers where people collect water. The dispensers enable community members to treat their water with chlorine to make it safe to drink.

Kiva loans are used to finance the installation, maintenance and refilling of chlorine dispensers. Evidence Action provides dispensers as in-kind loans to communities, represented on Kiva by dispenser “promoters,” who will help educate their neighbors about the equipment’s use and benefits, and refill the dispenser with chlorine.

Instead of these loans being repaid by community members, Kiva lenders are reimbursed by the sale of carbon credits. These carbon credits are generated when households use chlorine dispensers to treat their water, because they no longer have to boil it over wood-burning fires that release harmful greenhouse gases. This change in behaviour is monetized through the sale of carbon credits on the voluntary carbon market.

Here’s how it works:

1) Kiva borrowers grant the rights to carbon credits they generate to Evidence Action.
2) Evidence Action works with an organization called Impact Carbon to monitor, quantify and verify carbon credits, which can then be sold to individuals and organizations looking to reduce their carbon footprint.
3) Revenue earned from this sale is used to maintain dispensers and repay Kiva lenders.

A new way of thinking: Carbon as currency?

This post was authored by Michelle Kreger, Kiva's Senior Director of Strategic Initiatives.

During a recent trip to Kenya, my colleague and I had the chance to connect with the director of Dispensers for Safe Water at Evidence Action,  a deeply data-driven project looking at water purification adoption behaviours in rural Kenya. What started as a group of researchers seeking to understand the best way to encourage people to drink safe water, has now developed into an impressive non-profit scaling a proven solution to the problem of waterborne diseases.

Contaminated water causes illnesses like diarrhea and cholera that are a leading cause of death among children under five in Kenya. Researchers wanted to figure out how to lessen the burden of these waterborne diseases, but they also knew that they would face challenges with adoption: the mere availability of chlorine, filters, or other water purification technologies doesn’t necessarily mean that people will use them.

After several years of studying the behaviour of communities in western Kenya, they found that people were most likely to treat their water when they have access to free chlorine at a communal water source. After filling up their jerry can (a very common water transport container), people can administer a pre-measured amount of chlorine from a permanent chlorine dispenser installed at the water source. The research found that less than 1 in 6 households chlorinated their water without access to dispenser access, but more than half of households treated their water when dispensers were available. Equipped with rigorous research results, the group continued to build and improve on the operational model until they were ready to spin off a new organization – Evidence Action – and launch the project. Evidence Action is planning to provide access to safe water for over 25 million people in East Africa over the next five years.

After hearing Evidence Action’s story, we were immediately intrigued. And, as finance people, we wanted to know all about how they planned to fund it. To date the program had been funded by grants, but those grants were not guaranteed over the long-term. Because Evidence Action’s goal was to establish a sustainably financed service delivery model, they set up a voluntary carbon project so that they could generate and sell carbon credits from the program.

We wondered: what do carbon credits have to do with water purification? And, how could a water treatment program be  financed through a carbon credit program?

Thus we set about learning how water treatment and greenhouse gases are related. The idea is this: if people have access to low-carbon technologies like chlorine for treating drinking water, they are less likely to burn wood, gas, or oil to boil water to purify it. Chlorine dispensers therefore avert fossil fuel emissions, which can be quantified, verified, and sold as carbon credits.

We were intrigued but also skeptical. When we returned to San Francisco, we started looking into the project in detail. If we could confirm the potential of generating a revenue stream coming from the carbon credits for this project, then maybe we could fund the installation of chlorine dispensers as in-kind loans to communities in Kenya, which would be repaid by the revenues associated with their usage. Cool. But also a little crazy. 

Overall, we are confident that at the very least the loan funds raised on Kiva for these communities will be put to extremely good use - installing chlorine dispensers that have been rigorously evaluated and that will provide access to safe water for 636,000 people and save over 700 lives.

We also know that while we cannot be 100% certain about default risk for this project, we want to give it a shot as Kiva can - for some lenders - strike a fine balance between investment and philanthropy.  Whether these loans end up being repaid in full or not, if Kiva lenders choose to participate, at the very least they will have been part of a grand experiment to make water safe to drink, to save lives, to support the scale-up of a proven intervention, and to test the idea that debt funding can be tied to carbon revenue. So make a loan today!