New partnership improves finance for water and sanitation in Cambodia

Social impact investor Oikocredit has provided investment assistance of US$ 1 million to Cambodia-based Chamroeun, a socially focused microfinance institution, to help improve access to safe and clean drinking water through loans to private water operators. The transaction is supported by Aqua for All, an international foundation that catalyses private investments in water and sanitation using innovative and blended finance solutions.  

More than 1,600 Cambodian households are expected to benefit as a result. 

The agreement is the first transaction following a recent partnership between Oikocredit and Aqua For All. 

Under the tripartite agreement, Oikocredit provides Chamroeun with liquidity, while Aqua for All participates by way of technical assistance, first-loss capital and performance-based incentives.  

Access to clean water is a fundamental right. However, two billion people (26% of the world’s population) do not have safe drinking water as of 2023, according to UNESCO data. In Cambodia, only 28% of the population uses a safely managed drinking water service. 

Community-focused approach helps tackle poverty 

The agreement is in line with Oikocredit’s new community-focused strategy. It will see Chamroeun work with small private water operators in underserved low-income areas, said Tes Pilapil, Regional Director for Southeast Asia at Oikocredit. 

“Addressing the multidimensional challenge of poverty requires more than livelihood development or increasing income and asset building. We must improve resilience by tackling other key disadvantages, such as poor access to health, water, electricity, education and housing needs, as well as the impact of climate-driven disasters,” Tes said.  

“With a community-focused approach and by collaborating with partners and solution providers, we have the power to make a positive impact. By leveraging the strengths and resources of each stakeholder, we can empower communities, foster sustainable development, and pave the way for a brighter future,” she added. 

The collaboration seeks to catalyse financing to facilitate universal access to affordable and sustainable water and sanitation services to mostly low-income communities in underserved areas in Cambodia, she said. 

Loans for expansion and emergencies 

Chamroeun has developed two loan products for private water operators. These include providing finance to expand or upgrade operations, as well as quick access to funds for emergency repairs to pipe networks, said Yannick Milev, CEO, Chamroeun. 

In addition to these loan products, Chamroeun has partnered with a service provider offering engineering and business development services to operators who have expressed a need and interest. 

Chamroeun will aim to focus these services on less mature operators with a relatively small number of connections, he added. Such operators typically have greater difficulty in accessing commercial financing, due to their often-limited formalisation of key business processes, as well as limited capacity to offer collateral against the loan. “Chamroeun will offer these loans without collateral requirements, adapt our due diligence processes to the business practices of the private water operator, and link the loan to the business development services essential for these organisations to scale,” Yannick said. 

Currently, less than half of Cambodian villages are connected to piped water services, he said. 

“Accordingly, households may face significant challenges linked to quality of water accessed, [in turn] leading to a high occurrence of water-borne diseases and high costs in accessing water – both often disproportionately affecting women and children. The benefits of this easier access to cleaner and cheaper water are far-reaching: reduced vulnerabilities for women, fewer cases of business interruption due to health issues and increased incomes may all be seen across communities connected to these services,” Yannick said. 

Reducing risk for water and sanitation loans 

The partnership will increase Chamroeun’s ability to reach a new segment of water suppliers. Currently, only about 40% of Cambodia’s population is served by operators providing piped water. In rural areas, only 18.5% of the households has access to piped water. 

These are generally small and medium entrepreneurs who run their water businesses alongside other enterprises, explained Owais Shafiq, Innovative Finance Officer at Aqua for All. “Presently, very few financial institutions provide loans to private water operators due to a lack of collateral. Access to finance allows private water operators to improve the quality of their operations and expand services to stakeholders who would otherwise not be served,” he said. 

“It is expected that through this structure, 20 private water operators will be covered, providing 1600 households with improved access to safe drinking water and thereby contributing to achieving the Sustainable Development Goal 6. This will be validated through the monitoring of the loans and an independent evaluation,” Owais added.  

 “With this transaction, we will contribute to bridging the service and finance gaps in this region. Moreover, this is the first full deal that we close under the Oikocredit partnership, which is a milestone in our collaboration,” he said. 

“Aqua for All’s contribution complements Oikocredit’s liquidity offering and catalyses Chamroeun’s lending abilities to water service providers in Cambodia. By providing technical assistance and  first loss capital, the risk profile of Chamroeun’s water, sanitation and hygiene (WASH) loan portfolio is reduced’, he added.  

In turn, Chamroeun will increase its  knowledge of the sector and gain greater comfort around financing the high-risk WASH businesses. 

Long-standing collaboration in Cambodia 

Chamroeun has been an Oikocredit partner for more than nine years and both organisations’ social mission and values align strongly.  

“Chamroeun is a partner that Oikocredit intends to grow with and support over the long term with a view to creating better impact among low-income communities together,” Tes said. 

Oikocredit has provided seven loans to the Cambodian organisation over the past decade. These loans have facilitated research initiatives, small grant programmes targeting vulnerable groups and support for water and sanitation, Yannick said. 

Chamroeun has successfully disbursed the first loan to the first private water operator (PWO). The PWO is located in Takeo province, situated in southern Cambodia and is actively engaged in providing piped water services to four communes with approximately 7,000 households being connected to their water supply. The loan amount extended to the PWO will be instrumental in meeting the organisation's requirements for facility expansion and addressing any emergency repairs that may arise. Importantly, the loan will facilitate the construction of an additional water treatment facility, enabling the extension of piped water services to an extra 400 households within the communities.  

Chamroeun provides a range of loan services for individuals and registered entities in various sectors, with a particular emphasis on agriculture, services, trade and commerce, as well as business development and financial literacy support services to help ensure the resilience of its end clients, as well as referring its individual borrowers to inclusive insurance services.  

Chamroeun currently works with over 45,000 families with a total portfolio of US$ 45 million across 16 of the 25 Cambodian provinces, Yannick said. 

Potential for better water and sanitation worldwide 

The tripartite partnership could lead to more investments in the water and sanitation sector. 

Aqua for All sees the impact of the deal extending to similar projects in Asia and Africa. The foundation has been working closely with Oikocredit to scope, source and target financial institutions with the potential and interest to develop water and sanitation loan portfolios on both continents. 

“We expect this partnership with Chamroeun will pave the way to more investments in water and sanitation in the next few months in Cambodia but also in East Africa and West Africa.,” Owais said. “We believe this blended finance model can be used in other countries for increasing the flow of private capital into water and sanitation.”