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RECOMMENDATION REPORT ON SANITATION MICROFINANCE PROGRAM

RETA 6498: Knowledge and Innovation Support for ADB’s Water Financing Program

PILOT AND DEMONSTRATION ACTIVITY (PDA) September 14, 2012

Activity Title: Action Research Project to Develop a Sanitation Microfinance Program in Cambodia

Executing Agency: Habitat for Humanity Cambodia (“HFHC”)

Country: Cambodia

Region: Tonle Sap Basin

RECOMMENDATION REPORT ON SANITATION MICROFINANCE PROGRAM RETA 6498: Knowledge and Innovation Support for ADB’s Water Financing
  • A. Introduction/Background

As planned in the mid-term report, community workshops were conducted in Angkor Chum and Pouk districts on March 12, 2012 to share the indicative savings and loan schemes discussed with microfinance institutions (MFIs) with a selection of target households to obtain their feedback on the proposed features.

It was found that the majority of the participants at the workshops indicated interest in acquiring latrines by borrowing from MFIs. The loan terms most commonly preferred were as follows:

Loan sizes of around 50 - 62 USD (the cost of a basic pour flush latrine in the target areas) in the local currency, Riel (KHR) Individual loans against soft land titles (signed by commune council member) Interest Rate of 2% per month 12 month tenure with monthly collection at the village Disbursement directly to the latrine supplier Flexibility in principal repayment Possibility to prepay loans without penalty The demand was also for loans to be provided in March/ April, before the wet season.

RECOMMENDATION REPORT ON SANITATION MICROFINANCE PROGRAM RETA 6498: Knowledge and Innovation Support for ADB’s Water Financing

It was found that there was not much interest in savings schemes for latrine acquisition as this would mean that the household needs to wait till it accumulates the required amount, besides entailing the risk of increase in latrine price.

The above feedback from the workshop was shared with shared with the Ministry of Rural Development (MRD) in a meeting held to update them on the PDA. The feedback was also shared with the five MFIs with whom discussions had been held earlier on the possibility of their offering a loan product with the features requested by the households. A recommendation note for a partnership with VisionFund Microfinance was sent to ADB on April 12, 2012. The present note incorporates feedback from ADB and subsequent discussions with the proposed latrine suppliers and the MFI partner.

  • B. Discussion with MRD

Feedback obtained at the community workshop was shared with MRD at a meeting on March 21, 2012 to update them on the PDA. The following are the main points that were made by MRD during the discussion:

  • - MRD is currently working with different partners on different types of microfinance schemes for sanitation (such as WaterShed and Plan International). Eventually they want to harmonize all these efforts and come up with one standardized product that can be scaled-up, especially to reach poorer households.

  • - Officials felt that standardizing the cost of latrines might be difficult and instead linking the costs with the

technical aspects of the latrine might be easier.

  • - For Lessons Generating Workshop, MRD wanted HFHC to involve MRD while finalizing the list of participants and discussion points.

  • - MRD wanted HFHC to consider carrying out more analysis on poor households (ID Poor 1) in terms of their access to finance and ability to repay At another meeting with ADB on June 22, 2012, MRD further requested for a full briefing regarding the proposed sanitation microfinance product and its links with the social survey conducted, prior to its launch.

    • C. Proposals received from MFIs

We discussed with AMK, HKL, Kredit PRASAC and VisionFund the possibility of their providing a sanitation microfinance product with the features requested by the households.

It was found that all the five MFIs expressed inability to provide loans at 2% per month as the standard rate charged by MFIs in Cambodia is 3% per month particularly when collections are made at the village. This is due to the high cost of Cambodian Riel funds for MFIs. While interest rates may be lower in USD, Riel loans are preferred by households in rural areas such as the target areas of Angkor Chum and Pouk. HKL was able to offer an interest rate of 2% per month but does not provide collection at the village. Village collection was stressed by households during the workshop. Moreover, it is often considered an important reason for take-up and prompt repayment of microfinance loans by very low income, rural households. This is because a visit to the bank branch for them is often impractical and could be expensive due to transportation costs and opportunity cost of lost daily wages. Hence it was decided to only consider MFIs who offer village collection.

Among the MFIs which offer village collection, two MFIs, Kredit and VisionFund gave us a final offer letter. The terms of their offer in comparison with the features requested by households is given below:

 

Household Preference

Kredit

 

VisionFund

Loan Size and currency

50- 62 USD in Cambodian Riel

50- 62 USD in USD *

 

50- 62 USD in Cambodian Riel

Nature of Loan

Individual

loans

(if

Accepted

 

Community Bank method

required

soft

land

titles

 

where 2 to 10 member

 

joint liability groups

are

signed by Commune leader can be provided)

formed is preferred but if it is hard to gather a group, individual loans against soft land titles can be provided

Interest Rate

2% per month

 

2.75% per

month but

2.8% per

month but

(declining balance)

 

principal

 

installments

principal payment will be

need

to

be

paid

every

based on customer’s cash

month.

In

case

of

delay

flow

penal

interest

will

be

charged at 0.02% per day after 3 days grace period.

Collection

At Village

At Village

 

At Village

Tenure

12 months

12 months

 

12 months

Disbursement to supplier

Accepted

Accepted

Accepted

(though

disbursement in monthly

installments

 

is

preferred)**

 

Principal Repayment

Flexibility

Not Accepted

 

Accepted

Prepayment option

Without penalty

After 4 th month without penalty

Without penalty

 

Loan Loss Cover

-

Requires

HFHC

to

cover

Requires

HFHC

to

cover

loan losses

up

to

3%

of

loan losses

up

to

2%

of

the

total

loans

the

total

loans

outstanding

under

the

outstanding

under

the

scheme

scheme

*Kredit’s offer letter mentions currency of disbursement as USD. When we pointed out to Kredit that in rural areas Riel loans are more appropriate, they agreed to reconsider this but we are yet to receive their official confirmation on this

** We have conveyed to VisionFund that the price of the latrine has been negotiated with latrine suppliers on the understanding that they will receive the amount as a onetime payment after the household confirms receipt of the latrine and hence disbursement in installments will not be possible.

The main difference between the offers of Kredit and VisionFund from the households’ perspective is that while Kredit offers a slightly lower interest rate, it requires monthly repayment of principal and has stringent penalties for delays whereas VisionFund offers flexibility in principal repayment according to client cash flows. The lower interest rate charged by Kredit of 0.05% per month will be nullified even if there is a 3 day delay in principal repayment by the household (beyond the 3 day grace period) in a month and if the delay is more than 3 days in a month, the customer could end up paying an even higher interest rate. Given that the majority of households in the target area are involved in farming which has seasonal cash flows, a strictly monthly repayment regimen may not be appropriate and hence flexibility on principal repayment was specifically requested by households during the workshop.

Moreover, in the case of sanitation microfinance, flexibility in repayment of principal is especially important because the loan is not being availed for an income generating activity. Though there may be indirect monetary benefits on account of time saved and better health and sanitation, the benefits may be spread over time. Therefore during the one year loan tenure, principal repayment will have to come from household savings from other sources such as farm income. In view of this, it is recommended that the proposal from VisionFund be accepted.

Another difference between the two MFIs’ offers is with regard to loan loss coverage though this does not affect households. VisionFund requires lower coverage at 2% of portfolio as compared to 3% requested by Kredit.

VisionFunds’s offer is also better in this respect.

Proceeding with both MFIs is not considered necessary as each MFI is active throughout the target area. Further, according to the estimates obtained towards the end of ADB’s TSRWSSP, the total target customers number around 3,496 households as these are the households without latrines in the target areas. Given the limited number, splitting them up among MFIs may not be required. Moreover, monitoring and coordination will also be easier with respect to latrine suppliers (for disbursement of loans) and HFHC (for payment of incentive amounts and tracking take-up and repayment) if there is only one MFI involved.

Based on feedback from

ADB,

it

is

proposed to offer households three option on including cost of

suuperstrucutre under PDA to either go for a basic latrine or a latrine with a superstructure and remove the limit on the size of the loan as

  • D. Brief profile of VisionFund

VisionFund Cambodia Limited (VisionFund) is part of VisionFund International’s global MFI network spread over 46 countries. It is a limited liability company registered with the Ministry of Commerce and a licensed MFI with the National Bank of Cambodia. More details are available at its web site, http://www.visionfund.com.kh/.

It has a presence in 19 districts in Cambodia, including the target areas in Angkor Chum and Pouk. on the performance for the year ended December 31, 2011 are given below: 1

Brief details

Number of customers

132,036

Loans Outstanding

USD 37,719,086

Average loan Size

USD 286

Number of operating villages

4,674

Percentage of rural customers

91%

Percentage of female borrowers

92%

Customer retention rate

70%

Loan Loss Rate

0.33%

Portfolio at risk (greater than 30 days)

0.14%

Portfolio at risk (greater than 90 days)

0.08%

It may be observed that while VisionFund has requested for loan loss cover of 2%, their loan loss rate at present is less than 1%.

The MFI has undertaken a number of social initiatives relating to persons with disabilities and HIV/ AIDS besides providing education scholarships and financial education. In 2011, VisionFund successfully piloted a microfinance scheme to provide loans for purchase of water filters in Kompong Speu province in collaboration with Hydrologic, a local social enterprise with technical and financial support from PATH, an international not- for-profit organization. The scheme is now being scaled up in four provinces.

  • E. Proposed Process Flow

A proposed process flow chart is enclosed at Annexure 1. Sanitation Coordinators have been identified by HFHC at each village in the target area to facilitate coordination. Some of the coordinators are Village Development

Committee (VDC) members. In some cases where VDC members are not active or keen about participation in the scheme, other individuals assessed by HFHC field staff to be capable of the required tasks have been identified.

These coordinators will receive an incentive from the latrine supplier after the MFI loan is disbursed.

  • F. HFHC’s arrangement with latrine suppliers

1 An update on more latest financials will be obtained from the MFI closer to the date of finalisation of the note.

At the workshops, a preference for a basic pour-flush latrine estimated to cost between 50 US$ (in Angkor Chum

district) and 62$ (in Pouk District) was observed.

However based on feedback from ADB, it is proposed to offer

the households four options with regard to the sanitation product:

Description

Option 1

Option 2

Option 3

Superstructure

Superstructure
Superstructure
Superstructure

$ 100.93

$ 105.07

$ 122.76

Slab and Pan

Slab and Pan $ 19 $ 31
$ 19

$ 19

$ 31

$ 31

$ 21.5

Underground Pit

Underground Pit
Underground Pit
Underground Pit

$ 35.5

$ 42.69

$ 42.69

Total

cost

$ 157.93

$166.76

$196.45

excluding

labor

cost

Option 4: Upgrading existing latrine

 

Description

Cost including

labor

4.1

From concrete slab to pan tiled slap

$29.5

4.2

Add water tank on the concrete slab pan

$ 19.22

4.3

Upgrade from concrete slab to pan tiled slab and tank

$ 51.12

4.4

Change super structure from mat leaf to zinc

$ 142.76

4.5

Change superstructure from zinc and wood to brick wall

$214.46

4.6

Upgrade toilet to bathroom

$ 253.01

4.7

Upgrade from single offset pit to double offset pits

$73.95

Discussions were held in March 2012 and again in June 2012 with the three suppliers earlier shortlisted regarding their interest in participation in the proposed scheme. All three suppliers agreed to be part of the scheme, participate in the launching workshop and adhere to the proposed arrangement. Basic details regarding the suppliers are at Annexure 2. The detailed cost break-up of each of the options is placed below. Supplier 1, 2 and 3 refer to Mr. Thon Chamroeun of Kouk Dong, Angkor Chum, Mr. Phon Phal of Nokor Pheas, Angkor and Mr. Chum Chet Sovanareth, of Pouk District respectively.

Option 1 Price of Toilet Pan, Underground Pit and Chamber box by Supplier

         

Supplier 1

 

Supplier 2

Supplier 3

 

N

 

Description

Unit

QTY

Cost

Total

Cost

 

Total

Cost

Total

1

PVC Pipe 75mm

 

m

1

2.0

2.0

 

2.0

  • 2.0 2.5

 

2.50

2

PVC Pipe 21mm

 

m

1

1.0

1.0

 

1.0

  • 1.0 1.0

 

1.00

3

Slab and squat pan

 

set

1

19.0

19.0

19.0

 
  • 19.0 18.0

 

18.00

4

Concrete ring 1m diameter X 0.5m height X 40mm thickness

set

4

7.0

28.0

 
  • 28.0 10.0

  • 7.0 40.00

 

5

Ring Cover

set

1

4.5

4.5

  • 4.5 4.5

 

8.0

8.00

6

Chamber Box

Set

1

2.5

2.5

  • 2.5 2.5

 

2.5

2.50

7

Transportation Cost

 

Time

1

-

 

-

  • 5.0 5.0

 

-

-

 

Installation cost of underground

               

8

part

 

-

 

-

20.00

 

Total Cost

     

57.0

   

62.0

 

92.00

 

Option 2 and 3: Price of toilet pan and underground pit

 

Description

 

Supplier 1

Supplier 2

 

Supplier 3

   

Slab and squat pan

 

$19

$19

 

$18

Underground pit

 

$42.69

$42.69

 

$58.69

Transportation

 

$5

 

0

0

Installation cost

 

$12

$10

 

$20

Total Cost

 

$78.69

$71.69

 

$96.69

Supplier 1 Detailed Price Break-up

 

Supplier 1 Location: Nokor Pheas, Angkor Chum district

 

No

Items

Descriptions and specifications

 

Unit

QTY

Unit

Total

 
   

Price

Cost

 
  • 1 Offset pit lining

Lining: Cement ring 0.8m-1.2m diameter pit 1m -5m deep

#

  • 4.00 7.00

 

28.00

 
  • 2 Offset pit cover

Cement lid with access hole and cover (0.8m 1.2m diameter)

#

  • 1.00 4.50

 

4.50

 
  • 3 Connecting pipe

PVC pipe 75mm diameter

 

M

  • 1.00 2.00

 

2.00

   

PVC pipe 21mm diameter

 

M

1.00

1.00

1.00

4

Backfilling

Sand N2

 

m3

0.50

9.00

4.50

5

Brick chamber

 

Bricks

#

     

(0.6m wide x 0.7m

32.00

0.05

1.60

long x 0.3m high)

Cement mortar (1:2) (for bricks and

Kg

     

Cover Ring 1m

inside chamber)

 
  • 7.00 0.84

0.12

 

Sand N1

 

m3

 
  • 0.02 0.25

12.00

 

6

Slab and squat pan

 

Concrete slap and ceramic pan

Set

  • 1.00 19.00

 

19.00

 

Transportation

 

From

supplier

place

to

customer

time

     
 

houses

  • 1.00 5.00

5.00

7

Labor (installation)

 

Skilled

Days

  • 2.00 6.00

 

12.00

 

Total Cost

 

$78.69

Supplier 2 Location: Kouk Dong Commune, Angkor Chum district

 

No

 

Items

 

Descriptions and specifications

Unit

QTY

Unit

Total

   

Price

Cost

1

 

Offset pit lining

 

Lining: Cement ring 0.8m-1.2m diameter pit 1m -5m deep

#

 
  • 4.00 7.00

28.00

2

 

Offset pit cover

 

Cement lid with access hole and cover (0.8m 1.2m diameter)

#

 
  • 1.00 4.50

4.50

3

 

Connecting pipe

 

PVC pipe 75mm diameter

 

M

 
  • 1.00 2.00

2.00

   

PVC pipe 21mm diameter

 

M

 
  • 1.00 1.00

1.00

4

 

Backfilling

 

Sand N2

m3

 
  • 0.50 9.00

4.50

5

 

Brick

chamber

 

Bricks

#

32.00

0.05

1.60

(0.6m wide x 0.7m

 

long x 0.3m high)

 

Cement mortar (1:2) (for bricks and

Kg

7.00

0.12

0.84

Cover Ring 1m

inside chamber)

 
   

Sand N1

m3

0.02

12.00

0.25

6

 

Slab and squat pan

 

Concrete slap and ceramic pan

Set

1.00

19.00

19.00

   

Transportation

 

From

supplier

place

to

customer

time

1.00

-

-

 

houses

7

 

Labor (installation)

 

Skilled

Days

2.00

5.00

10.00

 

Total Cost

 

$ 71.69

Supplier 3 Location : Pouk District

No

Items

Descriptions and specifications

Unit

QTY

Unit

Total

Price

Cost

1

Offset pit lining

Lining: Cement ring 0.8m-1.2m diameter pit 1m -5m deep

#

4.00

10.00

40.00

2

Offset pit cover

Cement lid with access hole and cover (0.8m 1.2m diameter)

#

1.00

8.00

8.00

3

Connecting pipe

PVC pipe 75mm diameter

 

M

1.00

2.50

2.50

PVC pipe 21mm diameter

 

M

1.00

1.00

1.00

4

Backfilling

Sand N2

m3

0.50

9.00

4.50

5

Brick chamber (0.6m wide x 0.7m

Bricks

#

32.00

0.05

1.60

long x 0.3m high) Cover Ring 1m

Cement mortar (1:2) (for bricks and inside chamber)

Kg

7.00

0.12

0.84

Sand N1

m3

0.02

12.00

0.25

6

Slab and squat pan

Concrete slap and ceramic pan

Set

1.00

18.00

18.00

7

Transportation

From

supplier

place

to

customer

time

 

-

-

houses

1.00

8

Labor (installation)

Skilled

Days

2.00

10.00

20.00

 

Total Cost

 

$ 96.69

Additional Cost of Option 3 : Pan tiled slab and water tank

Size of Water Tank : 1.5 m x 2 m

 

Items

Unit

Quantity

Unit

Total Cost

No

price

1

Solid Brick

psc

140.00

0.048

6.72

2

Cement

Kg

75.00

0.100

7.50

3

Sand N2

m3

0.32

12.500

4.00

4

Sand N1

m3

0.060

15.000

0.90

5

Tile Floor

box

3.00

4.000

12.00

 

Total Cost

     

31.12

6

Labor Cost

 

1.00

20.00

20.00

 

Total

$51.12

Option 4: Upgrading Existing Latrine

 

4.2.1- From concrete slab to pan tiled slap

 

Size: 1.5 m x 2 m

 
 

Items

Unit

Quantity

Unit

Total Cost

No

price

1

Sand N2

m3

0.20

12.500

2.50

2

Cement

bag

1.00

5.000

5.00

3

Tile Floor

box

3.00

4.000

12.00

 

Total Cost

     

19.50

4

Labor Cost

 

1.00

10.00

10.00

 

Total

29.50

4.2.2-Add water tank on the concrete slab pan

Size of water tank: 0.5 m x 1m x 0.5 m

 

Items

Unit

Quantity

Unit

Total Cost

No

price

1

Solid Brick

psc

140.00

0.048

6.72

2

Cement

Kg

25.00

0.100

2.50

 

Total Cost

     

9.22

3

Labor Cost

 

1.00

10.00

10.00

 

Total

19.22

4.2.3- Upgrade from concrete slab to pan tiled slab and tank

 

Size: 1.5 m x 2 m

 
 

Items

Unit

Quantity

Unit

Total Cost

No

price

1

Solid Brick

psc

140.00

0.048

6.72

2

Cement

Kg

75.00

0.100

7.50

3

Sand N2

m3

0.32

12.500

4.00

4

Sand N1

m3

0.060

15.000

0.90

5

Tile Floor

box

  • 3.00 4.000

 

12.00

 

Total Cost

     

31.12

6

Labor Cost

 
  • 1.00 20.00

 

20.00

 

Total

$51.12

4.2.4- Change super structure from mat leaf to zinc

Size: 1.5 m x 2 m

 

No

Items

Unit

 

Quantity

Unit price

Total Cost

 

1

Wood structure

m3

 

0.114

676.000

 

77.06

2

Nail 80 cm

Kg

 

1.000

1.250

 

1.25

3

Nail Cap

kg

 

0.500

2.500

 

1.25

4

Zinc

sheet

 

18.000

2.400

 

43.20

 

Total Cost

       

122.76

5

Labor Cost

   

1.00

20.00

 

20.00

 

Total

 

$142.76

4.2.5-Change superstructure from zinc and wood to brick wall

 

Size of Toilet room: 1.5m x 2 m

 

No

 

Items

 

Unit

Quantity

Unit price

Total Cost

1

 

Hallow Brick

 

pcs

1,000.00

0.048

48.00

2

 

Solid Brick

 

pcs

50.00

0.050

2.50

3

 

Air Block

 

pcs

8.00

0.380

3.04

4

 

Sand N2

 

m3

1.00

12.500

12.50

5

 

Sand N1

 

m3

1.00

15.000

15.00

6

 

Stone 4 x 6

 

m3

0.50

15.000

7.50

7

 

Cement

 

bag

6.00

5.000

30.00

9

 

Zinc 2.4 m

 

sheet

3.00

2.500

7.50

10

 

Cap Nail

 

kg

0.50

1.125

0.56

11

 

Purlin

 

Length

2.00

8.450

16.90

12

 

Plastic Door

 

set

1.00

19.000

19.00

 

No

Items

Unit

Quantity

Unit price

Total Cost

13

Lime

kg

10.00

0.370

3.70

14

Brush Paint

pcs

2.00

0.630

1.26

15

Transportation

Time

1.00

7.000

7.00

 

Total Cost

     

174.46

16

Labor Cost

 

1.00

40.00

40.00

Total

$214.46

4.2.6-Upgrade toilet to bathroom

 
 

No

Items

Unit

Quantity

Unit price

Total Cost

 
  • 1 Hallow Brick

Pcs

1,000.00

0.048

48.00

 
  • 2 Solid Brick

Pcs

50.00

0.050

2.50

 
  • 3 Air Block

Pcs

 
  • 8.00 3.04

0.380

 
 
  • 4 Sand N2

m3

  • 1.00 12.500

 

12.50

 
  • 5 Sand N1

m3

  • 1.00 15.000

 

15.00

 
  • 6 Stone 4 x 6

m3

  • 0.50 15.000

 

7.50

 
  • 7 Cement

Bag

  • 6.00 5.000

 

30.00

 
  • 9 Zinc 2.4 m

Sheet

  • 3.00 2.500

 

7.50

 
  • 10 Cap Nail

Kg

  • 0.50 1.125

 

0.56

 
  • 11 Purlin

Length

  • 2.00 8.450

 

16.90

 
  • 12 Plastic Door

Set

 
  • 1.00 19.00

19.000

 
 
  • 13 Lime

 

Kg

10.00

  • 0.370 3.70

 
 
  • 14 Brush Paint

Pcs

2.00

  • 0.630 1.26

 
 
  • 15 Siphon

Pcs

     
 

No

 

Items

Unit

Quantity

Unit price

Total Cost

     

1.00

  • 1.500 1.50

 
 
  • 16 PVC 60

 

M

2.00

  • 0.650 1.30

 
 
  • 17 Transportation

   

1.00

  • 7.000 7.00

 
 

Water tank 1m x 0.7 m x 1 m

  • 18 Set

 

1.00

35.000

35.00

 

Drain Cap

  • 19 Pcs

 

1.00

0.750

0.75

 

Total Cost

       

213.01

 
  • 20 Labor Cost

   

1.00

40.00

40.00

 

Total

$253.01

 

4.2.7. Upgrade from single offset pit to double offset pits

 

No

Items

Unit

QTY

Unit Price

Total Cost

 
 
  • 1 Sand N.2

m3

 
  • 0.10 $

 

12.50

 

1.25

 
  • 2 Stone 4 x 6

m3

 
  • 0.25 $

 

15.00

 

3.75

 
  • 3 Cement

kg

10.00

 

0.12

 

1.20

 
  • 4 PVC Pipe 21

Length

 

1.00

$

1.50

 

1.50

 
  • 5 PVC Pipe 80

Length

 

1.50

$

5.50

 

8.25

 
  • 6 Concrete Ring

pcs

 

3.00

$

7.50

 

22.50

 
  • 7 Cover Ring 1m

pcs

 

1.00

$

6.50

 

6.50

 
  • 8 PVC T-80

pcs

 

2.00

 

1.00

 

2.00

 
  • 9 Glue for PVC

pcs

 

1.00

$

0.25

 

0.25

10

Transportation

   

1.00

$

6.75

 

6.75

 

Total

       

53.95

11

Labor cost

   

1.00

20.00

 

20.00

 

Total Cost

   

$73.95

5-Advantages and disadvantages of each option

Description

Option 1

Advantages

 

Disadvantages

 
 
Can be used for a long Requires frequent repair

Can

be

used

for

a

long

Requires frequent repair

time,

low

cost,

and maintenance and may

convenient, can be easily

be damaged by rainstorms

Superstructure

built

by

family

within

a

or high winds.

short time.

 

Leaf

 
 
Strong, easy to keep clean, Slippery when wet,

Strong, easy to keep clean,

Slippery

when

wet,

can be easily installed by

concrete can retain smell

Slab and Pan

local people. It is available

of urine

Chamber box

with many of local latrine suppliers.

 
Can easily be built with Requires good skill level

Can

easily

be

built

with

Requires

good

skill

level

Underground Pit

local skills. Can be used for

for construction.

 

many years depending on

 

Concrete

lined

depth and

soil

type.

offset tank

Suitable for

all

soils

and

high ground water table.

Can be upgraded to double pit design later.

Description

Option 2

Advantages

 

Disadvantages

 
 
Reasonable cost Walls require frequent

Reasonable cost

 

Walls require frequent

Use

of

locally

available

repair and maintenance as

materials

 

they may be damaged by

Superstructure

Can

be

easily

built

and

storms and heavy rain.

repaired.

 

Leaf and Zinc

To further lower the cost

use

of

only

leaf

can

be

 

considered.

 
 
Strong design Slippery when wet,

Strong design

 

Slippery

when

wet,

Easy

to

keep

clean

concrete can retain smell

Slab and Pan

 

of urine

Ceramic slab and ceramic tank

Requires less water Life span is long.

 
Basic design can easily be More complex design

Basic design can easily be

More complex

design

Underground Pit

built with local skills.

requires high skill level for

Can

be

used

for

many

construction

Concrete

lined

years depending on depth

When

the

pit

is

full, the

offset tank

and soil type.

 

wet

sludge

requires

safe

Suitable for

all

soils

and

disposal

high ground water table.

Pit can be emptied through hole in cover. Can be upgraded to double pit design later.

Description

Option 3

Advantages

 

Disadvantages

 
 
Long lasting Requires occasional

Long lasting

Requires

occasional

Convenient Provides good privacy

maintenance May be damaged in heavy

Superstructure

Quick and easy to build

storms and strong winds.

Zinc

with low skill level.

Zinc material will rust if in

regular

contact with

water.

 
Convenient as water does Requires skill on the part

Convenient as water does

Requires skill

on

the part

not

have to

be carried

in

of builder

 

Slab and pan

each time,

familiar

to

Slippery

when

wet

Ceramic

Pan,

many people, strong design, easy to keep clean.

Concrete can retain smell of urine. Mosquitoes can breed in

 

water

tank

unless well

concrete slab and tank

covered.

Underground Pit

     
Can easily be built with

Can

easily

be

built

with

Concrete

lined

local skills.

 

More complex

design

offset tank

Can

be

used

for

many

requires good skill level for

years depending on depth and soil type.

construction, when the pit is full, the wet sludge

Suitable

for

all soils

and

requires safe disposal ( it

high ground water table. Pit can be emptied through hole in cover. Can be upgraded to double pit design later.

will contain fresh stools)

The arrangement proposed by HFHC with the latrine suppliers is attached at Annexure 3.

  • G. HFHC’s arrangement with the MFI

A draft memorandum of agreement between HFHC and the MFI is given at Annexure 4. HFHC proposes to provide an incentive to households for take-up and prompt repayment of the loan by paying the last 5 USD of principal of the loan, if the loan is repaid on time, subject to a cap of 7500 USD. This will provide for an incentive for up to 1500 loans, roughly half the number of households without latrines in the target areas (as mentioned earlier, the total number of households without latrines is estimated to be 3,496). HFHC is also required to provide loan loss cover of up to 2% of the loans outstanding under the scheme. A cap of 1800 USD is proposed for the loan loss cover, which will cover 1500 loans of average size 60USD. The number of loans it will actually cover will depend on the size of individual loans which can vary depending on which sanitation option the households go for. The amount of 4000 USD currently available under the PDA for “loan loss reserve” is proposed to be used towards covering costs of monitoring activities of HFHC.

  • H. Time Schedule for Implementation

The PDA was to be completed by March 31, 2012. While the community workshop to obtain feedback on the proposed schemes was conducted on March 12, 2012, it took about a month subsequently to finalize a scheme with an MFI that best meets the preferences of the community. The scheme has now been finalized and the final letters of offer received from VisionFund and Kredit (dated April 10, 2012 and April 6, 2012 respectively) are enclosed.

The schedule of activities now is as follows:

The MFI and HFHC would need time after ADB’s final approval to organize a workshop for launch of the scheme. It was suggested in the community workshop that the scheme be launched before the wet season which commenced in May. As the wet season has now already commenced, it is recommended that the scheme be launched during the period October / November, 2012 after the wet season. VisionFund based on their experience with the microfinance scheme for acquisition of water filters, suggest keeping it open for at least six months as the take-up in the first few months is typically low and subsequently it picks up. Repayment of loans under the scheme will continue for a 12 month period after the scheme closes.

  • I. Monitoring System

The monitoring system is proposed to be set up at HFHC. The logic model of the PDA is as follows:

Logic Model of PDA While HFHC will be monitoring all four outcomes, the first three will

Logic Model of PDA

While HFHC will be monitoring all four outcomes, the first three will be directly monitored through its field staff while that fourth outcome will be monitored through the MFI. The entire process from the household’s initial expression of interest to installation and maintenance of the latrine will be tracked and monitored. Once the MFI approves a request of a loan, HFHC field staff will examine the latrine construction plan and provide inputs to the household. After disbursement of the loan, HFHC will monitor if the latrine was delivered to the household and thereafter review the progress of the latrine installation on a weekly basis until completion. After completion, monitoring of maintenance and use of the latrines will be carried out. To summarize, latrine delivery, installation and maintenance will be monitored by HFHC through its field staff.

Monitoring of repayment of MFI loans will be mainly done by the MFI which as part of its normal operations carries out monitoring activities with respect to the loans extended by it. For this purpose, it has a team of dedicated field staff. Collection of principal installments and interest payments is made by the field staff as per the schedule agreed to by with the customer. The field staff also follows up cases of delayed payments until the amounts are recovered.

On a monthly basis for a period of six months (till the scheme is open), HFHC will submit reports to ADB and MRD on household’s take-up of the sanitation microfinance scheme, latrine installation, maintenance and use as well as on their ability to repay loans. Thereafter for a period of one year till all loans are repaid, monitoring reports regarding maintenance and use of latrines and repayment of loans availed will be submitted. In addition, four quarterly random surveys on the satisfaction of borrowers with the scheme are proposed to be carried out for which a format is at Annexure 5.

The following reports are proposed to be obtained to monitor the PDA throughout the period of 18 months for which it is to be in operation. Copies of the reports will be shared with ADB and MRD.

Report

Period of time for which it will be prepared

Frequency

Prepared by

Detailed report on loans

As long as the scheme is

Weekly

VisionFund

availed

under

the

open (November 2012-

Sanitation

Microfinance

April 2013)

Scheme

Detailed report

on

As long as the scheme is

Weekly

HFHC

increase

in

sanitation

open (November 2012-

coverage under PDA

 

April 2013)

Summary report on PDA

From launch of sanitation microfinance scheme till the loans under the PDA are repaid (ie November 2012 April 2014)

Monthly

HFHC

The suggested formats are at Annexure 6.

J.

Recommendation

It is recommended that the PDA period be extended till March 31, 2013 and an arrangement be entered into with VisionFund on the terms at Annexure 7.

K. Next Steps

 

TARGETED OUTPUT

 

APPROVALS

DATE OF

DATE OF

ACTIVITY

(mainly based on Aug 2011

DATA REQUIRED

NEEDED

LAUNCHING

COMPLETION

workplan)

(if required)

(proposed)

(likely)

Share final model for implementation with

Feedback from MRD on

Note on Proposed HFHC

 

October 1,

October 15,

MRD; Present Draft MOA

proposed scheme prior to

MFI Partnership

ADB approval

2012

2012

launch

needed

Share MRD feedback with ADB

 

Minutes of Meeting with

Appointment

October 15

October

27,

MRD to obtain feedback

with MRD

2012

2012

on proposed HFHC MFI Partnership

officials

Implement the actual schemes: Marketing

Community Workshops in

Workshop agenda:

 

Week of Oct 29

November 3,

and awareness-raising campaign to present final version of savings and/or loan microfinance models to all communes

all PDA communes

Reinforce importance of sanitation and information on

2012

2012

sanitation ladder; Details of MFI schemes; • Details for incentives

for households; Details of local latrine suppliers' pricing and contact details

Monitor household’s sanitation

Monthly Reports

   

Every month

 

microfinance take-up, maintenance and utilization of latrines and ability to repay loans on monthly basis

from December 3, 2012 to November 3,

2012

Conduct random satisfaction survey; report

Quarterly Reports

   

February/ May/

 

survey findings

August/

November 3,

2013

Present results to MRD, and possible schemes to scale up results of the pilot, if results are positive

Final Report three months after launch (after the first quarterly report)

Based on monthly and quarterly monitoring reports

 

March 1, 2013

 

Lessons Generation Workshop to share

Presentation (together with

   

Before March

 

findings with other development partners (together with ADB) at sector TWG & WATSAN working group

ADB) at the sector TWG & WATSAN working group

31 2013

Annexure 1: Process Flow

Annexure 1: Process Flow

Annexure 2: Proposed Arrangement between HFHC and Latrine Supplier Roles and Responsibilities:

  • A. HFHC shall:

1) Structure a promotion arrangement to incentivize households to commit to acquire latrines through a microfinance loan scheme. 2) Commit to collaborate exclusively with the Supplier in the commune during the Pilot Period on a sanitation promotion. 3) Provide backstopping for any sanitation coordination work of sanitation coordinators. 4) Ensure that there will be support from local authorities in the area.

  • B. The Local Supplier Shall:

1) Collaborate exclusively with HFHC during the Pilot Period on the scheme. 2) Keep confidential the details of the arrangement with HFHC with the Supplier. 3) Assist HFHC in organizing the Launch Workshops including information dissemination about the latrine among potential customers. 4) Ensure that quality of the constructed materials is at minimum quality standard as described in the material needed for construction detailed in Annexure 3. 5) Ensure that the latrine construction parts are delivered within the duration of XX days (10 days for Mr. Chet Sovannareth in Pouk, 7 days for Mr. Phon Phal & 10 days for Mr. Thon Chamroeun in Angkor Chum) after the request of household/customer. 6) Cost each part of latrines based on the agreed price between HFHC and the suppliers during the field negotiation as stated in Annexure 3. 7) Replace all parts of the latrine construction materials (either broken or unbroken parts) which are not found satisfactory by the customer. 8) Keep all activities including construction, transportation, installation, and payment transparent to all parties including HFHC, Sanitation Coordinators, Recipients, and MFI.

  • 1. Coordination. For this collaboration, the parties hereto assign focal persons who will coordinate on behalf of their institutions:

  • 2. Documentation. This collaboration will be documented through a Memorandum of Agreement, which will take effect from the execution date to the end of the Pilot Period.

Annexure 3:

Information on the Three Local Suppliers Proposed

         

Mr. Thon

#

 

Characteristics

 

Mr. Chet

Mr. Phon Phal in

 

Charmoeun in

 
 

Sovanareth in Pouk

Angkor Chum

Angkor Chum

1

Age in Years

 

53

39

40

2

Telephone number

 

017 318 484

 

097 6666 763

 

012 1722 579

 

3

Market Actor Type

 

Whole Seller Retailer Concrete producer Masonry

 

Whole Seller Retailer Concrete producer Masonry

 

Whole Seller Retailer Concrete producer

 

4

Year

of

Commencement

of

1996

2003

2000

operations

 

5

Annual revenue

 

10,000 USD

 

10,000 USD

 

95,000 USD

 

6

Current volume of business

 

150

Latrine

for

3

200

Latrines

for

3

150

latrines

for

3

 

months

 

months

 

months

 

8

Transport

Means

proposed

to

2 Trucks

 

2 Trucks

 

2 Trucks

 

be

used

for

supplies

to

     

households

 

ANNEXURE 4: DRAFT MEMORANDUM OF AGREEMENT

This Memorandum of Agreement made and entered into by and between:

Habitat for Humanity Cambodia herein referred to as HFHC, represented by …… ……………………

..

with office address at

and

VisionFund Cambodia. herein referred to as VFC, represented by …………with office address at ………………;

VFC and HFHC, hereinafter referred to as the Parties, have agreed as follows:

WHEREAS HFHC is a a non-profit housing solutions organization which has built over 2,000 houses and served over 7,000 families through housing, community development and water, sanitation and hygiene in Phnom Penh, Siem Reap, Kandal, Takeo, Prey Veng and Battambang

;

WHEREAS VFC is a microfinance institution based in Cambodia providing loans and savings products, currently operating in 19 provinces and municipalities across Cambodia;

WHEREAS, the Parties agree to cooperate, to share information, skills and experience and, through the conduct of collaborative efforts, to facilitate the development and implementation of a pilot and demonstration activity (PDA) for a sanitation microfinance scheme in Ankor Chum and Pouk districts in Cambodia.

NOW THEREFORE, for and in consideration of these premises, the Parties to this Memorandum of Agreement do hereby mutually declare and agree to cooperate as follows:

ARTICLE 1

Objective

This Memorandum of Agreement (MOA) is being entered into by HFHC and VFC to facilitate the development and implementation of a pilot and demonstration activity (PDA) for a sanitation microfinance scheme in Ankor Chum and Pouk districts in Cambodia.

  • A. HFHC agrees to:

ARTICLE 2

Roles and Responsibilities

1)

Commit to collaborate exclusively with VFC during the Pilot Period on a sanitation microfinance loan

scheme (the “Loan Scheme”, as described further below).

2)

Present the Loan Scheme proposed to MRD and get the required sign-off from MRD.

3)

Assist the MFI to implement the actual scheme through marketing and awareness-raising events

targeted at villagers from all the 38 villages in the pilot area (“Launch Workshops”).

4)

Provide an incentive to customers of the Loan Scheme by contributing the last 5 USD of principal

5)

repayment per customers up to an overall limit of 7500 USD of incentive disbursement. Guarantee up to a maximum of 2% of loan losses on the loans outstanding under the Loan Scheme

6)

subject to an overall cap of 4000 USD of losses. Establish with the MFI a monitoring mechanism for sanitation microfinance loans originated, and for

  • B. VFC agrees to:

tracking collections, repayments and defaults.

1)

Collaborate exclusively with HFHC during the Pilot Period on the following sanitation microfinance loan scheme:

Nature of Loan

Joint liability loans where 2 to 10 member joint liability groups can be formed Individual loans against soft land titles in other cases

Loan Purpose

Acquisition / Up-gradation of a Latrine

 

Disbursement

of

The MFI will disburse loan proceeds to

 

Loan Proceeds

the Latrine Supplier designated by HFHC in the target area within 10 days of loan approval after receiving confirmation from HFHC regarding delivery of the latrine materials by the suppliers.

In

the

case

of

the latrine

 

superstructures

since

the

prices

of

these

vary

considerably,

if

the

household decides to go for a supplier

other

than

the

ones

designated

by

HFHC, the disbursement may be made

directly to the household.

 

Maximum Term

12 months

 

Place of collection

At the Village of the borrower

 

of

principal

 

installments and interest payments

Repayment

Monthly interest payment

 

Amount

and

Principal repayment according to client cash flow

Frequency

Interest

Rate

2.8 % per month (on outstanding balance basis)

(Monthly)

Incentive

HFHC pays the last US$5 of the principal repayment, if loan is

repaid on

time subject

to

a

cap

of

7500 USD of incentive

disbursement

Loan Losses

HFHC to cover up to a maximum of 2% of loan losses on the loans outstanding under the Loan Scheme subject to an overall cap of 4000 USD of losses. Loan losses in excess of 2% of loans outstanding or beyond 4000 USD (whichever is lower) are to be borne by the MFI.

2)

Keep confidential the details of the arrangement provided by HFHC to the MFI

3)

Establish a monitoring mechanism for the loans originated under the Loan Scheme to track originations,

4)

collections, repayments and defaults, in a manner and frequency acceptable to HFHC. Cover losses in excess of 2% of loans outstanding under the Loan Scheme or beyond the cap of 4000

5)

USD of losses (whichever is lower). Assist HFHC, as requested by it, to present the proposed scheme to MRD and get the required sign-off

6)

from MRD. Assists HFHC organize the Launch Workshops, including information dissemination about the Loan Scheme among potential customers.

NOW THEREFORE, for and in consideration of these premises, the Parties to this Memorandum of Agreement do hereby mutually declare and agree to cooperate as follows:

Article 3

Waiver

Nothing contained in this MOU shall constitute a waiver, express or implied, of any privileges and immunities which the Parties may enjoy, whether pursuant to the Convention on the Privileges and Immunities of the Specialized Agencies or any other convention or agreement, law, order or decree of international or national character.

Article 4 Entry into force, Amendment, Extension and Termination

This MOA will enter into force on the date of signing by all Parties and will expire on 31 December 2013.

This MOA may be terminated by communication in writing sent by the interested Party and received by the other Parties at least thirty (30) days before the date of the proposed termination.

This MOA may only be amended or extended by agreement in writing reached among the Parties, and only before the expiration of the MOA.

Article 5 Settlement of Disputes

Any controversy or claim arising out of, or any breach of this MOA shall, unless settled by direct negotiation, be settled in accordance with UNCITRAL Arbitration Rules as at present in force. The place of arbitration shall be in London and the language of the arbitral proceedings shall be English. Any arbitration award rendered as a result of such arbitration as the final adjudication of any such controversy or claim shall bind the Parties.

Article 6 General Conditions

All rights and title to any intellectual property (IP) generated in the course of activities under this MOA, which include but are not limited to copyright, shall be held by all Parties. However, in such a case where the information originated from, or is procured or obtained solely by the effort initiated by one of the Parties, then that Party shall have the right to retain and use the same for its benefits and purposes. In any publication of that work arising from the project, all Parties to this MOA shall be acknowledged.

In cases where the materials are created or produced solely by, or on behalf of one Party, then that Party shall hold exclusive IP rights over such materials, including the right to register the said materials in its name, to retain and use the same for its own purposes and to exclude others from deriving benefits there from without its prior written consent.

In accordance with the above, the representatives of the Parties agree to sign this MOA in Phnom Penh on…… , ..

in two originals in English.

On behalf of HFHC

On behalf of VFC

Name

Name

Designation

Designation

Signed in the Presence of:

___________________________

____________________________

Annexure 5

Quarterly Surveys of Borrowers

Introduction: Introduce yourself before proceeding to the questions.

My name is

I am representing Habitat for Humanity Cambodia. We are currently conducting a study on the

__________. sanitation microfinance scheme in partnership with VisionFund. The interview will last for about an hour depending on our

discussions. Rest assured that the information you shared will be kept confidential.

Respondent’s Profile:

Name

of

Respondent:

__________________________________________

Date

Interviewed:

____________________________________________

Sex of Respondent: ( ) Male

( ) Female

Age of Respondent: __________

SL#

Questions and instruction

 

Code categories/Answer

Q1

What type of latrine

was being

 

used by the household prior to

your availing the loan?

 

(By observation)

 

Q2.

What was the amount of loan you obtained from VisionFund for

 

sanitation? What did for?

you use

it

Q3

Is this latrine bought/ upgraded

 

with

the

loan

being

used

regularly? If

so

is

it

solely being

used by your family or shared by

other households?

 

Q.4

Did

you

face

any

problem

in

 

obtaining the loan? If so what was the problem?

Q.5

Did

you

face

any

problem in

 

obtaining delivery of the latrine?

How did you do the installation?

 

Was

there

any

difficulty

in

installation?

 

Q6

Is

your household able to meet

 

the repayment schedules of the

Q7

loan easily? Do you have any suggestions regarding the scheme?

 

Thank you very much

Report on Inspection of latrine:

Annexure 6: Monitoring Reports

A.

Weekly

report

from

VisionFund:

Loans

under

HFHC

Partnership

S. No.

District

Commune

Village

Customer

Date of

Loan

Loan

Date of

Date of

Repayment

Principal

Overdues

 

Name

Registration

Amount

Amount

Loan

Disbursement

Schedule

Outstanding

if any

 

of interest

Requested

Sanctioned

Approval

of Loan

 

(in USD)

(in USD)

(in USD)

B. Weekly detailed report from HFHC: ADB PDA S. Amount Amount No. District Commune Village Customer
B.
Weekly
detailed
report from
HFHC: ADB
PDA
S.
Amount
Amount
No.
District
Commune
Village
Customer
Date of
Date of
Date of
of
of
Name
Registration
Intimation
Loan
Loan
loan
of interest
to MFI
Approval
Applied
Approved

Sanitation

Date of

Date of

Date of

Intimation

Latrine

latrine

to

Supplier

Delivery

installation

  • C. Weekly Summary report on PDA (To be prepared by HFHC)

Loans Overdues, if Loan Gross Loan Book Outstanding any Amount Incentive Number Number Repaid so of
Loans
Overdues, if
Loan
Gross Loan Book
Outstanding
any
Amount
Incentive
Number
Number
Repaid so
of
of
(in USD)
(in USD)
(in USD)
far
Provided
latrines
latrines
(in USD)
(in USD)
<