Tag: water

Incofin announces in the lead-up to the UN 2023 Water conference, the launch of the Water Access Acceleration Fund (W2AF). W2AF is a private equity fund focusing on safe drinking water, with EUR 36 million of commitments. The blended fund aims to provide 20 billion liters of water to 30 million people, mainly in Africa and Asia. W2AF invests in innovative water businesses that provide affordable, safe drinking water to underserved populations.

The committed capital comes from a diverse pool of private and public investors, including Danone along with BNP Paribas, the U.S. International Development Finance Corporation (DFC), Norfund, the Danish development finance institution IFU, and international foundation Aqua for All. The U.S. Agency for International Development (USAID) provided catalytic funding to enable a first-loss tranche.

W2AF is the first private equity initiative in a sector that is traditionally financed by  governments, donors and foundations. The fund aims to demonstrate the financial viability of the safe drinking water market worldwide.  It has a blended finance structure – an approach to use part of the public and private donor funds to attract capital from private investors. W2AF hit EUR 36 million in commitments at this first closing and aims to achieve total capital commitments of EUR 70 million in subsequent closings.

 

W2AF goes the last miles

Today, more than two billion people do not have access to safe drinking water. Inadequate or unreliable access to safe water is a harsh reality for many, especially in large parts of Africa and Asia. Piped water is in most countries a common way to get water to consumers, but where piped networks are unavailable or unreliable, people rely on wells or community water supply systems. Mostly women and girls have to walk, sometimes for miles, to reach the nearest water source. A growing world population, together with rising consumption and climate change threatens to increase water access inequality even more.

More and more, local entrepreneurs are coming up with promising market-based, yet affordable solutions. W2AF plans to invest in various decentralized solutions, such as water kiosks, which deliver safely treated drinking water in gallons to the home or to the local store. In addition, the fund will invest in water pipe infrastructure and water technologies. The investments will contribute to delivering safe drinking water to low-income communities around the world.

State Street Bank International GmbH in Paris will provide depository services.

“Drinkable water is a luxury we too often take for granted. Yet, 2.2 billion people today do not have access to safely managed drinking water. Meanwhile, there are talented water company owners who know how to solve this problem but can’t find an investor who aligns with their vision to help them scale up. That’s why Incofin created the W2AF, to address the growth capital needs of these entrepreneurs, and to prove that the drinking water sector is investment-ready, even when targeting low-income people.” Dina Pons, Managing Partner Incofin and W2AF Fund Relationship Manager.

“In a context where 1 in 3 people in the world do not have access to safe drinking water, we consider that it is crucial to join forces with public and private actors and scale up financial and social impact. Water is a key pillar of our mission to bring health through food and drink. Building on the experience of our impact fund Danone communities, we are today going a step further in supporting innovative social businesses dedicated to water access issue, and we hope other actors will soon join us.” Henri Bruxelles, Chief Sustainability and Strategic Business Development Officer of Danone

“Blended finance is critical to achieve universal access to water. Safe drinking water enterprises complement public efforts serving low-income communities in emerging markets. These enterprises struggle to access capital to scale and become sustainable. By making impactful water investments, W2AF will pave the way for other private and public investors”, said Josien Sluijs, Managing Director of Aqua for All.

“Norfund is delighted to play a part in setting up this first-of-its-kind fund and contribute to developing new ways of mobilizing the needed capital to provide access to safe and affordable drinking water. Norfund has ambitions to invest further in this sector that is essential for people’s health, but also for job creation, and we see this fund as an important step in building a larger portfolio”, says Delphine Gilbert, Investment Manager at Norfund.

“We are very happy to join W2AF that aims at improving affordable and safe water access for underserved low-income population in South Asia and Africa with a Just Transition approach, a very innovative initiative in the impact investing space. Indeed, W2AF’s theory of change focuses on the safe water value chain which addresses both social and environmental issues with substantial positive impacts: avoiding preventable diseases, fostering gender equality, plastic bottles reduction, CO2 emissions avoidance, …. ”, Laurence Pessez, Head of Group CSR at BNP Paribas.

“W2AF investments in innovative water businesses will advance water security by providing affordable, safe drinking water to millions of people in Africa and Asia. The fund will work to address the fundamental problem of access to clean water, which is increasingly scarce due to climate impacts such as excessive heat and drought. We are proud to be a part of this investment that meets DFC’s mandate of financing solutions to the most critical challenges facing the developing world today”, said Jake Levine, Chief Climate Officer at DFC.

“Lack of access to clean drinking water has profound consequences for billions of people in emerging economies, and we are far away from meeting the SDG 6 target on creating access to safe water for all. W2AF is an innovative tool to mobilise the needed private capital, which can speed up investments in private sector water companies and demonstrate that the water sector is financially viable. We are looking forward to being part of this initiative and make a positive impact by providing clean and affordable water to 30 million people”, said Arent Christian Kjær, Investment Director at IFU.

“At State Street we believe that addressing ESG issues can help generate better long-term outcomes. As an asset servicer, asset manager and responsible corporation, we aim to create value for our stakeholders. We are very pleased to accompany Incofin with the launch of this pioneer fund and to provide depository services”, Christophe Baurand, Country Head at State Street Bank International GmbH in France.

 

 

 

16/03/2023

At the beginning of the pandemic, COVID-19 put a break on a vast majority of businesses around the world. Logistical chains were broken, borders were closed, planes could not fly. This caused massive ramifications for certain sectors. Meanwhile, some sectors are growing even faster than expected. This is the case for water businesses which increase access to drinking water to local populations and which seem to digest these times rather well.

Since the start of the pandemic, through a series titled “Water Businesses in COVID-19 times, even more needed, even more wanted”, Incofin IM has been monitoring a number of water businesses around the world to better better understand the impact of COVID-19 on their operations. In previous articles we explored the case of water kiosks (safe water enterprises) and of small scale piping water companies.

Today, we dive into the world of the water technology and show how technology is playing an increasingly important role in helping water businesses build resilience, efficiency gain, and customer centricity. This article is written in collaboration with Dick Bouman, water expert from Aqua For All, who is part of the Technical Expert Committee of the Water Access Acceleration Fund. Mr. Bouman provided practical examples from the field to share insights on potential solutions in the water sector.

First, we will show how the water sector faces increasing challenges, including higher costs, energy cuts, accelerated climate change and emerging contamination from industrial and agricultural activities. Yet, testing and purification technologies have evolved and have been able to provide some answers to those challenges.

In the following section, the article zooms into digital technology solutions and how they help water companies to be more efficient in problem detection, and to be closer to their clients.

Innovation in testing and purification techniques: faster, more energy efficient, more comprehensive…

Evolving purification technologies against evolving contamination risks:

Purification technologies are core to water businesses that strive to provide safe and affordable drinking water. The strength depends on how adapted the technologies are to the context in which they are applied, and to the contaminants they are expected to remove, which are also constantly evolving. Natural water resources are for instance contaminated with an increased amount of various types of pollutants such as nitrate, arsenic, fluoride, pharmaceutical residues, traces of heavy metal to name only a few. This means that in an increasing number of contexts, traditional treatment by simple filtration and chlorination is no longer sufficient. For example, arsenic can only be absorbed in multi-stage treatment, while fluoride can be absorbed by synthetic absorbents. The increase in pollutants requires rather sophisticated operations and consequentially, a cost increase.

The good news is that testing technologies have greatly evolved. While the main constraints of testing were typically the need of a stove (36°C) and 24 hours to detect micro-organisms, there are now new technologies available that can detect micro-organisms more quickly and accurately than before. For instance, the Comparative Bag Test of Aquagenx[1] works without a stove and lasts up to 48 hours. Aquagenx provides portable water quality test kits which are designed for field testing in low resource areas without labs and electricity. Another example is Udetect of Orvion, a Dutch company focused on water and environmental technology. Udetect is an analysis tool using DNA-based technology to detect several pathogens in water within two hours’ time[2]. These DNA techniques can also detect the source of the contamination, for example, measuring whether there is faecal or industrial contamination.

Another interesting development to look at are sensor technologies connected to a smartphone. These technologies enable faster water quality testing and provide a web based data solution for stand-alone testing equipment. Sensor based field testing leads to a great reduction in time between sampling and results (from over 24 hours to less than a few hours or even minutes). It also allows for onsite analysis cutting down the time spent on transport of the sample, costs and reporting. India based FFEM[3] developed chemical tests that use Android smartphones to digitize colorimetric tests. With the camera option of a smartphone, the results get automatically stored in any water businesses’ database.

A need for more energy efficient and more sustainable purification technologies…

Purification technologies that are more water and energy efficient allow water businesses to minimize waste and lower their operating costs. Which, in turn, creates an opportunity to price water affordably. For instance, while reverse osmosis (RO) has been the mainstay of water purification technologies for drinking purposes, it is notorious for wasting upwards of 3 units of water to produce 1 unit of drinking water.

To conserve water, the Government of India is considering banning the use of RO for water with a lower level of total dissolved solids. In this context another membrane technology, called capacitive de-ionization (CDI) has emerged. As effective as RO in purifying water, CDI has a water efficiency two times higher than RO. Well-designed membrane CDI can also consume less energy.

Additionally, some companies are turning to other power sources like solar energy, allowing them to gain efficiency and protecting them from power cuts. Elemental Water Makers[4], for example, uses both solar panels and energy recovering from the brine from RO-treatment, reducing the number of required panels by a factor of four. The company provides an efficient and easy reverse osmosis technology that is powered not only by sun, but also wind and waves, to provide reliable access to clean water that is more affordable.

 

Beyond purification, the role of technologies in digital innovations…

Digital innovations for faster decision making:

The water sector has been traditionally dominated by centralized utilities, whose financial viability is supported by economies of scale only. Centralized solutions have their limitations, especially when it comes to serving last mile customers. Decentralized solutions, such as mini grids and water kiosks, are more agile, but by definition face a more challenging cost structure as it is heavier on the fixed costs due to their smaller scale. However, this can be compensated for by new technologies which have been emerging, allowing efficiency increase, and reducing variable costs.

For instance, sensors and flow meters enable operators to manage their networks in real time, leading to faster and better decision-making. Technologies which allow companies to conduct activities remotely and perform real time process control checks help to reduce water loss. Leakages, for example, can be detected and repaired sooner. One example of such technology are the smart solutions of Upande[5] in Kenya.  Upande uses low-power radio communication technology to run fully offline chlorine sensors in places where there is no internet connectivity. Another example, also in Kenya, is Mobitech[6], which offers a cloud-based platform for water monitoring, management and billing. Mobi-Water, as the platform is called, integrates remote sensors to allow users to remotely monitor water storage tanks, track and analyze water consumption using smart meters and pay their water bills using mobile money services.

 

Digital technologies… know your systems, monitor your cashflows…

Digital technologies open the possibility for water businesses to organize networks of kiosks or water stations, and to communicate with each other. Most safe water enterprises have a dispersed network of small water points of sales, run by local entrepreneurs who usually do not have a technology or engineering background. By using centralized IT platforms, water businesses provide their employees access to online training or real time instructions in case of system failures or maintenance and, by doing so, bridge the knowledge gap within their staff.

Digital innovation can also allow water companies to calculate their billing more precisely and by doing so, contribute to cashflow management and enhanced client relationships. For companies that cannot afford upfront payments, pay-as-you-go models offer an alternative payment plan since the information is available for this. These digital solutions are further adapted to allow for flexible payment e.g. pay for only what you can afford, a positive alternative to reach end consumers who have a low and unstable income, especially in COVID-19-times. For instance, the Dutch company Mobile Water Management[7] has developed a meter reading system using the camera of a smartphone to ‘read’ analog meters. This mobile application does not only allow a digital billing process, but also provides water businesses feedback on meter infrastructure health and monthly consumption patterns, while informing clients on exceptional use, which incentivizes saving of water. The system is applied in six small town networks in Mozambique.

 

Digital technologies.. engage with your customers –  serve them better…

We observe an increasing number of water providers informing their customers more frequently about promotions, service disruptions, etc. This is possible, because real time data are available. The SAC-TIC application of the Cotonou water utility SONEB in Benin, for example, warns clients of planned interruptions in their water supply, while providing hygiene education[8].

IT focused on data collection plays an important role for impact results based funding models. Impact funders require well recorded data on specific impacts, such as CO2 reduction, volumes sold, time saved etc. There is an increasing number of projects to support water businesses with data collection and management. A filter project in Ethiopia has automated its sales and customer data to arrange for timely replacement of filter spare parts and to clearly communicate the impact it has on the immediate community.

Another example is the adoption of decentralised and smart contract technologies to facilitate financing and settlement of smart connections (prepaid) and monitoring of water supply service performances and licenses. A first pilot in Mozambique, supported by Walifi, has raised interest of small town operators, with an initial case load of 29,000 pre-paid water meters.

As highlighted above, digital technologies, ranging from smart meters, Internet of Things (IoT) monitoring, or digital billing, help decentralized water businesses build a holistic, real-time, centralized view of their water operations. It allows them to make faster and more relevant business decisions. These technologies also allow them to communicate more often with their end clients, be more transparent and proactive and therefore offer a higher quality of services. Such benefits ultimately help improve the margins of these businesses, allowing them to be more efficient and reach financial sustainability. For the most mature businesses, increasing margins due to efficiency gains may trickle down to the end clients in cheaper products.

 

Conclusion

Technology is at the heart of any water company business’ strategy. The environment from which water companies collect water will likely continue worsening from a pollution level and from a climate risk perspective. As such, water companies need to equip themselves with the most innovative, energy efficient and agile testing and purification technologies in order to remain relevant.

Water provision is a low margin business model. The end product sold, water, is a basic need which needs to be priced at the most affordable level to reach as many people as possible. In this context, water businesses aiming for financial sustainability have only one solution: reaching enough scale to realize gains. Digital technologies can be great contributors to such a strategy. By monitoring their operations real-time, collecting fees through digital billing system, increasing client engagements and being transparent about service issues and new products, technologies can help businesses act more efficiently and retain their customers better, leading to financial sustainability and social impact.

[1] https://www.aquagenx.com/cbt-ectc/

[2] https://en.orvion.nl/markets/water-quality-and-detection/; https://udetect.eu/ 

[3] for FFEM’s products see https://www.hueristicdevices.com/products/

[4] https://www.elementalwatermakers.com/solutions/

[5] https://upande.com/

[6] http://mobiwater.co.ke

[7] https://mobilewatermanagement.nl/product-details/

[8] https://www.youtube.com/watch?v=Pp0nuOdBmq8 .This project was financed by Via Water (https://aquaforall.org/viawater/index.html), and set up by the Partneriat National de l’Eau (PNE-BENIN) in collaboration with Société nationale des eaux du Bénin (SONEB), Eau et Assainissement pour l’Afrique (EAA-BENIN); and the company Solutis from Benin.

09/12/2021
At the beginning of the pandemic, COVID-19 put a break on a vast majority of businesses around the world. Logistical chains were broken, borders were closed, planes could not fly, people could hardly move. This created massive disruptions in many sectors, including hospitality, tourism and any other industry reliant on imports or exports. Slowly, in some regions and sectors, businesses have begun  to recover from the impact of the pandemic by adapting to this new situation. 

Meanwhile, sectors that work to produce and provide a basic good, embedded in domestic economies dynamics, serving local populations, are not only surviving… in certain cases, they are even growing faster than expected. It is the case of local small scale agriculture production. For instance, Incofin IM noticed that the agricultural portfolio in comparison to its financial inclusion portfolio tends to face less risk.

Similarly, water businesses that increase access to drinking water to local populations seem to manage well in these times. Since the start of the pandemic, Incofin IM, along with its partner Danone Communities, have been monitoring a number of water businesses around the world to better understand the impact of COVID-19 on their operations.

This article is part of a series of articles titled “Water businesses in COVID-19 times, even more needed, even more wanted”. In the first article we discussed the case of water kiosks (safe water enterprises). Today, we explore the realities faced by small scale, decentralised piping water companies. These companies typically operate where public utilities do not go, serving as “last mile water providers” for many of the bottom of the pyramid population. They directly connect a pipe from a neighbouring water station to household premises.

All around the world, COVID-19 awareness campaigns have sensitized people on the need to keep a strong immune system. In fact, drinking water consumption has been increasing and these decentralised piping water companies have been there to provide the supply, while reinventing themselves.

Four key conclusions can be drawn from the decentralised piping companies during COVID-19 times:  

  1. Where public utilities fail, privately-owned piped water companies play a crucial water access role, as they help address households’ water needs while complying with the social distancing constraints linked to COVID-19.
  2. Despite offering one of the lowest prices per litre, revenues of decentralised piped water supply companies are highly resilient, since water consumption, a necessity, is non-cyclical. In fact, many pipe networks, especially in developing countries saw consumers’ demand increase.
  3. Because of its strict requirements on social distancing at best, full lockdowns at worst, the pandemic has accelerated the need and implementation of digital solutions including digital finance, automated services, and remote monitoring to be more efficient and resilient in the future.
  4. Decentralised piping water companies’ advantage of steady cashflows has become more prominent during the pandemic. Combined with the social impact of providing a necessity at an affordable price and offering better hygienic and health options to underserved populations, the business model makes a strong proposition to impact investors.

 

CONCLUSION 1: Piped water supply’s ability to provide on-demand on-premise water access addresses households’ water needs of high public health relevance in a social distancing-compliant manner.

While access to safe tap water is usually taken for granted in developed countries, in the developing world, a vast population lives off grid and needs to venture out to collect water. This water may not be adequately treated and expose people to risks of various water borne diseases. During the time of COVID-19, these daily water collection journeys carry greater risks. Without on-premise piped water supply and sewage systems, quarantined people essentially lose access to water and sanitation services. Stock-outs of bottled water, interrupted water transport and increased prices are other risks that many face in this context.

But it doesn’t have to be so. Well managed, small scale, decentralised piping companies can extend the water grid to the underserved population and equalize the on-demand on-premise access to safe drinking water.

In Cambodia, while access to water in urban areas is catered by public utilities, rural populations often have no other solution than to collect rain water or buy from water trucks. While the  government has put water access high on its agenda, it also recognizes that it does not have the means to reach the whole country. The private sector needs to play a role. In such context, the government decided to grant a 20-year exclusive license in rural Cambodia to attract private investors.

Khmer Water Supply Holding (KWSH) runs a portfolio of water stations across 4 provinces in rural Cambodia. Each station serves thousands of households in one to two local districts. A centralised engineering team ensures the stations are efficiently managed and adhere to the high quality standards, which are more stringent than national standards. KWSH is also pilot testing a project to install handwashing sinks for connected households at a below market price, with the hypothesis that the sinks would not only improve household hygiene practices but also increase water consumption by an amount that is more than enough for KWSH to recover the losses in the sales of the sinks. In this context commercial and social interests are well aligned.

Another example is 3BL, a water business in Ethiopia, that provides affordable piped water to rural homes and farms. Ethiopia is considered as a ‘water stressed’ nation, due to the accelerated increase in population size over the last 10 years. In 2017, 89% of the people had no access to safely managed drinking water creating a demand that can be filled by the water businesses. Ethiopia aims to invest in water related infrastructure to address the obstacles to safe drinking water and to increase its access.

3BL works with communities that have already existing infrastructure: 3BL connects the pipes to the households and is responsible for the maintenance. The water is first treated at the source before it is released through the pipes. The company uses technology like water meters to quickly detect and repair leaks so that the communities have a continuous water supply.

The pipe network supply is an ideal model in times of lockdowns and social distancing because on-demand, on-premise access to drinking water makes physical contact avoidable.

 

CONCLUSION 2: The revenues of decentralised piped water supply companies are highly resilient

While the economic impact of the outbreak prompted people to cut back on spending, heightened public health awareness has made it clear that safe water is not the commodity to save on. This is especially the case in underserved areas in developing countries, as those “fresh onto the grid” tend to consume based on need rather than want: a person with a tap at home in rural Cambodia typically consumes 70 litres water per day, a data point that is easily upward of 200 litres in the United States.  As such, what KWSH has observed among its clients during the COVID-19 crisis is that water consumption outperformed projections and strong bill payment rates.

This increase in water consumption was also observed at 3BL in Ethiopia. However, in the beginning of the pandemic, the company faced delays of payments because many of their clients who were economically negatively impacted did not have any savings to pay their water bills.

Both companies explain that once a certain level of trust has been reached and the customers understand the value of having clean water at home, the demand increases as the access becomes more convenient, particularly when compared to other water sources that are not on premise.

 

CONCLUSION 3: the pandemic has accelerated the need and implementation of digital solutions, including digital finance, automated services, and remote monitoring.

The first impact of COVID-19 made many companies realise that in order to ensure business continuity and to remain competitive in this quickly changing context, accelerating and analysing their digitalisation strategy was a necessity.  Although this entails an initial (capital) investment, which is less favourable in times of a crisis, the positive long term effects are clear and the pandemic has shown that digital applications can be crucial to ensure business continuity. Digital innovations in the water sector can contribute to reducing water loss and increasing operational efficiency. Digital solutions have been developed for billing and payment, pre-paid systems, quality and process control and operation, water loss reduction, and consumer relations.

3BL uses digital technology for real time tracking activities, maintenance and invoicing. All these functionalities can also be used offline considering the low internet penetration rate in Ethiopia. The company further recognised the importance of the digital tools that came in handy during the pandemic in ensuring the smooth running of the operations.

KWSH already planned before the pandemic to prepare for a move to a cloud based solution for customer relationship management and work-order. This will enable the company to scale efficiently. Additionally, auto-head meters are introduced at water treatment plants to execute real-time monitoring and reduce non-revenue water. KWSH will continue to invest in these types of digital solutions, as this improves overall business continuity.

 

CONCLUSION 4: Steady cashflows and the social impact of providing a necessity at an affordable price and offering better hygienic and health options to underserved populations, make that decentralised piping water companies’ have a strong proposition to impact investors.

The COVID-19 pandemic has posed a significant challenge in the progress towards the Sustainability Development Goals (“SDGs”)[1]. In 2017, the World Bank pointed out that USD 29 billion is needed on a yearly basis to achieve basic WASH needs and USD 114 billion to achieve safely managed WASH needs in 140 developing countries[2]. Already pre-COVID, in 2019 the World Bank indicated that the present value of additional funding needed in the WASH sector through 2030 would exceed USD 1.7 trillion[3]. In addition to other crises such as the accelerating climate change and the growing debt crisis in many developing countries, COVID-19 has had a negative impact on financing the WASH sector and SDG 6, and has widened this financing gap even more. The pandemic reinforced the importance of access to safe and affordable drinking water[4].

Small-scale, off grid decentralised piping water companies is a more CapEx intensive business model with a longer payback period, thus they have traditionally faced a more challenging funding landscape when compared to a franchisee water kiosk model. However, in a crisis environment like COVID-19, piped water supplies’ resilience, backed by steady demand and stable cashflows truly stands out. Part of this resilience also lies in the fact that compared with other sources, piped water is typically priced at a level affordable to low income populations, who during a crisis time would rather economize other discretionary spending over water consumption, which is necessary and affordable. Multilateral organizations such as OECD, UNDP and ADB typically define affordable water as households spending less than 3-5% of their income on water. In the case of KWSH, a typical monthly water bill for a household of 5 individuals is around USD 5, which is well below the affordability threshold, even for those living on less than USD 1.9 a day, the international poverty line. The model thus makes an appealing case to impact investors who can bring patient capital and a comprehensive value creation strategy in exchange for stable financial return and social impact achievement.

In these turbulent times, Incofin IM is actively working on creating short-term solutions to support our investees, while also continuing to build initiatives that will support entrepreneurs to drive growth and impact in the long-term together with our partners such as Danone.

By investing in the water companies and by offering technical assistance, the Water Access Acceleration Fund (W2AF), aims to contribute to SDG 6 and accelerate the development of the water sector in developing countries.

 

[1] https://sdgintegration.undp.org/sites/default/files/Impact_of_COVID-19_on_the_SDGs.pdf

[2] https://openknowledge.worldbank.org/bitstream/handle/10986/26458/114545-WP-P157523-PUBLIC-SWA-Country-Preparatory-Process-Discussion-Paper-8-Mar-17.pdf

[3] http://documents1.worldbank.org/curated/en/725521553154723194/pdf/Mobilising-Finance-for-WASH-Getting-the-Foundation-Right.pdf

[4] https://europa.eu/capacity4dev/public-water_and_sanitation/discussions/bridging-financial-gap-investing-sdg-6

 

 

 

 

18/03/2021

The case of Safe Water Enterprises, from Kenya to Cambodia

COVID-19 has put a break on the vast majority of businesses around the world. Logistical chains are broken, borders are closed, planes cannot fly, people can hardly move. This has created massive disruptions in many sectors, including hospitality, tourism and any other industry reliant on imports or exports. Meanwhile, sectors that work to produce and provide a basic good, embedded in domestic economies dynamics, serving local populations, are not only surviving… some of them are even growing faster than expected. It is the case  of local, small scale agriculture production. For instance, Incofin has noticed that the agriculture portfolio of most of its partners tends to face less portfolio at risk.

Similarly, water businesses that provide drinking water access to local populations seem to manage well in these times. Since the start of the pandemic, Incofin IM, along with its partner Danone Communities, has been monitoring a number of water businesses around the world to better understand the impact of COVID-19 on their operations.

This article is part of a series of articles titled “Water Businesses in COVID-19 times, even more needed, even more wanted“. Today we explore the realities faced by a specific type of water businesses, the Safe Water Enterprises (SWE), or most commonly known as water kiosks. Because of COVID-19 campaigns people are becoming more sensitized to the importance of a strong immune system, drinking water consumption from Kenya to Cambodia is in fact increasing and water kiosks are there to provide it while reinventing themselves.

Six key conclusions can be drawn from the water kiosk in COVID-19 times:

  1. Since the pandemic started, safely managed drinking water was promoted as an essential good and water businesses were promoted as crucial “COVID-19 fighters”. 
  2. Despite decreasing purchasing power from clients, drinking water consumption from low income population has been going up across the world. The majority of safe water kiosks managed to preserve or even increase their revenues during the crisis. 
  3. Safe Water Enterprises’ decentralized operating structure is made of numerous points of sale, close to local production for local consumption, this allows to spread the risk.  
  4. The Safe Water Enterprise business model has proven to be able to adapt in contexts of crisis: some businesses accelerated the implementation of the delivery service, others also focused on accelerating digital payment solutions, using mobile applications or water ATMs.  
  5. Thanks to their grass roots nature, Safe Water Enterprises have been powerful amplifying agents of the WHO messaging overall and played the role of last mile health agents in local communities. 
  6. By cumulating a strong social impact and a proof of financial resilience, Safe Water Enterprises are the perfect partners for impact investors looking to support self-sufficient businesses in need of capital and know-how to bring their contribution to  UN SDG 6 on “ensuring availability and sustainable management of water and sanitation for all”.  

 

Since the pandemic started, safely managed drinking water was immediately promoted as essential to maintain a high immune system, playing a crucial role in the fight against COVID-19

Water is essential for good health – it is the largest single constituent of our bodies (about 60% on average) and is vital for us to live and function well. Water helps to maintain normal physical and cognitive functions with an intake of at least 1.6-2 liters per day as advised by various international public health organizations including the World Health Organisation (WHO). Proper hydration is the fundamental pillar for the optimal development of the most important physiological functions that occur in our body. Staying hydrated, as well as other good practices like sleeping, exercising and eating well keeps people healthy and in a better position to fight off any illness.

When people get sick, it is also essential to keep providing them enough quantity of safe water. When people go through fever (COVID-19’s main first symptom), risk of dehydration is high, and more specifically in the risk groups (older people, children and pregnant women). Drinking water is also good to soothe throat irritation. Given the above, it goes without saying that promoting access to safe drinking water is an even more imperative need during the COVID-19 times that we are in.

 

Demand for water during COVID-19 is increasing

Despite decreasing purchasing power from clients, it seems that drinking water consumption from low income populations has been going up across the world. The majority of water kiosks managed to preserve or even increase their revenues during the crisis. They provide a unique and affordable way to access safe drinking water for vulnerable populations for whom buying 1.5 liters packaged water for example is too expensive and who have no other affordable options except boiling untreated water extracted from boreholes putting their health at risks.

Most SWEs have seen their volume of water sold increasing every month since the beginning of 2020. Some SWEs witnessed a sales decrease in April due to lock down restrictions, but by showing strong adaptation of their delivery model, also these businesses noticed that on a year-to-date basis (from January to May 2020), their volumes are above last year’s performances.

 

Supply remains sound thanks to the decentralized business model

The decentralized model of SWEs has been their key strength to face the crisis. Water kiosks’ operating structure is made of numerous points of sale, close to local production for local consumption, each kiosk reaching about 3,000 to 5,000 people. The consequence of such organisation is that the risk is spread. Even if one kiosk has to close, it will have a very low impact on the overall capacity to supply water. 

Furthermore, most water kiosks organize their network in clusters, where a sub-group of kiosks are supervised by a regional office whose role is to support kiosks’ operational needs, helps them to develop outreach strategies to deepen their outreach, ensure water quality at all times, and lead marketing and awareness campaigns to boost sales. With such a set– up, in case one kiosk was to run into difficulties, the cluster structure would easily allow an agile reorganization.  

We need to think of these kiosks as franchisees: a local entrepreneur is on the ground operating the kiosk, and is strongly supported by her/his network. When COVID-19 started, it was clear that to remain convincing towards clients, water kiosks had to be exemplary in their implementation of “good behaviors” to fight COVID-19. This is where the power of the franchise business model kicked in. Most SWEs approached their entrepreneurs through their regional managers to instruct them to implement appropriate social distancing measures and guide them on business continuity measures. They were able to continue providing drinking water and to make an income for themselves.

Naandi, in India, showed exemplary business continuity and innovation reflexes during the first weeks of the crisis. To ensure proper maintenance in areas touched by lock down, where its team might not be able to travel, Naandi quickly put together a database of all local entrepreneurs who met their quality and expertise criteria and could support any kiosk facing maintenance issues.

 

An agile model, proven able to adapt in contexts of crisis

The SWE model covers the whole value chain, from water extraction to payment collection.

We have seen a fast transformation of the business models to adapt to new consumer behaviors. Some businesses accelerated the implementation of the delivery service, like Oshun in Senegal, or Jibu in Kenya, by collecting and activating consumers databases and overcoming logistic barriers. Others also focused on accelerating digital payment solutions, using mobile applications or water ATMs without contact between consumer and operator.

In India, in the context of a strict lockdown, people are looking for a home delivery service and e-commerce. At Naandi, everything was done to keep the contact, albeit mostly virtual, with consumers and to get their feedback. Today, Naandi is in the process of developing an app for consumers to place their orders more easily and during the lockdown, they continuously communicated around health and safety via Whatsapp, SMS or phone calls.

 

Safe Water Enterprises, last mile health agents in local communities

Dealing with water should imply abiding by the highest standards of hygiene and purification rigor. SWEs’ first priorities were to protect the health of their workers and to lead by example.  Many SWEs provided trainings related to Water and Sanitation to their staff to inform on how to stop the spread of the virus. They quickly adopted WHO recommendations, by making hydroalcoholic gel and masks available to all staff and train them on measures of social distancing.

For instance, Naandi, a water kiosks network touching more than 300,000 clients around India, quickly set up an internal management committee in order to reinforce organizational alignment. The work of this committee has led to designing new communication channels and guidelines as well as redefining the roles and responsibilities within the team, implementation of safety measures, sharing inspirational stories from the field across the network, dispelling fake news and sharing ways to manage their well-being.

 

Thanks to their grass roots nature, SWEs have been powerful amplifying agents of the WHO messaging overall. For instance 1001fontaines Cambodia, a network of around 200 kiosks mostly located in rural Cambodia, has sent their consumers text messages to educate them on the WHO sanitation guidelines. 1001fontaines Cambodia has also partnered with UNICEF to distribute free bars of soaps in rural areas.

 

Meanwhile in Mexico, the testimony of EcoAlberto underlines how close SWEs are to the local community and how their proximity allows them to operate as a last mile health agent: “In a context where the community is not precisely aware of what preventive measures they can adopt, our team made the difference. Each time our staff implemented WHO advised behavior in front of our clients it had a positive impact and a change of habits of our clients.”

EcoAlberto has donated 30,000 liters in 4 communities via the bulk system reaching approximately 900 people who were lacking safe drinking water access. Many other SWEs took specific actions: Jibu in Uganda gave water to hospitals and to orphanages, while Oshun donated water to NGOs taking care of babies. Waterkiosk Limited for example distributed in partnership with Bilal Kenya pedal operated hand washing stations to communities along the coastal region in an effort to curb the spread of COVID-19.

 

SWEs are active and resilient players in their community

Water kiosks or SWEs are providing one of our most precious and basic goods on this planet: water. The fact that they succeed during a global crisis in continuing delivering their service proves their strong resilience.

Awareness campaigns made people, including the most vulnerable ones, understand the importance of clean drinking water to preserve their health. Through a decentralized model, a deep outreach and agility, water kiosks established a customer recognized brand, as proven by the sales increase since the first quarter of the year.

They have also shown that in a difficult and disrupted business environment, they can adapt and continue to operate, using new home delivery strategies and digital payment solutions to maintain their revenues and cash flows. Additionally, water kiosks have proven their true and original nature as social businesses, playing the role of the last mile health agents in those parts of the world where basic facilities can be miles away.

By cumulating a strong social impact and a proving financial resilience, SWEs are the perfect partners for impact investors that look to support self-sufficient businesses in need of capital and know-how in order to contribute to the UN SDG 6 “ensuring availability and sustainable management of water and sanitation for all”.