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How to grow an ecosystem for water entrepreneurs 

In the natural world, a diverse ecosystem is a healthy and strong one—and business ecosystems are no different. There’s no one-size-fits-all model when it comes to creating and maintaining these ecosystems to deliver clean water in some of the poorest and most isolated parts of the world. “It’s really important to focus on what is the target population for improving access to water from a business standpoint,” says Mike Barbee from market-based safe water charity Water4, which works with local communities in 12 African nations and Peru.  “When developing models to help business partners, we need to determine what markets are untapped in terms of potential, and who does not have access from a rights perspective.” Barbee says that focusing on growth potential for local businesses in the sector will provide safe water for more people.  “High quality water costs less than five percent of household income, so it’s very affordable to [the] majority of people. We believe people can and do pay for water even in the most rural areas—whether through potable water at community managed water points, or offsetting household use through paying for sachet or bottled water.  “If they don’t have access to safe water, they’re paying indirectly, through lost opportunity costs such as healthcare. We are seeing that as an optional aspect of revenue that our partners can tap into, and also help them understand what they’re spending themselves.” Barbee says that the two greatest barriers to entry for water entrepreneurs are financing, such as obtaining seed capital to start up a business, and having the business savvy to deliver a one-off service from time-to-time and to deliver long-term viability and be able to expand.  A 2018 Waterpreneurs white paper, Impact Investing for Water, says that the sector is seeing the emergence of hybrid models for water, sanitation, and hygiene financing, because they are considered the most effective, by combining complementary and sometimes unconventional approaches.  “Enterprises also see the potential for the franchise model in markets that require intensive demand generation and where it is difficult to provide direct maintenance support,” the report states.  “The franchisee makes an initial investment (down payment), with direct or indirect financial support from the CWP enterprise, and operates the unit under a revenue sharing agreement with the enterprise.” An example project is Jibu, operating in East Africa, which is a social franchise business model. Its structure ensure that entrepreneurs operate within the constraints of a revocable franchise license—meaning they are required to adhere to Jibu’s brand standards and charitable goals. One of the project’s innovations is the integration custom banking services for aspiring entrepreneurs, offering entrepreneurs access to both the upfront asset financing needed to launch a business, as well as infrastructure support to keep profits aligned with impact.  “The most important thing when looking at the financing, whether a franchise or build-own-operate models, it to contextualise, and ask what will work in this scenario given the market and the demand and the human capacity and capital there,” says Mike Barbee. “In urban and peri-urban areas, those with experience with franchise models or in commerce, generally might be willing to take on a water business. However, in areas with no expertise, it is difficult to replicate franchises in our experience.” Barbee says that when it comes to growing local businesses to maximise their impact, the sector can be guilty of focusing on front-end support. “There needs to be a greater awareness that the process of supply and support is a medium-to-long term project.” This is the second article in a four-part series that explores ideas to improve water and sanitation funding around the world. Read the series:

• Part one: Is impact finance the solution for improving access to safe water and sanitation?
• Part three: Can entrepreneurs in the water sector bring solutions to leave no one behind?
• Part four: Combining water with empowerment for better development outcomes in Asia

10/08/19