4 Ways Digital Finance Can Help Bring Clean Water to All

Digital financial services can play an important role in achieving financial sustainability in the water sector, but much work remains to be done. Water sustains life, yet 663 million people do not have access to a clean, reliable source of it. Waterborne diseases related to inadequate access killed 842,000 people in 2012, a third of them children. The Sustainable Development Goal around water access would require every household to have piped water on the premises, but over 3 billion people currently lack that simple luxury.

Digital financial services have been instrumental in helping to expand energy access, providing over 800,000 households with solar energy in Africa alone. Although similar digital solutions may produce results in the water sector, the context in which they will be applied is unique. As we show in our new publication on the subject, the water sector is fractured into multiple dimensions, each with their own issues. Large-scale urban utilities often do not recover their capital expenditures, rural water systems are consistently unrepaired and under-managed, and peri-urban areas receive varying levels of service, often from informal or private operators.

Water collection point, South Sudan. Photo by Arne Hoel, World Bank
Water collection point, South Sudan. Photo by Arne Hoel, World Bank

DFS use cases in the water sector

Achieving universal water and sanitation coverage is estimated to cost $114 billion annually between now and 2030, or three times the current expenditure. But in 2014, the average municipal water utility barely covered its operating costs, and at any given time 20 to 40 percent of rural water points in the developing world are non-functional. Few water service providers generate enough profit to be creditworthy, making it difficult for them to obtain desperately needed funding from the private sector.

For the water sector to expand access without creating larger losses and more broken systems, water providers must manage costs and generate enough revenue to sustain their operations while providing for future repairs or replacements. Digital financial services can help them to grow revenues, lower costs, and enable new service models that will allow lower-income people to access the water they need. Here are four specific use cases:

  • Digitizing existing payments. Paying a water bill can be a complicated and frustrating process, often involving long queues at banks or payment halls. By simply digitizing existing bill payments, water providers large and small can reduce the friction of paying one's water bill, saving their customers time and money. One experiment in Kenya showed that digital payments reduced the time required to pay a water bill by 82 percent. The Dar es Salaam Water Service Company saved millions of dollars and generated significant new revenue by allowing users to pay using mobile money, while reducing opportunities for corruption.
  • Pay-as-you-drink. By coupling digital payments with prepaid metering technology, water providers can shift their service to a more flexible, pro-poor model, similar to what electric utilities and PAYGo solar companies currently provide. Allowing households to purchase large or small quantities of water, depending on their cash flows, can help them match income with expenditures and avoid lumpy payments at the end of the month. Prepaid models reduce billing and collection costs for providers and allow them to focus on providing their service instead of chasing arrears. Prepaid water can function without digital payments but requires building out an entire token infrastructure. On the other hand, smart meters at home or public access points (often called “water ATMs”) provide a seamless solution that allows access at any time. CGAP is currently working with Safe Water Network, a nonprofit water service provider in Ghana, to test the impact of prepaid meters and digital payments in the field.
  • Digital credit for affordable connections. Although having piped water on premises is the end goal, last-mile connections can be expensive for poorer households, costing upwards of an entire month’s budget. Microfinance programs already exist to help clients finance such connections. In India, for example,’s WaterCredit program has helped MFI partners to give out 500,000 loans for water connections and sanitation improvements, with a repayment rate over 99 percent. Digital credit can also help such programs reach wider scale by lowering transaction costs and facilitating easier repayment.
  • Digital government transfers. Water is a commodity that is also a human right. Households that are not able to afford a minimum amount of water still need it just as badly. In such cases, governments can assist with cash transfers, either by sending the money directly to recipients’ digital wallets or topping up their prepaid water credit. The former is significantly more cost-effective using digital transfers, while the latter may only be feasible with a prepaid service that accepts digital payments.

The water sector may never see the level of private sector funding that has flowed into energy access in the last several years. Setting prices that reflect full life-cycle costs is more difficult with water, which has been historically underpriced, ironically because of its value. Digital financial services will not solve the economics overnight, but incorporating them into the sector is an important step toward reducing costs and creating a sustainable business model for expanding access to clean water.



This Brief explains how digital finance is enabling pay-as-you-go energy expansion, which in turn provides a gateway to a range of financial products for the financially excluded.

This Brief on digital finance in the water sector looks at how people currently access water service, and finds that it varies from urban to peri-urban to rural areas.

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