Background
Water.org is a dynamic, rapidly growing international organization committed to promoting access
to clean drinking water and improved sanitation to communities in developing countries. Working in
partnership with donors, partner organizations and communities, we have helped more than 30
million people around the world access improved water and sanitation supply services.
Our WaterCredit initiative leverages the power of microfinance to promote universal access to
water supply and sanitation (WSS) services. The traditional WaterCredit model engages financial
institutions to lend for water and sanitation improvements. Water.org has adapted the WaterCredit
model to help urban service providers develop their capacity to provide household loans to
customers to finance connections over time. Water.org’s initial value-add through the utility
engagement model, called WaterConnect, has been in the form of support to help utilities view low
income households as a viable market base and to help market connections and add customers,
thereby increasing revenue.
Indonesia’s work with local and regional water utility companies (PDAMs) began in 2016.
Water.org helped the PDAMs understand that low-income customers were a potential market and
assisted with market assessments. Water.org also strengthened the utilities’ capacity to provide
improved customer service. Most of the PDAMs designed their own installment schemes to market
the loan products directly, using internal funds to finance the loans. In a few cases, the utilities
entered into a memorandum of understanding (MOU) with an financial institution (FI) so that the FI
could offer loans to households to finance connection costs over time, As of late 2019 the program
had facilitated over 30,000 connections through the partnership with the initial four PDAMs, and
over $2M in capital mobilized.
Water.org expanded the scope of the WaterConnect partnerships and signed a Memoranda of
Understanding with the Association of Indonesian Municipal Water Supply Companies
(PERPAMSI), whose networks spans 440 PDAMs across Indonesia. Under this MOU, Water.org
and PERPAMSI supported activities to build the capacity of 18 selected PDAMs to allow them
increase piped water access. The two entities would work together to train PDAMs in accounting,
financial management and customer relations, and help them offer water connection financing
products. To date, the 18 selected member PDAMs have completed the full training and those
PDAMs added over 100,000 connections, representing $11.4M in capital mobilized.
Although Water.org has ongoing partnerships with PDAMs and with PERPAMSI, there are other
utilities that could be influenced to promote and provide WSS financing.
Purpose
Water.org has identified the need to present a strong and compelling business case to help
motivate Indonesia’s utilities to consider the following:
1. Offering financing options for water connection and wastewater management financing to households, and
2. Obtaining enterprise financing for the utility company itself to help fund activities such as, infrastructure upgrades, network extensions, and offering financing or installment payment plans for their customer base.
To meet this need, Water.org seeks a consultant to prepare a business case study that outlines the key benefits of (1) offering customer financing by a utility company, either through their own installment schemes or through a partnership with local capital providers, and (2) obtaining enterprise financing. While the volume of new household water connections is one basic measure for success, utilities also wish to understand how offering water connection loans to their clients can improve their financial viability to get close to full cost recovery, expand their service area, and enhance their pro-poor targeting and inclusivity coverage.
Figure 1. Water.org’s engagement models with utilities and households
Objectives
Utilizing the experience of water utilities in Indonesia over the last 6 years, the three main objectives of this study are:
1. Reveal the circumstances and conditions under which WaterConnect can benefit these water utilities as businesses seeking to maximize revenues and increase while also improving clients’ lives,
2. Synthesize Water.org’s emerging evidence base about the business case for WSS financing options for utilities, considering financial viability as well as other benefits such as attracting new clients and other stakeholders, and
3. Identify the risk profile for the utilities for offering financing options.
Audience
The Business Case for WaterConnect in Indonesia study should present the business case for WaterCredit to an audience primarily consisting of senior leadership of Indonesian water utilities.
Methods
Based on the provision and details of these TOR, Water.org will contract with the Consultant to perform the following services:
1) Collect and synthesize Water.org’s existing evidence base about the business case for WaterCredit for utilities, complementing with outside sources as needed, to identify the main benefits of WaterConnect. This should include:
a. levels and factors that influence WSS lending;
b. costs and benefits involved (when possible);
c. How WSS lending can improve PDAM performance against several important indicators set by the Ministry of Public Work and Housing, including return on equity, operational ratio, cash ratio, billing effectiveness, range of technical service, and customer growth;
d. any differences in the case for water connection lending as it has historically been made in Indonesia with the case for new types of lending, such as water quality and wastewater management
e. utility partner motivations to provide water connection financing, based on feedback collected from Water.org’s active and inactive implementing utility and utility apex partners, as well as those who have not partnered with Water.org, and Water.org staff. The breadth and depth of information collected and analyzed should provide a fair representation of the target population, i.e. existing and potential utilities and utility apex institutions implementing WaterCredit in Indonesia.
2) Analyze publicly available data about the Indonesian water utilities sector and identify the key characteristics and business drivers in the industry. Consultant should also review PDAM ratings within the Ministry of Public Works. Propose which benefits of WaterConnect will be most relevant and attractive to the Indonesian market.
3) Conduct key informant interviews: The Consultant should also meet with Water.org staff and Water.org’s partner staff from Indonesian water utilities and PERPAMSI. The Consultant may choose to conduct independent surveys or interviews of senior water utility professionals as well to cull more specific feedback on their orientation. Based on interviews, assemble a list of best practices that strengthen the business case for Indonesian utilities and help to drive scale. In addition, provide a list of recommendations for a utility new to water and sanitation lending that would help enable rapid product development, incorporation of the product into the institution, and product scale.
Deliverables
1.A draft report of the findings, for Water.org staff to review and provide feedback
2.The comprehensive final report of the findings, between 10-20 pages (in English and Bahasa)
3.The case study brief, between 2-4 pages, that highlights the key findings in a form easily digestible to senior microfinance professionals in Indonesia. The use of easy to interpret graphics is encouraged. (in English and Bahasa)
4.3 Slide decks, outlining value proposition, (1) for PDAMs, (1) for PERPAMSI, and (1) for the government (local and national). (in English and Bahasa)
5.Summary of each PDAM studied for the business case, if applicable
6.All sources referenced during the study, including:
a. Interviews in summary form, if applicable;
b. Survey questionnaires and response data in raw form, if applicable;
c. Quantitative data analyses produced, if applicable
d. All additional data collected and analyzed.
7.Tools and indicators developed and utilized during the assessment.
Timeline
We anticipate that this assignment will take approximately ten weeks. All final deliverables will be due on February 2, 2021.
Proposal Requirements
Individual consultants, consortia, or firms may apply. To respond to these terms of reference, please send the following to zshabbir@water.org before November 10th. The assignment is expected to begin on November 24th.
1. Brief technical proposal outlining the recommended methodology and timeline, no more than 8 pages
2. Budget proposal for the entire study, separating time, travel, and miscellaneous costs
3. Tentative timeline, with key milestone dates identified
4. List of qualifications highlighting similar past work, including work conducted in Southeast Asia