Our latest PRI: Evidence Action’s Dispensers for Safe Water

The philanthropic and social investment world is filled with examples of good intentions gone awry and counter-intuitive outcomes. Consequently, we believe that evidence-based strategies and decision-making are critical. Without credible and transparent evaluations to assess outcomes, it feels nearly impossible to know if funding or investments are making a genuine difference. This is particularly true in fields such as healthcare and education where a myriad of variables can impact outcomes and where proper research carries with it a host of challenges. Our latest program related investment (PRI), Evidence Action’s Dispensers for Safe Water project, is an example of how sound, evidence-based solutions can be scaled.

The Problem
According to the World Health Organization (WHO) 2.5 billion people lack access to improved sanitation, 1 billion people practice open defecation, nine out of ten in rural areas, and an estimated 1.8 billion people use a source of drinking-water that is faecally contaminated.  Diarrheal diseases are the second leading cause of death in children under the age of five and one of the leading causes of malnutrition. The vast majority of these cases can be directly attributed to poor water, sanitation and hygiene.

Given this, there is an urgent need for sustainable, effective, low-cost water treatment services, especially in rural areas. Growing safe water solutions so that they reach millions of people has been a challenge due to cost, compliance, and other logistical challenges.

Proposed Solution
Evidence Action is a young organization, founded in 2013, scaling rigorously-evaluated interventions so that they are reaching millions of people. The organization looks to “fill the gap between knowing ‘what works’ and having impact at scale.” Evidence Action does this by developing business and operational models for interventions that have been rigorously evaluated. . The organization has already received praise from funders that we respect. Evidence Action’s Deworm the World Initiative was selected by GiveWell as one of its top global programs. The rigorous GiveWell process identifies charities that deliver the greatest marginal human benefit for every dollar deployed.

Evidence Action is expanding Dispensers for Safe Water, a rural water service focused on increasing household water chlorination. Originally incubated at Innovations for Poverty Action (IPA), it now serves more than 3 million people in Eastern and Southern Africa.

Chlorination kills 99.99% of harmful bacteria and remains effective for up to 72 hours resulting in lower levels of recontamination. Proper chlorine treatment has been found to reduce diarrheal incidence by 40%.

Dispensers filled with chlorine are located directly at water sources and fitted with valves that deliver the correct dosage. The dispensers are regularly monitored and refilled by Evidence Action field workers and are maintained by health promoters who live in the community, refill the dispensers regularly, and educate people on why chlorination of drinking water is important.  The location of the dispenser directly at the water source makes drinking water treatment convenient, salient, and public. Evidence Action removes user fees, which reduce access to preventative health products for the poor.

The simplicity and convenience of the model has led to high and persistent usage rates with 40%+ of households in communities with dispensers treating their water.

Dispensers for Safe Water are installed in rural Kenya and Uganda, and the organization is looking to extend the program to communities in Malawi. The country faced catastrophic flooding early in 2015 that has only heightened the need for effective water treatment.

Commentary on Funding Mechanism
When we began our discussion with Evidence Action, we asked a number of questions about the long-term financial sustainability of Dispensers for Safe Water.  In general, Evidence Action looks for various public, private, for-profit, and non-profit mechanisms to scale deployments. We inquired about models where communities might pay some portion of dispenser costs, but were presented with data that showed dramatically lower usage rates with fee-based models. There is some evidence that third-party organizations such as MFIs that depend on healthy customers for timely repayment might subsidize some of the dispenser costs, but, to date, this has not proven to be a significant source of funding.

In attempting to build a sustainable financing model for the program, Evidence Action has focused on the use of carbon credits. Chlorine treatment reduces the need to burn firewood for boiling water and consequently is considered a low-carbon approach. The project has been certified to receive carbon credits for the associated reduction in emissions per dispenser. The future revenue from these carbon credits, assuming a liquid market for them persists, will be used to sustain the project.

However, there remains a significant working capital need to fund installation and use until carbon revenues begin to compensate for costs. We will be filling this capital gap with a long-term, no-interest loan from our Foundation in the form of a PRI (program related investment). The PRI will be focused on new dispenser units in Malawi. We have chosen this philanthropic approach for three key reasons:

(1) We are convinced that keeping operational costs to a minimum, and eliminating user fees, is essential for achieving the targeted health outcomes of this project.

(2) While there is not much financial margin in the project, we believe that a loan, even without interest and extended over a very long time horizon, creates the right incentives for project sustainability. As opposed to a one-time grant, this facility can potentially act as a revolver, multiplying impact over time as repayments can be redeployed as new loans for new dispensers.

(3) We think that Evidence Action’s approach to taking on our own loan, and others, demonstrates a commitment to long-term project sustainability that will ultimately bring the program more credibility than pure, grant-based alternatives.

We look forward to learning alongside Evidence Action as they expand this program and others.