Previous Year Question
With reference to WaterCredit, consider the following statements:
It puts microfinance tools to work in the water and sanitation sector.
It is a global initiative launched under the aegis of the World Health Organization and the World Bank.
It aims to enable poor people to meet their water needs without depending on subsidies.
Which of the statements given above are correct?
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
Correct Answer: C
Detailed Solution
Statement 1 is correct. WaterCredit is a microfinance-based arrangement developed by the international non-profit organisation Water.org. It encourages local financial institutions to provide small and affordable loans for water and sanitation facilities.
Households may use these loans for:
obtaining a household water connection;
constructing a well or rainwater-harvesting system;
constructing or improving a toilet; and
arranging safe water storage or purification facilities.
WaterCredit does not operate as a bank directly lending to every household. Water.org supports local microfinance and other financial institutions through technical assistance, market assessment and loan-product development. The local institution then extends loans to eligible households.
Statement 2 is incorrect. WaterCredit was not launched under the aegis of either the World Health Organization or the World Bank. It is an initiative of Water.org. Therefore, describing WHO and the World Bank as its founding or operating institutions is incorrect.
Statement 3 is correct. Under a conventional aid-based approach, households may have to wait for a government grant, charitable donation or subsidy. WaterCredit enables such households to meet their water and sanitation requirements through small and affordable loans.
When borrowers repay these loans, the capital can be lent again to other households. It therefore seeks to use limited philanthropic capital to extend water and sanitation facilities to a larger number of families.
This does not mean that every poor household can afford a loan or that subsidies become completely unnecessary. Public expenditure, grants or targeted subsidies may still be required for extremely poor households without repayment capacity. However, the statement describes WaterCredit’s declared objective of enabling financial access without dependence on subsidies.