Digital Credit: Closing the Water Financing Gap in Rural Tanzania




Patel, Neil

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The United Republic of Tanzania explicitly recognizes the human right to water and sanitation in its constitution. However, full implementation of this right has been complicated by Tanzania’s ongoing decentralization process for water governance, which has created a significant public financing gap for cash-strapped rural water schemes. Under the framework of the progressive realization of the human right to water, this thesis examines the potential for digital credit financing to bridge the public financing gap for rural water schemes in Tanzania. The thesis utilizes (1) country-wide data on digital financial inclusion and rural water access and (2) two case studies of digital credit financing in the rural water sector to explore the viability of a digital credit financing model. This thesis challenges sector-wide intuition on a “cost-recovery” model for rural water financing, instead arguing in favor of a “cost-reduction” model that prioritizes the use of debt financing for cost-reducing asset improvements, such as low-maintenance solar pump technology. It further finds that the weak regulation of the digital credit industry creates a major risk of predatory lending toward financially-illiterate consumers and outlines clear delineations of responsibility for various government agencies in regulating lending terms and providing technical assistance for rural water schemes. Finally, the thesis explores opportunities for cross-subsidization to ensure that the improved financial sustainability of water schemes does not come at the cost of equitable access to water for the rural poor.


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