Griselda Gay Gloria-Santos l April 26, 2024 l The Manila Times
THIS month marks the 54th year of celebrating Earth Day. Earth Day was established to serve as a reminder to everyone that each of us is accountable for the well-being and sustainability of Mother Earth. Over time, this day was also extended to include awareness of issues resulting from climate change. Sadly, I must say, as significant as Earth Day is, one may not need a day marked to be reminded of the importance of our role in preserving the planet. Unprecedented events already serve as a strong reminder of the consequences of climate change.
Last week, Dubai experienced more than a year of rain, flooding the city in just over 24 hours. Southeast Asia continues to experience extreme heat waves with the recurring consequences of the El Niño phenomenon. On the home front, we are experiencing the challenges caused by climate change. Five dams in the country recorded a decrease in water level this week. Angat Dam, a source of 90 percent of Metro Manila’s water needs, recorded the biggest decrease. Due to El Niño, hydroelectric plants are running below capacity. The country’s power and water supply are challenged. Our food security is faced with agricultural losses already at around P357.4 million. All these threaten our access to many basic needs, with water as the most critical one.
Out of the 118 million population, around 60 million Filipinos still lack access to safe water. To achieve sustainable access to safe water and sanitation by 2030, the Philippines will need P1.07 trillion. With competing priorities, this financing gap is huge for the government to address alone. The private sector and individuals will need to play a role to drum up the need to address this financing gap. More specifically, financial institutions and financial technology can help close the gap.
In the past two years, the Bangko Sentral ng Pilipinas (BSP) has issued a series of enabling policies as part of its Sustainable Central Banking Framework. It was a step in the right direction to instill the critical role that financial institutions have in ensuring the sustainability and resilience of the country. As the BSP pursues more sustainable finance initiatives, it has become a race for compliance among financial institutions. Investment in the water sector is a clear opportunity for these financial institutions to be among the first movers in sustainable finance initiatives.
At the household level, the average loan size to get a water connection in the Philippines is about P10,000. About 4 million Filipinos still rely on surface water and unimproved water sources. At the enterprise level, micro, small and medium enterprises (MSMEs) in the water sector are experiencing the same challenge as any MSME in accessing finance. This challenge is real, especially for the missing middle, the enterprises that are too small for the big financial institutions to engage in and perceived as too risky for the smaller financial institutions to fund.
According to Statista, looking at the bottled water industry alone, it is anticipated that revenue generated by bottled water businesses serving the home is approximately P130 billion in 2024 alone. Revenue generated by bottled water businesses from commercial establishments in 2024 is anticipated to be approximately P18 billion. The potential is huge for financial institutions to tap into these missing middle, revenue-generating businesses.
Many islands in the Philippines are challenged to access water due to their location. There is the absence of financial resources. Many financial institutions find it too risky to be present in these areas due to the high transaction costs associated with the number of people they can reach and their physical location.
Given its ability to expand its operations through technology, digital banks/fintech players can have a vital role in addressing these challenges. For example, Wing Bank, Cambodia’s leading mobile bank services, recently provided a $1 million financing facility to Camma, a microfinance institution, to fund its WASH (Water, Sanitation and Hygiene) loan project.
Beyond being a corporate and social responsibility, the opportunities to invest in water are real from a business and financial standpoint. Beyond the business and financial standpoint, every amount spent on water results in, at least four times, reduced health costs for individuals and society as a whole. Engagement of these financial institutions cannot be possible without the tone from the top. This is a call to all those at the top to champion the effort of investing in a sector critical to our sustainability and resilience as a nation.
*** Gay Santos is the regional director for Southeast Asia at Water.org, a global NGO co-founded by Matt Damon and Gary White. She holds an MBA degree from Johns Hopkins University in Baltimore, USA. The opinion expressed herein does not necessarily reflect the views of these institutions, Water.org and Financial Executives Institute of the Philippines. Photo from Pinterest.