Improving Community Water Supplies in the Philippines | Asian Development Bank

Improving Community Water Supplies in the Philippines

Article | 1 December 2011

How can small entrepreneurs help improve the country's urban water sector?

Small-scale private water providers (SSPWPs) like us deliver water to pockets of poor communities in the country unserved by the bigger water utilities. When combined, these small efforts become a significant contribution.

In the Philippines, it's only recently that we got the attention of the water sector. I think this is an exciting development - I'm hoping it means that better support services, increased financing, and responsive regulation that we have been lobbying for are forthcoming.

As for IWADCO, we've been working closely with other water providers, utilities, national and local governments, hoping that this could facilitate more private sector engagement in the sector.

What are your toughest challenges as a private water provider?

In the mid-1990s, when IWADCO was still Inpart Engineering, the neighboring village where some of our employees lived had difficulties accessing safe, drinking water. So we decided not only to help our employees get water, but also to work with them in bringing water to the community. This marked the beginning of our water service business.

Our operations hinge on the partnerships we forge with communities and local governments. So changes in leadership are always difficult times for us - there is always the risk that the new leaders will affect our original agreements.

Fortunately, because we work directly with, and provide employment for, the poorest segments of the communities, we earn their trust and support. This, somehow, minimizes the risks involved in changing leaderships.

How does IWADCO maintain good working relationships with local governments and customer communities?

I think it's because we have a lot to offer them.

We usually aim for a management contract, building on whatever water supply system is already in place. We offer to operate, improve, and expand it at no cost to them. And they also get a share in the gross income of the project.

Local governments and customers also appreciate our flexibility in terms of payments, which are chiefly based on consumption. We do not charge connection fees. We work with them to define water rates and, from there, decide on the billing systems - whether daily, weekly, or bi-monthly depending on customer income flows.

We also have an effective feedback mechanism. Our customers give feedback on a daily basis through the water tenders and the community officials. They can also provide feedback through text messaging. They help us protect the pipes by reporting leakages, which keeps our nonrevenue water to a minimum.

How does the tariff compare with other providers like Maynilad and Manila Water?

Of course, our rates are more expensive than Maynilad's or Manila Water's. That's mainly because they treat us as commercial buyers of bulk water (since we use this for business). Our pass-on rate to customers includes costs and a percentage that goes to the water tenders and the community or local government. Despite the higher price, though, our customers still generally appreciate our projects because they don't have to pay for service connection fees.

How do you view other small-scale private water providers?

Definitely not as competitors. The water market is full of untapped opportunities - there remain a lot of areas in need of private sector help. But I also see a lot of small water providers not operating in a sustainable way because of very low water tariffs. We should target 24 hours water accessibility and find an appropriate scheme that will be acceptable to all stakeholders, cost and benefit wise.

We also want to help each other. In fact, we have just started organizing ourselves nationally. We established the National Water and Sanitation Association in August 2007, and I was elected president. NAWASA was borne out of a series of round table discussions among SSPWPS, and its aim is to provide a venue for SSPWPs to share experiences and learn from each other.

What important lesson have you learned as a small entrepreneur in the water industry?

I didn't expect to be the president of NAWASA. Managing NAWASA is a real challenge for me, given that it is a new organization trying to establish itself nationally. However, as I continue to relate to the other members of the organization (we now have 250), I realize that I had gained a lot of insights while managing IWADCO, which I can share with my fellow water service providers.

First is the need to create strong relationship with partners as I explained earlier. Next is the need to work together so that we can appeal more strongly to donors, the government, and big private companies for support. This will also help us push for greater access to cheaper and accessible financing. Finally, we need to learn from our collective experience, use better technologies, and become more efficient and sustainable water providers.

About the Champion

Elsa D. Mejia is General Manager of the Inpart Waterworks and Development Company (IWADCO), a family enterprise that started as a small construction company specializing in the production of water tanks for small towns and municipalities in and around Metro Manila.

During the 1990s, IWADCO (then known as Inpart Engineering) invested US$350,000 over a 5-year period in low-income communities. Raising this amount, which enabled IWADCO to deliver water to 125,000 people either through piped connections or hose connections from storage tanks, wasn't easy.

At the onset of the Metropolitan Waterworks and Sewerage System privatization in 1997, IWADCO started water service delivery to consumers not yet reached by the big Metro Manila concessionaires - Maynilad Water Services, Inc. and Manila Water Company, Inc. Ms. Mejia realized the great opportunity this market offered to her company so she approached commercial banks for loans. Unfortunately, IWADCO failed to convince them that selling water in poor districts is a bankable enterprise, even if it already had more than 25,000 customers and good commercial indicators.

With very few options available to it, IWADCO borrowed money from relatives and other nonbank lenders, often at usurious rates of 5%-15% interest per month, to raise up to US$100,000 for a small piped water supply system. Elsa took this risk knowing that IWADCO can recover its costs and even earn profits because people were willing to pay for water. With its US$100,000 investment (around US$30-40 per household), IWADCO sold 30,000 cubic meters (m3) of water in a month, serving over 3,000 households.

Since then, governments have shown increasing interest in partnering with small enterprises for water supply provision. With its extensive experience, IWADCO stands out as one of the most viable and trustworthy partners in the water sector.

In August 2007, Elsa became president of the National Water and Sanitation Association of the Philippines (NAWASA), a new organization of SSPWPs in the country.