Microcredit to help families turn on tap water in Malang

from The Jakarta Post

Wahyoe Boediwardhana, The Jakarta Post, Malang

Some 58,000 poor families in Malang regency will have access to microcredit to connect their homes to tap water from the state-run Malang regency tap water company (PDAM).

The payment scheme is stipulated in an agreement between the PDAM and the Malang branch of Bank Rakyat Indonesia (BRI).

According to Malang PDAM head Muhammad Hasan, the credit line is aimed at people who have so far had trouble setting aside cash for water connections.

"Residents who usually depend on money derived from arisans (informal lotteries) to pay for new water connections can initially borrow from the BRI and return the loans in three-year installments. So it's quite easy," said Hasan.

Previously, residents who wished to be PDAM customers had to set aside between Rp 650,000 (about US$72.00) and Rp 3 million.

Residents can apply for a loan of Rp 1 million and pay a monthly installment of Rp 61,000, at an interest rate of 2 percent.

The Malang PDAM hopes to increase its clientele from around 9,000 now to 26,000 in 2010, mostly by adding poor households to its customer rolls.

Hasan says PDAM hopes to sign up at least 1,200 new clients in the first year following the agreement with BRI. Only 23 of the 33 districts in Malang regency can be provided with clean water service at the moment, due to limited infrastructure.

"It would be impossible for us to initiate this program because we don't have the means. That's why we established this cooperative effort, because who knows, it could turn into a long-term investment," explained Hasan.

Malang branch BRI manager Zainuddin Fatif said BRI was committed to setting aside funds for the program. The bank's loans amounted to Rp 125 billion in 2006, and it is slated to increase its loans 20 percent this year.

Agreement facilitator Bintoro W. Prabowo, Environmental Service Program (ESP) communication specialist at the US Agency for International Development (USAID), said the program was intended to help the public gain access to clean water.

Only around 42 percent of urban residents and 21 percent of rural residents in Indonesia benefited from clean water services in 2006. The U.N. Millennium Development Goals state that around 80 percent of the urban population and 60 percent of rural residents should have access to clean drinking water by 2015.

"What's going on now is that PDAM has limited funds to expand its network, and the same is true of potential customers," said Bintoro.

Purnawan Dwikora of the East Java chapter of Indonesian Forum for the Environment (Walhi), however, argued that the loan problem would not be effective.

He said the public should not pay to gain access to clean water, because that was the responsibility of the local administration. Furthermore, he said, water in the Greater Malang area (Malang regency, Malang city and Batu city) did not need to be treated because it was categorized as surface water.

"(PDAM) only needs to channel it through pipes to every house, and there's no need to process it any more," said Purnawan.

Purnawan expressed concern that water could become a trade commodity used by lawmakers to boost their Locally Generated Revenue (PAD) figures.

"In the end, poor residents will be the ones gradually affected by the expensive price of water set by PDAM, for the sake of meeting the PAD target set by policy makers," he elaborated.