Attempting the Production of Public Goods through Microfinance: The Case of Water and Sanitation

This paper evaluates the attempt to create public goods via microfinance loans. Microfinance loans in the production of goods with public goods characteristics signify an emergent micro-privatisation. As a case study, the production of water and sanitation resources via microfinance loans is examined in India and Vietnam. It is found that microfinance projects for water and sanitation, which are based on individualism and a cost-recovery paradigm, ignore important collective action aspects and underlying distributional problems. Given its questionable effectiveness in other areas, the public goods iteration of microfinance leads not only to insufficient provision for the poor, but also may alienate these citizens from publicly accountable modes of governance and their human right to water.