Access to improved water in Deli Serdang has significantly increased from 27.84% in 2015 to 85.68% in 2019 (North Sumatra Province in Figures, 2020), surpassing the provincial access that at around 73.90% in 2019. \
Despite this tremendous achievement, there is still much to be done to ensure all communities in Deli Serdang have access to the improved water, among others by providing more people with piped water service.
As the government-owned operator for water supply, PDAM Tirta Deli is obliged to increase its service coverage. Therefore, the company has included the building of 5,000 new house connections in 2021 in its business plan.
Yet, achieving this target is not that easy. The PDAM has to seek a sustainable financing strategy because many of the PDAM’s potential customers cannot afford to pay the new connection fees up front.
“We used to have a credit scheme for the customers who cannot pay for the construction fees up front. But, this mechanism did not run well because some consumers failed to pay. We did not have a customer checking system at that time,” said the Head of General Affairs Division of PDAM Tirta Deli, Ms. Darsiyuni.
She also explained that the PDAM had already sought possibility to cooperate with the large conventional banks to finance the new house connections, but the banks could not provide the credit due to different market segments.
To allow the PDAM serve more low-income communities, USAID IUWASH PLUS facilitated PDAM Tirta Deli to seek possibilities to cooperate with BPRS Puduarta Insani through several discussions since October 2020. BPRS Puduarta Insani is among three microfinance institutions in Deli Serdang district which has partnered with USAID IUWASH PLUS to provide WASH credit for low-income families.
After five months of discussions, PDAM Tirta Deli and BPRS Puduarta Insani finally signed an MoU on microcredit on March 3, 2021, to finance construction of PDAM house connections.
Through this agreement, BPRS Puduarta Insani provides microcredit between Rp1,500,000 and Rp2,000,000 rupiahs per a house connection. The credit can be paid in installments over 6-12 months. Of the targeted 5,000 new house connections to be built by the PDAM, 20% could be financed through the credit from BPRS Puduarta Insani. Both the PDAM and the Bank will also promote the credit.
“This is a big opportunity for BPRS Puduarta Insani to make a profit and support the government to improve [piped] water access,” said the Executive Director of Puduarta Insani, Ms. Mailis Warti.
The Executive Director of PDAM Tirta Deli hopes that the cooperation with BPRS Puduarta Insani will help more low-income communities to receive improved water services