Insuring against Rural Water Risk in Africa

Lead Research Organisation: University of Oxford
Department Name: Geography - SoGE


Community management of handpumps has been the accepted mode of thinking for rural water supply over three decades in Africa. The approach underpins the hundreds of millions of US dollars invested each year to fix broken handpumps and install new ones. With four out of five people without safe and reliable water living in rural areas the need is great, particularly as rural people tend to be poorer and be more vulnerable to increasing climate variability. However, despite billions invested in rural handpumps one in three handpumps do not work in rural Africa. This represents a huge wasted investment and is associated with high but avoidable health, welfare and livelihood costs. In times of austerity governments are rightly thinking harder on more sustainable solutions that provide greater value for money for taxpayers who generally foot the handpump bill.

Encouragingly, the risk of handpump breakdown bears all the hallmarks of an insurable risk. A recent technological break-through by researchers at Oxford University makes an insurance model now feasible. The researchers designed and successfully launched a smart handpump that automatically texts how often it is being used to a maintenance team ready to respond. This provides good and reliable data on a regular basis to know how handpumps are working and critically when they fail so a trained mechanic can quickly get out to repair the pump. Like any insurance model premiums are lower with more handpumps as they spread the risk across all users. Rural Africans are already used to health and livestock insurance products so this would be a natural extension.

What is not clear is how much users would pay and what level of maintenance service they would want. Handpumps are used by often over a hundred people for drinking water and for watering livestock. Understanding people's payment preferences is critical to designing a socially-acceptable insurance product. Equally it is important to know what insurance products are available in Africa and how they are performing to consider realistic alternatives. Linking consumer demand with insurance supply will then provide a credible basis to test such a new handpump insurance product in the next phase of the research.

There is a lot of excitement and interest in the research with the project partners including the United Nations Children Foundation (UNICEF) and the global body representing mobile phone companies and operators (GSMA). The Kenyan government is also very supportive with the Water Services Regulatory Board a partner in the work as part of their mandate to deliver safe water to all Kenyan citizens. With over half of rural Kenyans lacking safe and reliable water there is a real need to address handpump performance. Kenya is not unique though. Across rural Africa similar problems are faced. If this project is successful it could help the 276 million rural Africans access safe and reliable water to make their lives and futures healthy and wealthier. That would be good news for everyone.

Planned Impact

Our pathway to impact recognizes the inherent risks and attempt to address them in a structured and explicit fashion. First, unless an insurance mechanism is socially and culturally acceptable it will fail regardless of any actuarial wizardry. Our work builds on earlier social choice experiments in Mozambique, South Africa, Senegal and Kenya to listen to the voices of the poor using pictorial trade-off cards that can then be modeled in discrete choice models. This has proven highly effective in all previous work. Second, to achieve enduring impacts we need partners like UNICEF and GSMA with the knowledge and the mandate to drive changes at scale. Third, we aim to develop an objective and rigorous evidential platform to allow policy-makers to make justifiable decisions to shift from tired, failing but safe options. By providing new evidence and insights this project will not only challenge accepted thinking about the way rural water services are managed and financed, but could also stimulate entirely new sustainable, scalable and market-based business service delivery models.

Primary beneficiaries of this pioneering research will include (a) rural water users, particularly women and children; (b) local entrepreneurs and enterprises; and (c) governments and donors/investors.

First, it is low-income water users who suffer most from the inability to manage the financial risk inherent in community managed handpump supplies. Rural water users currently lack any mechanism to share or transfer the risk of a handpump breakdown of an unpredictable size at an unforeseen time. Though they are least able to manage risk, it is women (through lengthier collection times) and young children (through diarrhoeal diseases) who bear the brunt of having to resort to unsafe alternatives when pumps breakdown. Handpump insurance could enable water users to manage this risk by ensuring sufficient financing is always available for prompt repairs when breakdown occurs. With more than one billion rural dwellers in the developing world sourcing water from boreholes or shallow wells, the potential developmental impact of this initiative is significant.

By catalyzing the creation of a handpump insurance market, the research could prove beneficial to enterprises and entrepreneurs involved in both insurance and handpump maintenance services. Even where insurers are national or multinational in scale, the delivery channel is likely to be provided by local entities and enterprises. Increases in financing available for repair activities will boost the commercial viability of a handpump maintenance business for small scale entrepreneurs.

Governments and donors also have much to gain from an insurance mechanism that improves the financial sustainability of these systems. By increasing the functionality rates of handpump supplies, insurance models will mean governments and donors will yield a significantly greater return on their investments. The research will chart a pathway to enable governments to broaden their policy ambit beyond community management when framing rural water strategies and programmes.

Our results will be disseminated via academic papers, briefing notes and our website (, and an electronic newsletter sent to our mailing list. This will provide a platform to communicate our findings to a large audience - in 2012 our website has received more than 10,500 page visits from 99 countries (including 20 Sub-Saharan African countries). Our work has been featured on BBC television, radio and on-line, plus numerous articles in African newspapers and online media.


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Description This research examined the potential for microinsurance to address rural waterpoint sustainability challenges in Kwale, Kenya. Analysis of survey responses from more than 3000 rural households and financial records from 100 communities generated several novel insights into the possibilities and pitfalls of rural waterpoint insurance, an as yet untested concept in sub-Saharan Africa.

The findings reveal compelling evidence that under the prevailing community-management approach, financial risk undermines the sustainable operation and maintenance of waterpoints. Around two-third of water users cited financial challenges as the main reason why their waterpoints are not repaired, and there was a statistically significant relationship between repair cost and system downtime.

Critically, the research demonstrates that financial risk would be considerably reduced if maintenance funds could be pooled across multiple waterpoints. Financial analysis highlights the variable and unpredictable nature of waterpoint repair costs, which results in 1 in 3 repairs exceeding the 'average' cost. Under a business-as-usual approach, communities would need to add a risk loading of 230% on to an average lifecycle cost tariff, in order to accommodate the 95th percentile repair cost. Actuarial modelling suggests pooling finances across 100 handpumps would reduce the required risk loading to just 20%. In other words, pooling maintenance funds across many communities would decrease the likelihood of a shortfall to pay for high cost-low frequency repairs.

However, there are several obstacles that would likely thwart the viability of a standalone rural waterpoint insurance product. Survey results showed levels of uptake and awareness of insurance products remain extremely low, especially among low-income households. Moral hazard, adverse selections and fraud present further stumbling blocks. Hence, a more viable prospect is likely to be an insurance-style financing mechanism that pools funds and spreads risk coupled with a high quality supra-community maintenance service. That is, the insurer doubles as the maintenance service provider. Promisingly, choice experiment results indicate households in Kwale would be willing to pay US $0.58-1.16 per month to access such a service, so long as waterpoints were repaired within 2 days of breakdown. Field trials of this concept are now needed to shed light on whether it offers a feasible, sustainable and scalable solution.
Exploitation Route The results provide instructive guidance for policy makers and practitioners looking to revise and rework approaches for the delivery of sustainable rural water services in Kenya and beyond. By characterising financial risk and its operational implications, the research lays out the case to drive reform and nurture business model innovation within the rural water sector, and inform the design of new approaches that effectively address financial risk. Governments and non-government organisations will likely be the enablers of the innovation resulting from this work. However, it is private enterprise who will most likely operationalise these business models.

The findings are of interest and relevance to multiple actors involved in rural water service delivery, including governments (national ministries; local government); water service regulators; rural water enterprises and entrepreneurs; microinsurance firms; non-government organisations; and multilaterals.
Sectors Financial Services, and Management Consultancy,Government, Democracy and Justice,Other

Description The findings have informed the design of a new Water Services Maintenance Trust Fund in Kenya. Private sector investors have verbally committed funds for 2017 and local government are supportive with advanced dialogue on investments to match user and investor contributions. The insurance logic advanced in the research informs the design of the Trust Fund. In September 2016, Kenya's new Water Act was gazetted which refers for the first time to financing arrangements for the rural water sector which, in part, was influenced by the research outputs.
First Year Of Impact 2015
Sector Other
Impact Types Societal

Description Article in The Economist (4 March 2017) on FundiFix model
Geographic Reach Multiple continents/international 
Policy Influence Type Influenced training of practitioners or researchers
Impact See
Description Citation in Government of Kenya Water Services Regulatory Annual Report 2014
Geographic Reach Africa 
Policy Influence Type Citation in other policy documents
Impact New model for rural water sustainability that benefits low-income and marginalised rural populations in Kenya gain more reliable water services.
Description UPGro - unlocking the potential of groundwater for the poor
Amount £1,890,000 (GBP)
Organisation Natural Environment Research Council 
Sector Public
Country United Kingdom
Start 02/2015 
End 02/2019
Description Rural Water Sustainability 
Organisation UNICEF
Country Global 
Sector Public 
PI Contribution Expands scale of existing work with new research programme
Collaborator Contribution Links to wider regional initiatives in East and Southern Africa
Impact None yet.
Start Year 2014
Company Name Kwale Handpump Services Ltd. 
Description With ESRC support we incubated a Kenyan-owned social enterprise called Kwale Handpump Services Ltd, under the FundiFix model. The company employs three local staff including a manager and two mechanics with a Director providing targeted support. The start-up has required close collaboration with the Oxford team in terms of developing a business plan to recruit communities to the maintenance service, establishing financial procedures, including a mobile billing system, and using the 'smart handpump' data to determine demand for water and likely failures. The manager has been trained in using the database which processes the smart data so he can observe the patterns of handpump usage over time. The mechanics have been equipped with parts and motorbikes so they can fix failures fast. 
Year Established 2014 
Impact Local repairs under the model used by the company achieve 99% completion under the 3 day contract compared to 53% for communities doing it themselves, significantly reducing handpump downtime.
Description Technical session at World Water Week in Stockholm on 25 August 2015 on Sustainable Finance for Universal Rural Water Services 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Session convened leading global practitioners advancing global goals of universal water services, including UNICEF regional office for East/Southern Africa (21 countries), GSMA (global mobile trade body), Government of Kenya and Government of Rwanda. The event is part of a global gathering of 3,000 policy-makers, scientists and practitioners focussing on Water and Development.

To follow
Year(s) Of Engagement Activity 2015