Over the last 15 years, GRET has been supporting small water operators in rural villages in Cambodia to improve access to drinking water. Since 2012, GRET has been supporting the development of a services centre called iSEA (Innovative Services for Engineering and Advisory), which is dedicated to these companies. Following World Water Day on 22 March last, on the theme of “Water and Jobs” and the institutionalisation of iSEA in the form of a company governed by Cambodian law, GRET looks back over this social entrepreneurship experience and its contribution to access to drinking water.
The potential of small private water operators in Cambodia
In Cambodia, 21% of the population has access to a drinking water network, of which 7% in rural areas. 1.8 million people have access via household connections (JMP, 2015). 400 small and medium private local operators invested spontaneously in the supply of water to rural towns and villages (with a population of between 1,000 and 20,000). Some of these are small in size and informal, others are more structured and obtained a licence from the Ministry of Industry and Trades. GRET was the first ONG to work with these private operators and supported their development over a 15-year period. However, “small in size does not mean small market shares”, as pointed out by a representative of the World Bank’s Water and Sanitation Programme (WSP) during a conference on water organised by GRET on 19 November 2015 in Phnom Penh. These companies invest between 10,000 and over one million dollars in infrastructures for pumping, treatment (purification stations) and distribution of water to towns and villages. Despite this dynamic, many constraints remain. In the absence of technical support, infrastructures are often poorly dimensioned, poorly built and poorly operated. Extra costs end up being borne by consumers. In the absence of sustainable financing, certain investors borrow from informal lenders, thus contributing to an increase in prices and hindering the extension of the service to new areas.
In recent years, clear progress is being made in terms of structuring the sector and the professionalization of water companies. After 10 years with no legislation, since 2014, legislation is gradually being implemented and creating an incentive for professionalization of the sector. In parallel, several projects aiming to develop access to bank financing have been initiated (More information).
Loans are granted to operators by a Cambodian commercial bank (Foreign Trade Bank) at preferential rates. However, these loans are dependent on in-depth technical and professional assistance
The creation of an innovative company
Since its first support projects for rural hydraulics in 1995, GRET gradually shifted its focus to specialise in support to private entrepreneurs in small towns, often referred to as “the grey area”, as it is neither totally rural nor urban. As part of projects Mirep (2000-2005) puis Pacepac (2006-2011), 18 investment projects were supported. After these project phases, the focus was placed on the transfer of GRET’s skills to local public or private structures to provide support to these companies. The absence of this type of stakeholder, inconclusive attempts to transfer skills to public authorities and the reticence of existing engineering firms specialised in hydraulic engineering prevented transfer to existing stakeholders. In 2012, given the limits of the project approach to sustainably develop access to water in Cambodia, GRET adopted a “social entrepreneurship” approach to reconcile public service, social added-value and economic sustainability. In 2012, with the support of Find – Fonds d’Innovation au Développement (Fund for Innovation in Development) and the Fonds Suez Initiatives, GRET created a services centre dedicated to drinking water operators: iSEA.
The 100% Cambodian team provides quality technical assistance at competitive prices to entrepreneurs, who are not used to paying for assistance and its multiple aspects (from sizing to operations). 17 operators have already placed their trust in ISEA and 21 contracts were signed between 2012 and 2015 for a total of over 132,000 US$ for contracts ranging from 3,000 to 20,000 US$, according to the services provided. Initially intended as support for banking intermediation, iSEA has positioned itself on an emerging market in order to meet companies’ expectations. It is developing design services, banking intermediation, intermediation with the Ministry (presentation and negotiation of business plans on behalf of entrepreneurs), support with construction, training and support and advice for operations. The diversification of its areas of work combines solid expertise in hydraulic, civil and electromechanical engineering with new skills in commercial management, financial analysis and company management.
Working towards organisational and financial autonomy: the challenges of a social enterprise
To guarantee iSEA’s social mandate, safeguards were defined, such as the reinvestment of 50 % of profits in the business and the inclusion on the Board of Management of at least one representative of the water companies and one member of civil society. Formally institutionalised in the form of a company governed by Cambodian law at the end of 2015, its capital is divided between GRET, four Cambodian shareholders, three directors and one external individual.
In a conducive environment and after 15 years of projects, iSEA, created by former GRET staff, has defined its own strategic and organisational vision, motivated investment by some of its employees and built corporate governance. With 13 employees in 2015, iSEA now has a new organisation chart, independent operating procedures and a specific commercial positioning. These promising results need to be consolidated but confirm initial hypotheses. iSEA faces many challenges in terms of market consolidation, organisational & financial autonomy and strategic positioning (areas of work, skills, independence).
This innovative approach to strengthening local entrepreneurship through social entrepreneurship is set to be developed in similar contexts elsewhere. In November 2015, a discussion workshop organised in Phnom Penh by GRET and the World Bank’s WSP made it possible for experts from different regions (Africa, South-East Asia) to reflect on this economic model and its development in other contexts, particularly in rural areas.