This paper critically assesses microfinance’s expansion into the provision of public goods. It focuses on the problem of public goods and collective action and refers to the specificexample of water and sanitation.
The microfinancing of water and sanitation is a privatebusiness model which requires households to recognise, internalise and capitalise thebenefits from improved water and sanitation. This requirement is not assured. Water andsanitation, being closely linked to underlying common-pool resources, are public goodswhich depend on collective governance solutions. They also have shifting public/privatecharacteristics and are merit goods which depend on networks to enable provision totake place.