Rajasthan, a state in northwestern India, faces severe water scarcity due to its arid climate and depleted groundwater. Many rural households struggle to access safe drinking water, forcing women to walk long distances daily to collect water for the family. This issue limits women’s education and economic opportunities, hindering the region’s development.
To address this challenge, the Indian government launched the policy initiative ‘Jal Jeevan Mission’ in 2019 to provide clean water to all rural households. As part of this effort, the Housing and Urban Development Co., Ltd. (HUDCO), which supports housing and infrastructure development, raised funds to build water supply infrastructure in Rajasthan. Sumitomo Mitsui Banking Corp. (SMBC) provided approximately USD 440 million in loans, including a “Blue Loan” specifically designated for water-related projects.
Abhishek Gupta from SMBC Singapore Branch’s Global Financial Institutions Group highlighted the importance of this initiative:
“Providing households with access to clean water enables women to use the time and energy previously spent collecting water for self-improvement, spending more time with the family and income generating activities. This also allows them to engage in small time business activities and generate additional income for the household. This project will not only improve living standards but also empower the women in the rural part of India.“
Developing the Blue Loan
Framework
A blue loan provides financing for initiatives including, but not limited to, improvement of water resource management and marine conservation. In HUDCO’s case, there were several challenges in establishing the blue loan framework for the water supply project.
Compared to green loans, which address broader environmental initiatives, blue loans have fewer precedents. As a result, there is also a more limited library of international standards offering guidance on structuring blue loans, alongside a smaller selection of case studies. To ensure the alignment with the selected international standards, HUDCO has developed an internal framework that outlines the underlying transaction use of proceeds. The framework demonstrates how they correspond to the use-of-proceeds categories specified by reference international standards.
SMBC Singapore Branch’s Sustainability Solution Group (SSG) referred to the Blue Bond Principles published by the International Finance Corporation (IFC) in January 2022. They explored using this as a guide to develop HUDCO’s own framework to align the blue loan with international standards.
Giuseppe Dell’Edera from SSG, who led this effort, explained:
“Many stakeholders in the region initially underestimated the wider range of assets and projects eligible for blue labeling, which extends beyond ocean-focused projects to include investments in the research, design, development, and implementation of efficient and clean water supply and sanitation.”
Implementation and
Outcomes of the Blue
Loan for HUDCO
Through this process, the loan to HUDCO was finalized as its first blue loan. This will provide many rural residents in Rajasthan with access to piped water. Abhinav Kalra, from SMBC New Delhi Branch’s Global Financial Institutions Group emphasized the impact of this loan:
“As of October 2024, approximately 78% of India’s 152 million rural households have access to piped water. This project will help bring that percentage closer to 100%. Additionally, this project will help resolve the issue of water leaking or spilling as women travel long distances to get water from wells which will significantly reduce water wastage.”
Dell’Edera added, “Having examples of such important initiatives is a significant strength when expanding into other markets. For instance, in Indonesia, where access to clean water and sanitation is a serious issue, we have shared this example with government agencies, clients, and stakeholders at our subsidiary, PT Bank SMBC Indonesia Tbk.”
This demonstrates the potential for expanding such efforts to other regions.
Regarding the relationship with HUDCO, Kalra reaffirmed their commitment to expand their support, saying, “We seek to explore providing additional funding support to HUDCO in blue, green and social sectors and advance initiatives that can impact the lives of many families in India.”
Reflecting on this project and his learnings, Gupta shared, “As a banker, we tend to see transactions as simple funding activities. However, it is essential to consider the broader societal impact of these loans. This project demonstrates how financing can transform lives, significantly improving the daily experiences of hundreds of thousands of women. For me, it was a valuable learning experience. We must broaden our perspective and focus on the intangible impact we can create in people’s lives.”
Dell’Edera echoed this sentiment of impact. “We often spend a significant amount of time debating whether a project is classified as ‘blue’ or ‘social.’ However, the real question is, ‘What is the impact?’ The development and labeling of international standards are crucial as the market evolves, helping to prevent greenwashing and mitigate reputational risks. However, we must ensure that the focus remains on the core issue: understanding the actual impact of our actions and the projects we help realize. For example, in this project, the true value is not in the blue loan amount but in the fact that millions of people are now given a chance to access clean water, significantly improving their standard of living.”
