The world is facing improper distribution of water and one of the major barriers to safe water and sanitation is affordable financing. There are millions of families spending more than 20% of their income on water. The truth is that many of these families can get a water or sanitation solution in their home for a fraction of their annual water costs. All they need is access to affordable financing to make this a reality. An attempt has been made through this paper to offer financial services to low income population through water credit system. Many financial systems in developing countries weren’t offering loans for water and sanitation to the poor. This paper focuses on water credit system as an exclusive solution to work in microfinance. Water credit system has been proved to be very effective solution for water management in rural area. This research highlights that the water credit is recognized as a proven, powerful smart solution to slum and rural areas and it has reached more than nine million people through more than 2.2 million loans. As every urban area is facing challenge of merging the connected rural areas as a part of smart city initiative. This research paper primarily aims at putting forth an optimal solution for dynamic parameters of rural and urban areas.