Left to right: Radu Ban (Bill and Melinda Gates Foundation), Babar Kabir (BRAC) and Bernadette Blom (Goodwell Investments), panelists at the workshop Making Sustainable Business out of Sanitation. Photo: Peter McIntyre
The business case for sanitation in developing countries is testified by the thousands of small scale entrepreneurs springing up to tackle problems of open defecation and process faecal waste and urine.
Will these businesses be profitable and sustainable? Can they address the huge scale of the problem? Will they address the issues in rural areas as well as urban areas? These questions are much harder to answer.
The evidence from an event at the International Water Week leading up to the Sarphati Sanitation Award was mixed. The workshop Making Sustainable Business out of Sanitation, showed a high level of innovation and enthusiasm for businesses to address two of the most intractable public health and environment issues of our age – the 2.5 billion people who don’t have access to safe hygienic toilets and sanitation, and how to deal with human waste.
Becky Auerbach (Sanergy). Photo: Dick de Jong, H2O Communications, 2013
Sanergy won the first Sarphati Santation Award because in the past two years it has built 242 sanitation facilities run by 130 local entrepreneurs from Nairobi’s slums, who earn US$ 2,000 per year in income for their families while providing hygienic sanitation to 10,000+ residents. The Mayor of Amsterdam awarded a cash prize of 50.000 euros (US$ 67,000) and a statue by famous artist Marte Röling to the winner, Becky Auerbach from Sanergy during the International Water Week (IWW) in Amsterdam. IDE Cambodia and Mr. Toilet, Jack Sim were the runners up.
The three nominees have in common that they provide remarkable sustainable business solutions “turning shit into gold”. They have shown that it is very well possible to address sanitation and public health issues in developing countries while making profit. Over the past years interest has increased for new ways to address the Millennium Development Goal (MDG) for sanitation.
Microfinance boosts latrine purchases in rural Cambodia | Source: WaterSHED, Sept 27, 2013 |
An innovative way to integrate micro-finance and sanitation marketing is resulting in a truly Hands-Off success story and helping to scale up access to safe toilets by the rural poor.
Many proponents of market-based sanitation programs around the world are keen to explore financing as a way to make toilets more accessible to the rural poor. The most repeated complaint by rural villagers when discussing toilet adoption in Cambodia, like elsewhere, is aut louy or “no money”.
Cost is also one of the major roadblocks in offering sanitation financing: loan assessment, disbursement, and payment collections are expensive activities. Because loans for toilets are relatively small, the interest (even at high rates) is not likely to offset the operating costs of the micro-finance institution (MFI). Furthermore, MFIs typically prefer to offer ‘productive’ loans as a opposed to ‘consumptive’ ones because of their lower risk of delinquency or default (a loan to buy a sewing machine for a small business that will generate revenue to make payments as opposed to a loan to repair the roof of a house). Loans to purchase toilets and water filters are considered consumptive.
Tapping the Market: Opportunities for Domestic Investments in Sanitation for the Poor, 2013. Conference Edition.
World Bank; WSP; IFIC.
The current market for improved on-site sanitation services in the four countries is large: supplying new systems and replacing old ones is conservatively estimated to be worth US$300 million a year. But the potential market is much larger: one-time sales of improved sanitation facilities to the 228 million people without access are worth at least US$2.6 billion.
Poor people alone would account for sales of about US$700 million. New customers would increase the replacement market to about US$550 million a year. Private sector activity associated with the market is not limited to the installation of latrines and toilets. The domestic private sector in these countries is engaged in a range of activities, including wholesale and retail sales of materials and components, the manufacture of prefabricated cement products used to build latrines and toilets, and the provision of advice on and the design of latrines and toilets.
Some enterprises also offer financing facilities or are engaged in related services, such as repairs, pit emptying, and septage disposal, which have the potential to be sizable business opportunities (the potential market for truck-based pit emptying in Indonesia is about $100 million a year, for example).
The study’s recommendations focus primarily on the constraints inherent in current technologies and in the supply chains that support provision of on-site sanitation services. It is these constraints that lead to households being offered products and services that they are not very interested in buying. The recommendations are aimed at governments, development partners, and industry.
Research Brief: The Economic Returns of Sanitation Interventions in Lao People’s Democratic Republic, 2013.
Water and Sanitation Program.
- Sanitation interventions have very favorable socio-economic returns to households and society, contributing to improved health, clean environment, dignity and quality of life, among many other beneﬁts
- Economic efﬁciency of improved sanitation can be optimized by improving program performance, which leads to sustained behavior change
- Sanitation solutions in urban areas that involve wastewater management are potentially cost-beneﬁcial, despite not all beneﬁts having been included.
- Improved hygiene and sanitation conditions in institutions, public places and tourist sites are important to attract more businesses and tourists to Lao PDR.
Evaluating the potential of microfinance for sanitation in India, 2013.
Sophie Trémolet, T V S Ravi Kumar. SHARE.
This case study investigates how household financing for sanitation can be mobilised via microfinance institutions and commercial banks in order to accelerate sustainable access to sanitation facilities and/or services. The research (conducted in India between May and June 2011) sought to document existing experiences in providing microfinance services to households to allow them to invest in sanitation solutions that meet their needs. The objective of the research was to map out the existing provision of microfinance for sanitation, identify where opportunities for future market development lie and identify how the development of such a market could be fostered (through the targeted use of public funds or regulatory changes for example).
This research has identified that there is potentially high demand for sanitation microfinance in India, due to a combination of factors. Coverage rates remain low (particularly in rural areas) and national policies emphasise household investments (combined with subsidies in some cases, such as in the Total Sanitation Campaign which provide ex-post subsidies once the household has made the investment, hence the need for pre-financing). By 2010, only 31% of India’s population had access to improved sanitation facilities (WHO/UNICEF, 2010).
This blog is a response to the video posted by Matt Damon, co-founder of water.org, where he announces a toilet strike to raise awareness for the water crisis.
I enjoyed your video on water.org about going on a toilet strike. It is great that you are so passionate about realizing access to safe water, sanitation and hygiene for all. I personally also like it that you bring in some humor into our sometimes very boring sector.
In your video you mention that it costs US$25 to provide a person with sanitation for life. This is not true. Over the past four years IRC’s WASHCost project in Burkina Faso, Ghana, Andhra Pradesh (India) and Mozambique has collected, validated and analysed cost and service level information for water, sanitation and hygiene. Based on this research we know that for US$ 25 you can construct a traditional pit latrine with an impermeable slab which provides a basic service. In order to sustain the service provided by that traditional pit latrine it costs between US$ 1.5 and US$ 4 per person per year – so to provide sanitation for life means finding that US$ 1.5-4 every year …. for life. If you do not know how, or by whom, these recurrent costs will be financed, it is very likely that the latrine you are constructing today will break down or not used within two to three years, wasting your investment.