Developing Markets for Sanitation: A Blog Series

In response to the growing prevalence of market-based approaches to sanitation, the Bill & Melinda Gates Foundation convened a meeting between three leading sanitation development practitioners—iDE, PSI, and Water for People—to discuss their experiences in building supply capacity and demand for sanitation products and services, and possibly develop a joint understanding of the process. The result of those discussions are presented in this four-part blog series.

PART 3 of 4: Achieving Sustainability and Measuring Results

Read Part 1 of 4: The Basics: Terminology, Organization, and Process
Read Part 2 of 4: Selling Sanitation: Who Does What?

Achieving Sustainability: Two Approaches

There are many facets to the concept of “sustainability.” To focus the discussion, the group examined sustainability by asking, “How would you explain market sustainability to your grandmother?” To which, the group provided the following possible answers:

• “The children’s children of the people who buy a latrine today should be able to buy a latrine for their new homes using the supply chains originally initiated by the intervention.”
• “Something that lasts a long time.” In the case of market development, the “something” refers to the ability to access desirable, affordable sanitation solutions, be it a pit latrine or a more sophisticated product. “A long time” implies that these solutions are available in the market for multiple generations after the initial market development efforts.

Photo by Water For People

A slightly more sophisticated way to describe sustainability (perhaps to a very savvy grandma or grandpa) is to say that market development approaches should leave the market in the hands of direct value chain players whose returns on investments are sufficient for them to continue delivering products and services that are affordable and desirable. These definitions indicate that market development efforts aim to develop supply chains that last, and to influence users’ perceptions and behaviors so that they reflect a priority for sanitation products and services.

Interesting follow-on questions included:

• How do we arrive at 100% coverage?
• How do we arrive at sustainable markets?
• Is there a trade-off between coverage and intensity of intervention?

iDE’s approach is to use the market to drive towards 100% coverage as much as it is cost-effective and efficient to use the market mechanism. iDE acknowledges that overall market activity will drop if and when iDE pulls out. This is especially true for latrine demand given iDE’s support of direct sales for demand creation. However, iDE believes in improving sanitation coverage as quickly and effectively as possible to meet SDG targets. Thus, iDE intends to play an active role to support market growth efforts up until the point where further efforts lead to substantially diminishing returns. For example, iDE may find that active intervention in the market leads to rapid rates of market penetration up until a certain point, say 80%, after which there are diminishing returns. At that point, iDE would likely recommend a more traditional approach combined with smart subsidies in order to reach the laggards (who may also be the poorest within the community).

Photo by iDE / 2016

iDE also anticipates that at about 100% coverage of improved, hygienic latrines, the overall market activity would drop anyway, since demand will drop given high coverage. However, iDE believes that there will still remain a sufficient level of supply to provide for replacement latrines. Of course, it is still yet to be seen whether businesses will continue to invest in the R&D for more sophisticated products and services.

Water for People and PSI believe in a lighter touch approach from the intervening organization so as to reduce the feeling of dependency, the external aid requirement, and to build a robust supply chain with healthy competition and active investment in new products and services. Actively driving towards 100% coverage is not the immediate project target of such an approach, but rather growing latrine ownership within the population to a point where social norms begin to dictate defecation practice and latrine ownership, and thereby latrine use is the only acceptable form of social behavior.  That is, Water for People and PSI’s theories of change hinge on the assumption that there is a “tipping point” that the interfacing agency can help reach.         

Both approaches have their merits and disadvantages, and it is too early to decide which one is more successful and cost-effective. However, it is an important question and one that informs intervention design. Like a lot of questions in development, the answer usually starts with “It depends…” In this case, it depends on the theory of change and the primary objective, whether it is to rapidly increase latrine coverage (and use), or develop independent, sustainable latrine supply chains. All three organizations agree that the two objectives are mutually reinforcing at this point, which is why each has chosen to adopt a variation of a market-based approach to improve sanitation.

Photo by Kiran Thejaswi / PSI

Measuring Market Development

For market-based approaches, sales are the topline metric.  As such, sales should be a process that is integrated into all levels of the program.  It is not just an afterthought. Below is a list of other indicators that are useful for monitoring market development.

• Sales: Markets are spaces where people buy and sell things. As such, the topline metric that market development programs use to measure impact is sales. However, it can be difficult to gain accurate sales information, particularly where a “light touch” approach has been used to encourage a business to enter the market.  “Why should I tell you, you have not given me anything?” was the response of one sanitation business owner in Malawi.  

• Use: From a public health perspective, consistent latrine use is key to gaining improvements in health.  There are challenges in accurately and non-invasively monitoring use, but these measurements are key to ensuring that latrine purchases lead to latrine use.

• Health outcomes: Significant research has been conducted to show that consistent use of hygienic latrines leads to health improvement. Further monitoring and research would be useful in establishing the coverage and use thresholds that optimize health gains. For example, how do health outcomes change when moving from 60% to 80% coverage? From 80% to 100%?

• Access to supply chains: One question the group had is whether we should develop metrics around access in order to measure ease at which households can buy a latrine. For example, could customers get to a supplier 10km away? What is the time to delivery for the customer? What is a reasonable time for loan dispersal to for a customer? It would also be important to understand how these factors impact consumer experience and decision-making as they move from contemplation to purchase to post-purchase.

• Viability of businesses: It can get overly complicated to measure the viability of businesses. Businesses themselves will make an informed decision about the viability of the sanitation business by choosing to engage in the market. As such, the focus of business metrics should be on whether or not they are satisfactorily serving customers (quality product, acceptable delivery time, etc.).

• Crowding-in: As the overall objective is to develop entire markets and not just specific businesses for sanitation, it is valuable to understand the patterns of growth or change in the general sanitation market. For example, are other businesses who were not directly engaged by the intervening organization entering the market as a result of observing the success of the engaged businesses? Is the market growing without any additional form of external support?

• Appropriate evaluation methodologies: While the Randomized Control Trial (RCT) is the gold standard for rigor, not every question requires that level of rigor to produce valuable insight/evidence. Evidence-based decision-making often does not require RCT-level rigor in order to make the right decision. Developing markets—inherently complicated and dynamic ecosystems—often requires constant iteration and close monitoring.

Read Part 1 of 4: The Basics: Terminology, Organization, and Process
Read Part 2 of 4: Selling Sanitation: Who Does What?
Check back for Part 4 of 4 on May 25, 2017.

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iDE creates income and livelihood opportunities for poor rural households. In the WASH sector, we design and build markets for products that have the potential to transform people’s health by preventing diarrheal-related disease. Yi Wei ywei@ideglobal.org

Population Services International (PSI) is a global nonprofit organization focused on the encouragement of healthy behavior and affordability of health products. PSI uses a market development approach to deliver sanitation and fecal sludge management products and services in a sustainable manner.  Genevieve Kelly gkelly@psi.org

Water For People exists to promote the development of high-quality drinking water and sanitation services, accessible to all, and sustained by strong communities, businesses, and governments. Steve Sugden ssugden@waterforpeople.org