Category Archives: Economic Benefits

Why WASH organizations need to hire and grow business-savvy leaders

Ghana_Sama Sama Launch_IMG_3045 (1)

Valerie Labi, iDE WASH Director in Ghana, speaks at the launch of Sama Sama, a sanitation social enterprise in northern Ghana.

By Yi Wei, iDE Global WASH Director

Every organization knows the pain and disruption caused by bad hiring decisions, or waiting for an employee to develop the necessary skills to excel in a position he or she is not a fit for. I work for iDE, a nonprofit organization that has been implementing market-based development programs for over 30 years. When it comes to successfully managing a sanitation marketing program, hiring business-savvy program leadership is critical.

If we truly want to drive progress towards the U.N.’s goal to “ensure access to clean water and sanitation for all,” I believe these four things should be considered by any organization working in WASH:

  1. Invest in recruiting talent with business acumen.
  2. Identify and develop business leadership skills.
  3. Incentivize potential leaders competitively, taking into account the opportunity cost candidates face forgoing potentially lucrative private sector positions, and not just the prevailing wages of the nonprofit labor market.
  4. Incubate and foster an organizational focus on training and knowledge sharing.

Dive deeper into the four strategies for building a business-savvy team. 

WASH & Finance – Water Currents, June 27, 2017

WASH & Finance – Water Currents, June 27, 2017.

This issue focuses on finance in the WASH sector and contains recent reports and publications from SHARE, UN Water, The World Bank, and others. Included are studies on microfinance, a podcast and reports on financing the WASH sector, and case studies on financing options from Tanzania and other relevant countries.

We would like to thank USAID-funded WASH-FIN Project staff for contributing to this issue. watercurrents

WASH Sector Financing 
Financing WASH: How to Increase Funds for the Sector While Reducing Inequalities. IRC; Water.org, April 2017. This position paper for the Sanitation and Water for All Finance Ministers Meeting in 2017 addresses three key issues that are receiving limited attention in the WASH sector discussions on finance: 1) the lack of finance for strengthening the enabling environment; 2) the untapped use of microfinance; and 3) blended finance and inequities in the allocation of finance in the sector.

UN-Water Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS) 2017 Report: Financing Universal Water, Sanitation and Hygiene under the Sustainable Development Goals. WHO; UN Water, June 2017. This report presents an analysis of the most reliable and up-to-date data from 75 countries on issues related to WASH financing and other elements of the enabling environment, including plans, targets, data availability, and measures to reach vulnerable populations.

Read the complete issue.

#Sanitation events at 2017 Stockholm #WWWeek

Sanitation-at-WWWeek-2017

From 27 August – 1 September, 2017 there will be nearly 50 sanitation events to choose from at World Water Week in Stockholm.

You can learn about everything from Sanitary Safety Plans to the Second Sanitary Revolution, from sanitation in small towns to wastewater management for indigenous peoples, and from inclusive sanitation to sludge based solid fuel .

View the full list at:
programme.worldwaterweek.org/events/all/all/all/sanitation/www2017

How can a program design rural sanitation financial support to reach the most disadvantaged? (Webinar)

How can a program design rural sanitation financial support to reach the most disadvantaged? (Webinar)

Hosted by the Cambodian Rural Sanitation and Hygiene Sub-Group (RuSH), this interactive webinar will discuss how different programs have tried to design rural sanitation subsidies to reach the poorest.

Examples will be shared from India, Bangladesh, Vietnam and Cambodia. Rapid presentations will be followed by discussion questions and polls for participants to share their rural sanitation knowledge with others.

The World Bank, USAID, UNICEF and SuSanA are hosting this webinar to present and discuss an emerging rural sanitation challenge. The main audience for the webinar is government staff and others working in countries with high rates of open defecation and unhygienic sanitation who want to learn more about how to reach the Sustainable Development Goals.

June 29th 2017 –  8pm Manila | 3pm Nairobi | 1pm Lagos & London | 8am NYC | 7am Lima

Register for this free webinar

 

Microfinance for Sanitation Policy Brief

Microfinance for Sanitation Policy Brief, May 2017. SHARE.

This policy brief highlights the Sanitation and Hygiene Applied Research for Equity (SHARE) Consortium’s contribution to the knowledge base on microfinance for sanitation.

The brief defines sanitation microfinance and summarises research conducted in India and Tanzania. It then discusses the research gaps that still exist and provides recommendations for improving policies and programmes on microfinance for sanitation globally.

 

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 4 of 4: For the Future: Making Markets Work for Everybody

Read Part 1 of 4: The Basics: Terminology, Organization, and Process
Read Part 2 of 4: Selling Sanitation: Who Does What?
Read Part 3 of 4: Achieving Sustainability and Measuring Results

When Do Markets Work?

Markets are not the silver bullet solution to all aspects of the sanitation crisis, and there is a limit to what markets can and cannot do. A market-based approach will only work under promising market conditions, which are determined by:

  • The market opportunity and consumer demand.
  • The level of consumer dissatisfaction with existing practices, designs, and/or pricing.
  • Sufficient market size for business owners to consider investing.
  • Sufficient market density to make it cost effective to promote and deliver the products / services.
  • Existing physical infrastructure for production and transportation.
  • Familiarity with market-based transactions within the community.
  • If the society is organized more around bartering or gifting, then a system based on buying and selling may pose challenges for adoption.
  • The priority given to spending on latrines within the household and whether there is sufficient disposable income. Households who are focused on covering basic needs, such as shelter, school fees, and food will likely not make latrine purchases a high priority.
  • The regulatory environment, including the government’s ability to enforce existing rules and improve regulations based on changing market conditions.

Even under ideal market conditions, market actors are driven to maximize profit, which provides little incentive to target the poorest of the poor. With this in mind, the group (and the sector as a whole) discussed two solutions—sanitation financing and smart subsidies—for ensuring that sanitation markets expand their reach to whole populations.

Photo by iDE / 2016

Finance Options

Research and experience (for example, the iDE-commissioned Willingness-To-Pay study)⁠ show that access to financing can significantly increase demand for sanitation at market price. Bottom of the pyramid customers may not be able to pay the full retail price of a latrine in one large single transaction, but they may be willing and able to pay in installments by taking out a loan to finance the purchase of a latrine. Financing can be an accelerator of demand. Repayment rates in iDE’s experience have been 100%, indicating the low-risk nature of sanitation loans in the Cambodian context.

PSI and Water for People are also experimenting with consumer financing for sanitation. The main results show that there is strong demand for consumer financing, but the sector is still working to develop a model that allows for financial sustainability and operational compatibility for the financial institution partners.

PSI has also demonstrated that there is demand for supply side financing, which can serve as a “carrot” of sorts to motivate businesses to cooperate with the NGO on matters such as record keeping.

Photo by Water For People

Smart Subsidies

A market-based approach does not mean the total absence of subsidies. In fact, everything we do as market-based NGOs is a form of subsidy, including R&D, capacity building, and demand creation activities. But practitioners should think about how subsidies can be used in a more strategic and targeted manner. In doing so, it is useful to think about subsidies in two categories. The first comprises subsidies for “behind the scenes” market development activities, while the second category is more closely aligned with traditional “direct” subsidies to consumers and businesses.

The group agreed that subsidies should be focused primarily on the first category, “behind the scenes,” which often include functions such as those listed above: R&D, capacity building, and demand creation. Product design is often a critical component of developing a healthy market, especially in cases where no affordable, desirable products or services exist. From the group members’ experiences, demand creation is also an area that often needs to be subsidized, particularly in the initial stages when trying to introduce a new form of service that users are not strongly “pulling” for on their own. In no instances have we seen businesses investing sufficient resources in actively generating demand to rapidly increase uptake. In fact, it is a common business practice in these markets to passively wait for customers to show up and sell only when a product is requested. As such, practitioners should be prepared to invest heavily in demand generation activities as a means of building the market. With that in mind, any demand creation program should be aware of customer acquisition costs and make an intentional decision about who should bear that cost and for what period: the NGO or the business.

Group members also agreed in their skepticism of the second category of subsidies, which comprises traditional, direct subsidies to consumers and businesses. This type of subsidy has the potential to create demand, crowd in other investments, and provide a one-time incentive for adopting a particular behavior (buying a toilet, in this case). However, direct subsidies to the customer-business transaction also have the potential to distort incentives on both the consumer and supply chain side, and to erode market health over the long term. Given the potential for these subsidies to undercut market development, the group agreed that they should be limited to those customers who genuinely cannot afford to pay at market price. In these cases, value-added services like loan financing can play a crucial role. The group members encourage other organizations to consider developing “smart” subsidies that precisely target poor customers through existing channels and market mechanisms, minimizing distortions in the rest of the market.

Photo by Kiran Thejaswi / PSI

Main Ideas for Building Markets

  • A market-based approach implies scale – we don’t do things one village at a time; you can’t tell a business where to sell and where not to sell. They will sell wherever they identify a profitable business opportunity, and this allows the impact to be district and country-wide.
  • Developing sanitation markets is not an add-on accessory effort to your existing sanitation approach. You need competent staff and you need to invest in quality. You need to have a team dedicated to sanitation, not someone who’s doing sanitation AND water supply AND business development, etc.
  • The market-based approach is also not a silver bullet. It does not work in EVERY circumstance, just like any other approach.
  • Market facilitation does not mean a lack of subsidies or incentives. Everything we do is subsidy. It’s just a matter of where you inject the subsidy. Use subsidy in a way that minimizes market distortion while maximizing impact.
  • You need to be nimble, iterative, and responsive to what you’re learning real-time from the market.
  • In order to do market development effectively, your organizational culture needs to be business-minded. It needs to be a part of your DNA. A handful of trainings and a set of guidelines will not be sufficient to respond to real-time problems. Product innovation alone is not enough. You need to get the product right, but the innovation really happens in the business model.

Read Part 1 of 4: The Basics: Terminology, Organization, and Process
Read Part 2 of 4: Selling Sanitation: Who Does What?
Read Part 3 of 4: Achieving Sustainability and Measuring Results


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

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.
W4P_San_Install

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).

iDE_San_Install

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.

PSI_San_Install

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.


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