Category Archives: Progress on Sanitation

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

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 2 of 4: Selling Sanitation: Who Does What?

We All Have a Part to Play

The group recognized that they are not doing their work in a vacuum, and that there are clear roles and responsibilities for every actor in the sanitation market:

Government

  • Regulation with enforcement
  • Consumer protection
  • Quality assurance standards
  • Financing large-scale public services
  • Creating enabling environments that encourage private sector participation and consumer uptake
  • Research and development
  • Underwriting risks and guarantees (delivering proof of concept for private sector to participate in market)

Private Sector

  • Delivering competitive offerings for customers
  • Lobbying government for improved market and regulatory conditions

Civil Society

  • Filling in gaps at a catalyzing level, rooted in the framework of the market
  • Market maker and loss leader
  • Bringing the market to a point where private sector actors are incentivized to join the market
  • Building the capacity of private sector actors, especially labor capacity and ability to access finance across the value chain
  • Supporting government, ensuring a high level of collaboration between the various intervening organizations and developing a unified mutually supportive approach
  • Resolve information asymmetry between buyer and seller
  • Monitoring and evaluation
PSI_San_Sales

Photo by Kiran Thejaswi / PSI

Note that many of the responsibilities listed above are related to facilitating an experience for the all-important fourth actor: the customer. The group recognized the importance of engaging communities from the beginning, as doing so ensures a higher likelihood that the proposed solution actually meets the needs of the users and a higher likelihood of buy-in and adoption. However, the market development approach does not advocate for the government and international development community to irresponsibly devolve responsibility to the community. Households should not be expected to design and construct their sanitation solutions under the guise of participatory design. In the developed world, we are not expected to design and construct our own toilets, so why should we expect this of communities who have even fewer advantages in education, income, and general access to resources? As part of a market-based approach, we believe in the importance of basing solutions on the needs and desires of the users. This process is based on gaining detailed input from users on their attitudes, beliefs, needs and desires; this information is used to guide experts in the design, engineering, and marketing processes. This approach manifests itself in desirable and affordable products that people are willing and able to purchase.

W4P_San_Sales

Photo by Water For People

Working with the Private Sector

Private sector actors are as much part of the market ecosystem as the end user of the product/service. Their needs and desires have to be taken into consideration. Most obviously, market actors strive to maximize profit. However, many other considerations have to be taken into account:

  • Access to capital
  • Regulatory conditions
  • Convenience and ease of managing product/service line
  • Ease of creating and size of existing demand
  • Cash flow
  • Opportunity costs of other business opportunities
  • Personal/family preferences
  • The low social status that working in sanitation (particularly waste management) may imbue
  • Education level needed
  • Competitive landscape
iDE_San_Sales2.jpg

Photo by Rachel Rose / iDE / 2016

In order to attract the private sector, development practitioners need to first get a deep understanding of all of the above considerations (and potentially others) that would drive a business to reject or pursue a business opportunity.

In addition to attracting businesses to join the sanitation sector, one must also consider how to keep them involved in the sector. Even when profits are good, the low status image of working in sanitation means that these businesses are always looking for alternatives. Working in sanitation often becomes a stepping-stone to working in something more lucrative or socially respected. Maintaining a sufficient level of private sector suppliers can be a challenge.

It is important to understand the main drivers for businesses so that can they can effectively and sustainably serve customers in the sanitation market. Businesses will try to minimize cost and maximize profit. Costs could be non-financial, such as effort required. Identifying what businesses are most motivated by will help design effective ways to engage them and keep them interested in selling sanitation products/solutions.

One common aspect of engaging with businesses across market-based interventions is intervening organizations’ dependence on businesses for record keeping of sales figures, which is often needed for donor reporting. SMEs are generally reluctant to put in the effort to complete record keeping as they do not see the immediate value in record keeping and may fear visits from tax officials. In order to incentivize businesses to complete record keeping, PSI has tied record keeping with access to capital, demonstrating that complete financial records will help businesses to access a loan. iDE has also tied continued support for demand creation to completion of sales records.

Check back for part 3 of 4 on May 18, 2017.


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

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

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 1 of 4: The Basics: Terminology, Organization, and Process

Terms and Conditions

Over the last decade, a number of different terms emerged that described essentially the same type of process: using business markets to increase sanitation sales and coverage. The three most commonly used included:

  • Sanitation as a Business (SAAB). Unfortunately, SAAB implies only the micro level of enterprise support and development, and this is too limiting. Markets consists of more than just enterprises, and market development efforts need to include the role of consumers, government, and civil society.
  •  Sanitation Marketing (SanMark). SanMark can lead to misunderstandings as people often think of marketing only as promotions, instead of the wider definition of the 4 Ps of the marketing mix: product, price, place, and promotion.
  •  Developing Markets for Sanitation. The group felt that the phrase “developing markets for sanitation” captured a more holistic systems approach where customers purchase desirable products and services that suppliers can sustainably offer for a profit.

Photo by Imran Nizami / iDE

The group decided to recommend Developing Markets for Sanitation to reinforce the concept that sanitation problems must be dealt with at the ecosystem level and not just at the enterprise level. Market development involves understanding why market failures exist in the first place. For example, why are there no existing actors, be it private or public, providing these necessary goods and services? It is important to understand how the constituent parts of an ecosystem interact with each other and be aware of the dynamic relationships that exist. It is also important that we do not implement overly simplistic interventions that do not address the root of the problem, or ignore the dynamic nature of markets.

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Learning from Sustained Success: How Community-Driven Initiatives to Improve Urban Sanitation Can Meet the Challenges

Learning from Sustained Success: How Community-Driven Initiatives to Improve Urban Sanitation Can Meet the Challenges. World Development, World Development Vol. 87, pp. 307–317, 201.

Past research by one of the authors of this paper has identified four key institutional challenges that community-driven initiatives to improve sanitation in deprived urban settlements face: the collective action challenge of improving community sanitation;
the coproduction challenge of working with formal service providers to dispose of the sanitary waste safely; the affordability challenge of reconciling the affordable with what is acceptable to both users and local authorities; and the tenure challenge of preventing housing insecurity from undermining residents’ willingness to commit to sanitary improvement.

In this article we examine how two well-documented, relatively successful and longstanding initiatives, the Orangi Pilot Project and an Alliance of Indian partners, met these challenges. They were met through social innovation, but also through the choice and development of sanitation technologies (simplified sewers for OPP and community toilet blocks for the Indian Alliance) that provided traction for the social innovations.

We also explore more recent efforts by civil society partnerships in four African cities, demonstrating some of the difficulties they have faced in trying to overcome these challenges. No equivalent models have emerged, though there has been considerable progress against particular challenges in particular places.

These findings confirm the importance of the challenges, and indicate that these are not just challenges for social organization, but also for technology design and choice. For example, the problem with household pit latrines is not that they cannot physically be improved to sufficiently, but that they are not well-suited to the social, economic and political challenges of sanitary improvement at scale.

The findings also indicate that a low economic status and a tendency to treat sanitation as a private good not suitable for public support also makes the sanitation challenges difficult to overcome.

Local governance and sanitation: Eight lessons from Uganda

The magnitude of the sanitation crisis means that sanitation and hygiene solutions must be delivered sustainably, and on a large scale. This requires the close involvement of government at all levels. A new case study outlines eight lessons from the Global Sanitation Fund-supported Uganda Sanitation Fund in coordinating, planning, and implementing Community-Led Total Sanitation (CLTS) at scale through a decentralized government system.

Download the case study or read the feature article on wsscc.org.

image1_uganda_case_st

Local government health workers and latrine owners proudly display an improved latrine in Lira district, Uganda.©WSSCC/USF

 

 

Do it differently: Toilets are not enough to achieve sanitation, India must reinvent the waste business

Do it differently: Toilets are not enough to achieve sanitation, India must reinvent the waste business. by Sunita Narain, Times of India, February 11, 2017.

The most important programme of this government is Clean India – not just of corruption, but of the muck and filth that is taking over our rivers, our air and our cities.

But equally (and more) important is the agreement that this ‘cleaning’ up is not possible unless we can provide every Indian with toilets that work and toilets that are connected to systems that will safely dispose human excreta, to prevent further pollution of our environment and create another source of bad health.

This agenda is therefore, not just about building toilets but about building sanitation systems that are affordable by all. Only when growth is affordable and inclusive can it be sustainable.

But this is where the opportunity also lies in doing things differently. Till now, the paradigm for urban sanitation has been costly. It has been based on the idea that building toilets is enough to clean the country.

But the excreta sums of different cities, or what we call the city’s “shit-flow” diagram, shows that the situation is grim. Today’s cities do not treat or safely dispose the bulk of human excreta generated.

Read the complete article.