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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

In Nepal, women are still banished to ‘menstrual huts’ during their periods. It’s time to end this dangerous tradition

In Nepal, women are still banished to ‘menstrual huts’ during their periods. It’s time to end this dangerous tradition. Independent, May 24, 2017.

After seeing the practice of seclusion and the plight of these women, I believe that taboos around periods are not a cultural issue, they are a human rights issue 

nepal

An example of a menstrual hut in remote areas of Nepal (Anjana Saud/Tatapani)

As a journalist and development professional living and working in Katmandu, I have had the chance to see menstruating women’s situation across Nepal from close quarters.

I found that the practice of isolating women during their period exists across the country in differing forms. The situation of women living at the rural areas is terrible.

In some places, women cannot be in their own homes during their period; in others women can be in the house, but not in the kitchen and worship room.

They are also forbidden from touching other people (especially male members of the family or neighbours) or cattle and from growing fruit and vegetables.

Read the complete article.

IRC – Menstrual Hygiene Day – everybody’s business

Menstrual Hygiene Day – everybody’s business. IRC, May 18, 2017.

This is 2017 and still menstrual health is a taboo topic around the globe.

We need to be more open about it, because it is a normal biological process.

Taboos on menstruation have a severe impact on the lives of women and girls. It can lead to unhygienic situations, missing out on school and work.

Progress is slow, but things are starting to change. Raising awareness during Menstrual Hygiene Day is hugely important.

Gaining some knowledge via the Menstrual Hygiene Day Quiz is a small but relevant contribution.

Take the Quiz and share it with friends and colleagues.

FRESH webinar: Menstrual Hygiene Management in Emergencies

Menstrual Hygiene Management in Emergencies – Global guidelines and lessons learned from the Philippines

Presenters: Marni Sommer, Mailman School of Public Health, Columbia University; Jon Michael Villasenor, UNICEF Philippines
Time: 17 May 2017

Marni Sommer discussed the soon to be published Menstrual Hygiene Management (MHM) in Emergencies Toolkit, developed by Columbia University and the International Rescue Committee in partnership with the global humanitarian response community.

Jon Villasenor’s presentation was on the MHM response to the typhoon Haiyan in the Philippines in 2014, where he will be discussing the actions taken in the immediate aftermath and over the longer recovery period.

 

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

WASH data dashboards from WHO

In the just published report below, WHO has WASH data tables that can be downloaded for use in reports and presentations: whs2017

World Health Statistics 2017: Monitoring health for the SDGs

SDG Target 6.1 | Drinking water

SDG Target 6.2 | Sanitation and hygiene

SDG Target 3.9 | Mortality from environmental pollution

Join now – SuSanA online discussion “Applications of Sanitation Systems and Technologies in MENA”

We are excited to announce the first thematic discussion of the SuSanA Regional Chapter MENA on the topic of

 

“Applications of Sanitation Systems and Technologies in MENA”

The MENA region, in its diversity of countries and contexts, presents a great variety of sanitation challenges: increasing water consumption, sanitation lagging behind, water scarcity, weak institutional coordination, rapid population growth, rural areas left out, armed conflicts, refugee crisis…

Despite massive investments made in conventional sewered systems, large portions of the region’s population will remain unconnected for the next decades. Many utilities are struggling to operate and maintain properly the existing wastewater treatment infrastructure, and the responsibility for non-sewered areas, relying on onsite systems, is often not clearly or not at all allocated. For the sanitation coverage to become more inclusive, sustainable and reach the low- and middle-income areas, especially the rural areas, new alternatives must be considered.

By establishing a Regional Chapter MENA, SuSanA opens its knowledge pool and makes content relevant and adapted to the MENA context accessible for the Arabic and French speaking communities, for both professionals and students looking to advance sustainable sanitation in the Region.

In this thematic discussion – the first discussion to be held under the umbrella of the SuSanA Regional Chapter MENA –  we will share our knowledge for tackling sanitation challenges in MENA, and discussing the best practices and applications of sanitation systems and technologies in the region.

 

Running for four weeks from Tuesday May 16 to Tuesday June 13 on the SuSanA online discussion forum, the discussion will look at the following areas:

Topic 1: Sanitation Systems Challenges in the MENA region

To join please visit: (https://goo.gl/V4fDRe)

Topic 2: How would we tackle Sanitation Challenges in MENA?

To join please visit: (https://goo.gl/yfMcED)

Topic 3: What are the key resources in Arabic in the field of Sanitation?

To join please visit: (https://goo.gl/278o7S)

Topic 4: What are the best sanitation practices and local solutions in MENA?

To join please visit: (https://goo.gl/J5G8EA)

During the discussion, regular summaries of forum entries will be posted to keep you updated on our conversation.

Coordination on behalf of the SuSanA Regional Chapter MENA for this thematic discussion is carried out by Kareem Hassan  (Benaa Foundation). For any questions, please post on the forum or contact us directly at info@susana.org.

Kindly visit http://forum.susana.org/thematic-discussion-applications-of-sanitation-systems-and-technologies-in-the-mena-region to join our discussion. Everybody can view the discussion, but in order to make a post you have to be a registered SuSanA member. Register here (for free): http://www.susana.org/register

We look forward to your contributions and an enriching discussion on applications of sanitation systems and technologies in MENA