Financing Household Sanitation for the Poor

Financing Household Sanitation for the Poor
Eduardo A. Perez
Senior Sanitation Specialist, WSP

Background
What: Field studies to review six programs with a history of success (Bangladesh, Ecuador, Maharashtra (India), Mozambique, Sénégal, Vietnam)
Big Questions: Who pays how much, in what way, and for what?

What was assessed?
Whether the financial approach leveraged increased sanitation access?
Whether the costs were affordable by the beneficiaries and the government?
Were public funds used in a way that maximized impact?
Whether subsidies were effectively targeting the poor?
Whether the financial strategy was sustainable?
Could the financial approach be scale up?

Six Different Approaches
Bangladesh – Community Led Total Sanitation (CLTS): reward for outcome and upfront subsidy for poorest
India (Maharashtra) CLTS: sanitation-linked reward for outcome, and hardware subsidy for poorest after success
Vietnam (3 cities sanitation project): Subsidized revolving loan fund for hardware in urban areas
Mozambique: Hardware subsidy to providers in urban areas
Senegal: Hardware subsidy to users in urban areas
Ecuador: Hardware subsidy to users in rural areas

A Distribution of Financial Approaches
100%
E
Ecuador
Mozambique
S
Mo
Sénégal
Hardware subsidies as % of public investment
V
Vietnam
Ma
Maharashtra
100%
Bangladesh
B
50%
Public investment as % of total investment in HH sanitation

Breakdown of Costs

Types of Subsidy
% of sanitation costs

Two Measures of Public Finance Impact

Accessibility for the Poor & Equity

Key Findings
Households (including the poor) are key investors in on-site sanitation; careful program design to create demand maximizes investments.
Public funding and related financial strategy have a profound influence on equity, scale, sustainability, levels of service and costs.
Software activities can have a substantial cost which public funding should take into account.

Key Findings, continued
Credit schemes in urban areas can be effective at facilitating and leveraging substantial HH investment.
Effectively targeted hardware subsidies reached the poor and helped real affordability constraints – but hardware subsidies that comprised a large percentage of total latrine costs reached less HHs and were less sustainable.
The provision of output-based or outcome-based subsidies to sanitation entrepreneurs can stimulate demand.

Key Findings, continued
Most relevant question: Not “subsidy” or “no subsidy” but rather, “How best can we invest public funds to maximize impact?”

Operational Implications
Early planning and careful design of finance promote project realism and sustainability . . . don’t “leave for later.”
M&E critical to know performance and adapt financial approaches . . . know your numbers!
Programs must define the right level and form of public and HH investment . . . not just “who pays what?” but “how and when?”
Use this report as a starting point!

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Financing Household Sanitation for the Poor

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