This document summarizes findings from studies of six sanitation financing programs in different countries. The key findings are: 1) Households, including the poor, invest significantly in sanitation but careful program design is needed to create demand and maximize investments. 2) The public funding model and financial strategy have a large influence on equity, scale, sustainability, levels of service, and costs. 3) Both hardware subsidies and credit schemes can effectively increase access when targeted and designed properly, but hardware subsidies are less sustainable when they comprise a large portion of total latrine costs.

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

2. 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?

4. Whether the costs were affordable by the beneficiaries and the government?

5. Were public funds used in a way that maximized impact?

6. Whether subsidies were effectively targeting the poor?

7. Whether the financial strategy was sustainable?

9. 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

10. Breakdown of Costs

11. Types of Subsidy % of sanitation costs

12. Two Measures of Public Finance Impact

13. Accessibility for the Poor & Equity

14. 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.

15. 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.

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

17. 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!