Innovative Financing in Sanitation for Poor People

Dec. 1, 2009
"The Water Supply & Sanitation Collaborative Council's main foray and contribution in innovative sanitation financing came in 2008 with the creation of Global Sanitation Fund."

By David Trouba

It is estimated that 2.5 billion people lack a decent, safe toilet. The Millennium Development Goal target of halving the number of people without access to sanitation by 2015 is the furthest of the various global development targets set in 2000 from being achieved.

Around the world, 10 million children die every year. Poor sanitation and hygiene are the chief or underlying causes in over half of these deaths. Unfortunately, donors, governments, organizations and other financiers have until recently virtually orphaned sanitation by placing it as an add-on to water programs or ignoring it. We hear or see these days that celebrities champion water causes left and right, but who sticks out their neck and their voice to champion toilets and excrement?

Not many, which is why the United Nations sponsored "International Year of Sanitation" in 2008 worked to help raise awareness of the importance of sanitation and the need for new resources – of people, ideas and money – for the subject. Since 2008, many good things have been happening in the area of sanitation financing. Indeed, there are more people involved – though not quite the celebrities just yet. New ideas are being developed and more money for the sector is likely just around the corner. This is important, because good sanitation has a proven, beneficial effect on people's health, environment, dignity and economic well being.

The Water Supply & Sanitation Collaborative Council's (WSSCC) main foray and contribution in innovative sanitation financing came in 2008 with the creation of Global Sanitation Fund (GSF). The purpose of the Global Sanitation Fund is to help large numbers of poor people to attain safe and sustainable sanitation services and adopt good hygiene practices. It is a single pooled fund open to contributions from any source including governments, foundations and the private sector. The money is allocated to Executing Agencies in carefully selected countries, which then grant funds to Sub-Grantees who implement the sanitation and hygiene work programs agreed for each country. The whole system is being closely monitored by WSSCC, as well as in country and global audit mechanisms.

People-centered and nationally owned, it is a demand-driven mechanism to bring new funds into the sector, and it is the first fund of its kind. Currently there is about $60 million in the fund. The GSF is just getting underway, with procurements over the last few months taking place for Executing Agencies and Country Programme Monitors in Madagascar, Senegal, Uganda and Nepal, with other countries set to follow.

While WSSCC is not a donor or funding agency per se, through the Global Sanitation Fund WSSCC will promote innovation in sanitation work and provide some resources to help the innovation that is showcased and the knowledge that is generated to be shared and disseminated widely. It is, we hope, an example of just one innovative type of financing mechanism in sanitation. The future should see more.

This is because today we are seeing a shifting paradigm around sanitation in general, and this affects how financing is done. Until recently, sanitation has been stuck in a box as an old-fashioned, uncreative, public sector activity. Most governments and agencies have seen sanitation as something done to people – and usually tacked on to water programs as a minor aspect. Governmental sanitation policies – if they existed at all – were based on subsidizing the cost of latrines or toilets, i.e. building toilets for people whether they wanted them or not.

Across the developing world about half of those toilets built by governments are used for some other purpose -- as store rooms for food, goats, bicycles and other valued possessions. The engineers built the toilets from their technical point of view – making toilets, digging sewers, and getting excrement away and out of sight to be dealt with scientifically. In poor countries, with neither the money nor the water for centralized sewerage systems, the engineers didn't know how to serve the mass of the people.

But now sanitation is moving out of its box into a new paradigm, namely that of a major, market-driven everyday human economic activity. Governments are changing policies to emphasize hygiene promotion, demand creation and sanitation marketing. Most external development agencies have already changed their policies in this way. In the future the aid money and government budgets will be spent on persuading people to raise sanitation up their own priority lists, and to improve their own sanitation service.

Then, once demand is generated, the local entrepreneurs and service providers will be ready to meet this increased demand. Think of this: just as almost anybody in the world can now get a cell phone and good customer service, so everybody should be able to get a toilet with full customer service – supplying the components, constructing it, maintaining it and collecting the contents to use for their economic value.

With the demand for toilets created, a tremendous opportunity will exist for a market to be served. In this scenario, the market will meet the people's demands by providing for toilets at the household level, pit emptying, public toilet management, fertilizer sales, methane generation, and a range of other profitable business lines related to sanitation. The work of meeting this demand will be done mostly by small local entrepreneurs and not by big commercial companies. Those entrepreneurs will need help accessing the market and they will need loan or equity finance. So work is underway by a wide range of actors, from sanitation professionals to bankers, to help find and supply the finance that is needed to create the market.

Just how big is the sanitation market? Most experts say the market is relatively substantive, requiring a minimum of US $8 billion per year, for a period of 10 years to meet the MDG target for sanitation. This translates to an estimated investment of US$85 billion with an estimated US$650 billion worth of social externalities, presenting scalable opportunities for banks, the social sector and other investors. In other words, nearly 8 dollars in direct and indirect economic benefits for every dollar invested, for people, local entrepreneurs, and the people supporting them.

About the Author:David Trouba is Programme Officer Communications, for the Water Supply & Sanitation Collaborative Council (WSSCC). Trouba joined WSSCC in April 2008. Prior to joining the Council, he worked for 10 years at the Stockholm International Water Institute (SIWI), serving most recently as its Communications Director. He was responsible for the overall communications, marketing and media strategies for SIWI and its various sub-programs, including the World Water Week in Stockholm.

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