Scaling Market-Based Sanitation: An Overview

Transcription

1 Scaling Market-Based Sanitation: An Overview Results of a WASHPaLS Desk Review July 12, 2018 Presenters Jesse Shapiro (USAID) Rishi Agarwal, Morris Israel, Jeff Albert (WASHPaLS)

2 What is WASHPaLS? Water, Sanitation, & Hygiene Partnerships for Learning and Sustainability. 5-year ( ) research and technical assistance project Goal: Enhance global learning and adoption of the evidence-based programmatic foundations needed to achieve the SDGs and strengthen USAID s WASH programming at the country level 2

3 The WASHPaLS Research Design Summary Achieve universal sanitation and hygiene When and how are sanitation approaches effective and sustainable? What does it cost? CLTS Desk Review This MBS Desk Review Ongoing field research with partners Ongoing field research with partners How to repeat success at scale? Play Spaces Desk Review Pending field research with partners Goal Key Questions Outputs MBS: Market-based Sanitation; CLTS: Community Led Total Sanitation 3

4 Poll #1: Attendee connections to MBS 4

5 Operational definitions Market-based Sanitation: The development of a sanitation market in which the user makes a full or partial monetary contribution (with savings and/or cash equivalents) toward the purchase, construction, upgrade, and/or maintenance of a toilet from the private sector. Toilet: A sanitation fixture used for capture and storage, or disposal of human urine and feces. The term toilet refers to the basic substructure (underground) components and the interface (e.g., slab, pan, water closet). A toilet may include the superstructure (walls, roof, and a door). 5

6 To understand the challenges facing Market-based Sanitation (MBS) interventions we reviewed available literature and 13 interventions Literature Interventions Listed 1,429 WASH documents 1,253 WASH grants Filtered 595 MBS-related 107 Prima-facie MBS interventions Reviewed 595 MBS-related 9 cases 23 Supplementary sources 4 caselets Note: Caselets are more narrowly-focused on one of the three evidence gaps identified for the desk review viz., appropriate product and business model choices; Viability of local entrepreneurs; unlocking public and private finance 6

7 1,253 Entries reviewed for WASHPaLS 1, Reviewed Interventions True market-based sanitation interventions are far and few inbetween Sanitationrelated Interventions Reviewed interventions were either related to another sector (such as water or hygiene) or if related to sanitation, were research, product development, or fecal sludge management related Single-country Interventions 11 multi-country interventions across total of 43 countries Interventions that did not scale to provide 10,000 toilets Scaled to >10,000 Toilets MBS Interventions at Scale Interventions were not truly marketbased (government or community based organizations played the role of product supplier) Note: In the desk review we defined scale as more than 10,000 toilets sold as one criterion to identify interventions for case study with the premise that such interventions were successful in fostering market activity i.e., participation by more customers and entrepreneurs 7

8 However, if funders stay invested, interventions can scale up Cumulative Number of Toilets Sold ( 000) Inter-annual trend of toilet sales for select MBS interventions % of toilets were sold in the second half of the interventions SMSU Cambodia Hands-Off SanMark Cambodia PHA Benin 3Si India (Bihar) 0 Y1 Y2 Y3 Y4 Year Y5 Y6 Y7 Y8 8

9 Amongst MBS interventions at scale, there is a variance in cost to scale Number of toilets sold ( 000) RWSSP Nepal CSM Peru 0 0 Number of toilets sold vs. programmatic cost per toilet SMSU Cambodia TSSM Indonesia 3Si India (Bihar) Hands-Off SanMark Cambodia CHOBA Vietnam CHOBA Cambodia 50 RWSSP Bangladesh 100 Programmatic cost per toilet 1 (USD) RBF Ghana 150 TSSM Tanzania Note: Programmatic cost per toilet as reported or estimated from program budget literature and toilets purchased; excludes the household s expenditure on purchasing toilets or funds from other sources (e.g., government subsidy programs); the types of cost included in programmatic costs may differ by program due to variations in reporting methods 9 200

10 The sanitation market can be depicted through this framework, which allows for diagnosis and problem solving for scale SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 10 10

11 MBS interventions face barriers to scale across the sanitation market system Enterprise SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 11 Lack of critical mass of customers to serve profitably Lack of product systems that are acceptable to customers and suppliers Lack of cost-effective mechanisms to activate demand Lack of efficient mechanisms to fulfill orders 11

12 Target market selection is important to ensure entrepreneurs can profitably serve customers and sustain their participation in the market Market segmentation for Mi Baño in Peru Market Solution 60% of total Households Served (5 million Households) Target market (0.5 million HHs) Potential / limited (1.8 million HHs) Innovation in Product and Delivery Model Innovation in Product and Delivery Model + Credit 40% of total households Subsidized segment (1 million HHs) Innovation in Product and Delivery Model + Subsidy 12

13 Appropriate product systems, which are acceptable to both customers and entrepreneurs, are an outcome of iterative product development processes Customers preferred functions and aesthetics Design and prototypes Contextually appropriate technologies Multiple iterations Final product and delivery model(s) Local entrepreneurs assets and capabilities Field tests 13

14 A range of delivery models exist and should be used based on the context to simplify customers buying experience No Aggregation Full Aggregation Mason/DIY Network One-Stop Shop (OSS) Turnkey Solution Provider (TSP) Focal Point Concrete products Mason Brick supplier manufacturer Customer DIY: Do-it-yourself Pan supplier Super-structure materials Cement, sand, gravel etc. 14

15 Demand activation is the missing middle that can enhance households willingness to purchase toilets Customer state of mind Open defecation is acceptable in my community and there is no benefit to using a toilet I see some value in getting a toilet and am thinking about how to build one I ve decided to buy a toilet and have/ am ordering one I have a toilet in my home Demand generation Demand activation Demand fulfillment Raise awareness of the problem Promote a solution(s) benefiting entrepreneurs CATS / CLTS CATS: Community Approaches to Total Sanitation; CLTS: Community Led Total Sanitation MBS 15

16 MBS interventions face barriers to scale across the sanitation market system Customer SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 16 Lack of awareness Lower priority accorded to sanitation Lack of savings/seasonal incomes limiting ability to make upfront payments Inadequate income to afford available products 16

17 Low liquidity can limit the customer s ability to make an upfront payment to purchase a toilet, which can be overcome with credit Growth in sanitation loans in Bihar, India (No. of loans issued) ~33,000 ~21,000 ~2,600 End 2015 End 2016 End Q

18 Customer participation can be limited by low affordability, which can be overcome in part with market-compatible subsidies Sanitation coverage among ID-poor 1 and 2 villages in Cambodia 44% 53% 32% 23% Baseline Coverage (2012) CHOBA only (2016) MBS only (2016) MBS + CHOBA (2016) Note: ID Poor refers to the poverty classification system by the Government of Cambodia; CHOBA: Community Hygiene Output-Based Aid Source: East Meets West Foundation, and WSP Study to Measure Impact of Output-Based Aid and Sanitation Marketing on Sanitation Adoption in Cambodia. 18

19 MBS interventions face barriers to scale across the sanitation market system Entrepreneur SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 19 Low profitability at unit/ business level and/ or absolute amount High opportunity cost in selling toilets Limited availability of entrepreneurs, especially in rural contexts Lack of affordable capital to invest in sanitation enterprise 19

20 Interventions can engage entrepreneurs with complementary or related businesses to bridge the gap in availability of entrepreneurs in sanitation markets Skilled labor Masons Pit diggers Raw material / component suppliers Hardware retailers Cement retailers Sand / gravel suppliers Concrete products suppliers Raw material / component manufacturers / importers Cement Sanitary hardware Door fabricators PVC pipes Roofing materials Proximity to customer in the sanitation context Examples PHA Benin Hands off SanMark Cambodia SMSU Cambodia 3Si Bihar STS Nigeria Mi Baño Peru 20

21 Sanitation enterprises may lack adequate access to capital, which if addressed could help enterprises grow Enterprises assessment of inadequate access to finance as an obstacle to overall operations in Bangladesh, Indonesia, Peru, and Tanzania 1 Distribution of SMSU Cambodia entrepreneurs availing a loan by performance 2 Did not take a loan 27% 24% 18% 16% 16% 221 Took a loan 6% 13% 25% 29% 28% 108 Quintile Lowest 4th 3rd 2nd Quintiles based on average monthly sales performance Top Source:1. Sy, Jemima, and Robert Warner Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor. Directions in Development. World Bank. 2. Produced from Wei, Yi, Tamara Baker, Michael Roberts, Stu Taylor, and Veasna Toe Sanitation Marketing Scale-Up (SMSU 1.0) - End of Project Report. ide. 21

22 Entrepreneurs can improve the viability of operating sanitation enterprises by expanding their target market or seeking crossselling opportunities Expand geographic coverage Cross-sell products Lower price Image credits: ide Cambodia website (left); FSG (middle) 22

23 MBS interventions face barriers to scale across the sanitation market system Business environment Lack of public goods (e.g. customer insights, product designs) Poorly penetrated associated supply chains (e.g., cement) Lack of credit for customers or entrepreneurs Inhibitory market rules (e.g., policy) SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 23 23

24 Intervening in business environment can accelerate interactions between customers and entrepreneurs, or reduce their barriers to participation Associated supply chains Raw materials for toilets (e.g., cement, gravel) Capital Availability of credit providers / penetration of FS providers Market rules Legislation, policies, and regulations Public goods Open-source product designs, demand generation 24

25 MBS interventions face significant barriers to scale across the sanitation market system Broader Context Unsupportive social norms Long history of subsidies reducing demand Poor transport infrastructure roads etc. Challenging geographical context population dispersion, terrain, etc. SANITATION MARKET BROADER CONTEXT CUSTOMER Affordability Target Market Delivery Model ENTERPRISE Product System Sales & Marketing ENTREPRENEUR Availability BUSINESS ENVIRONMENT 25 25

26 MBS alone might not be adequate in all markets because of broader contextual factors that are beyond the control of an intervention Social norms OD acceptable OD unacceptable Terrain, soil conditions Population density and dispersion Challenging Low density, dispersed Favorable High density, concentrated Transport infrastructure Weak Strong Favorable conditions for MBS 26

27 MBS interventions face barriers to scale across the sanitation market system 27

28 Poll #2: What do you believe is the most important barrier to scaling marketbased sanitation? 28

29 The context continually evolves and while interventions typically lead to outputs, desired outcomes depend on the way the intervention is designed, implemented, and evaluated Prior state Intervention Potential Outcomes BROADER CONTEXT Macroeconomic Factors Infrastructure Social Norms Environmental Factors SANITATION MARKET BUSINESS ENVIRONMENT Relationships Outputs Systemic change Power Dynamics Norms & Behaviors No Systemic change 29

30 To overcome the barriers, funders, implementers, and governments should intervene at different points in the system Funders Recognize that MBS alone cannot work in all contexts Understand local context; be a part of the system Ascertain latent demand Consider social norms Take a system-wide view and solve for barriers, not only within the sanitation market but also in the business environment Invest in long term change to maximize potential of the scale up phase Adopt MLE systems that encourage learning and measure systems change Implementers Develop a flexible, learning approach to implementation Consider the broader sanitation market and intervene to solve barriers with public goods and associated value chains Identify and support entrepreneurs from across the system Design interventions for sustainability in order to ensure that the market functions, as donors exit Actively built in self- redundancy Iterate between elements of enterprise and types of entrepreneurs available in order to reach a locally relevant MBS Government Invest in demand generation to change prevailing social norms Improve the availability of public goods such as product design, market insights, etc. Shape market rules to promote private sector participation Use subsidies to improve rather than distort market activity Address fiscal barriers to improve sanitation market attractiveness for entrepreneurs MLE: Monitoring, Learning, and Evaluation 30

31 FSG Q & A Learn more in the desk review available at Globalwaters.org ( Contacts: Jesse Shapiro, Senior WASH Advisor, USAID jeshapiro@usaid.gov Rishi Agarwal, Managing Director, FSG rishi.agarwal@fsg.org Morris Israel, Project Director, WASHPaLS morris.israel@washpals.org Jeff Albert, Deputy Project Director, WASHPaLS jeff.albert@washpals.org