FT: Sustainable Development: sanitation needs more private investment
By Sarah Murray, Financial Times reporter
Some 5,000 people living on low-incomes in poor housing in the Ghanaian city of Kumasi have been given better access to toilet facilities thanks to a project that uses an innovative business model. More than 1,000 toilets have been provided to residents under the scheme, designed by Ideo.org, a non-profit spin-off from Ideo, an innovation and design consultancy. Some 80 per cent of the population of Kumasi lacks domestic sanitation.
To prepare for the project, Ideo interviewed families about the kinds of sanitation they used. It found people were either defecating in the open or using poorly maintained public toilets. The only other option for them was to invest in a pit latrine, which are expensive to install and need to be emptied periodically by vacuum trucks, further adding to the cost.
“It was pretty unaffordable for middle and lower-class families in Kumasi,” says Jocelyn Wyatt, co-lead and executive director at Ideo.org. “So we thought that there could be a service model instead.” The end result was a rental toilet, also designed by Ideo.org, with a waste removal service, which households pay a monthly fee to use.
The UN estimates that more than 2.5bn people in the world lack basic sanitation services. These are badly needed. Among other things, lack of sanitation facilities increases the incidence of diarrhoea, a leading cause of death in children under five. The challenge is coming up with ways to fund the infrastructure needed to provide sanitation services.
Creating markets and educating consumers of the health benefits of sanitation is part of the process, says Sean Moore, portfolio manager at Acumen, a New York-based social impact investment fund. “The challenge has been understanding how people value clean water,” he says. “How do you create a willingness for people to spend their little discretionary money on this versus other things?”
This is a question being considered by the Water Supply and Sanitation Collaborative Council, part of the UN. Working with governments, non-governmental organisations and others, the WSSCC is developing education and training programmes, as well as awareness-raising campaigns that, for example, encourage people to adopt good hygiene practices such as hand washing.
“The approach is to bring about a change in thinking on the part of large numbers of people on the connection between sanitation and health, education and human dignity,” says Chris Williams, WSSCC’s executive director.
Generating demand is one thing, but creating incentives for investment in the infrastructure needed to supply sanitation services is another, and many see a bigger role for business and the financial sector. Globally, just 8 per cent of financing for water and sanitation infrastructure comes from the private sector, according to a report by the International Finance Corporation (IFC), part of the World Bank Group.
“One of the main challenges is the fact that in much of the developing world, responsibility for managing water and sanitation rests with government,” says Will Davies, Africa lead for the IFC’s 2030 Water Resources Group. “Utilities are often not run on financially sustainable lines and so find it difficult to access private financing.”
Moreover, traditional public sector or aid-based approaches to infrastructure have not always been successful, says Acumen’s Mr Moore and he cites the construction of water boreholes and wells as an example. “Often, the appropriate maintenance services weren’t in place and there wasn’t ownership of them by the community,” he says. He sees promise in local responses and companies that tap into microfinance and pay-as-you-go models or find innovative ways of generating revenue from water and sanitation facilities.
In India, for example, Guardian, a microfinance institution, makes small loans that allow families to buy water and sanitation products and services such as toilets, connections to the municipal water supply, rainwater harvesting equipment and household water purifiers.
Meanwhile, in Kenya, a Massachusetts Institute of Technology spin-off called Sanergy franchises its locally built Fresh Life-branded toilets to local micro-entrepreneurs operating in slums, and every day it takes the waste to be converted into organic fertiliser and sold to farmers. Sanergy’s model provides work and improves sanitation. And by selling waste to farmers, it generates the revenue needed to become financially sustainable.
When it comes to investments in large-scale sanitation infrastructure, the IFC is also working to help businesses develop skills and access financing through its Sanitation and Safe Water For All advisory service.
Mr Davies believes that widening access to private finance is essential to meet the global need for water and sanitation facilities. “The capacity of the public sector to finance the infrastructure is never going to be enough,” he says.
Source: Financial Times – see the article on the FT website