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Private Sector Sanitation Delivery in Vietnam

Harnessing Market Powerfor Rural Sanitation Making Sanitation Attractive and Accessible for the Rural PoorIn two Vietnam provinces, an international NGO developed a range of low-cost sanitation options andstimulated a network of local masons to market and deliver them to the rural population. As a result, thesanitation access rate increased markedly in the area, even among the poor. This Field Note outlines lessonslearned in the process of creating the demand for sanitation and meeting this demand locally.

February 2005

Field Note

The Water and Sanitation Program is aninternational partnership for improving waterand sanitation sector policies, practices, andcapacities to serve poor people

1

Subsidy-based, supply-driven intervensions have been painfully slow inbringing sustainable sanitation in developing countries, especially among therural poor.

1The Support to Small-Scale Private Sector Development and Marketing for Sanitation in Rural Areas project, funded by Danish International Development Assistance (DANIDA).2”Poor” currently means households that are able to demonstrate a monthly income of less than VND100,000 (US$6) per head per month. See also footnotes 5 and 6.

Scaling Up Sanitation:A Global Stalemate?

In 2002, the endorsers of the WaterSupply and Sanitation Declaration(WSSD) pledged to halve the proportionof people without access to sanitation bythe year 2015. However, existinginterventions have been painfully slow inbringing sustainable sanitation todeveloping countries, especially amongthe rural poor.

Most developing countries continueto rely on external aid for achievingnational targets for sanitation. For variousreasons, they also continue to give greaterpriority to increasing people’s access towater supply rather than to sanitation andimproved hygiene. Standardizedgovernment or donor-sponsored modelsare the most prevalent models forsanitation interventions. Such models,which are infrastructure-focused anddependent on subsidies for latrineconstruction, have a poor record in

effectiveness of use, efficiency ofinvestments, sustainability of services, andscaling up access.

Alternative models are now emerging,which challenge the efficacy of thesesubsidy-based and construction-drivenapproaches to sanitation and hygieneimprovement. These alternatives offer amarket-based approach, which can bemore sustainable, cost-effective, and easierto scale up. This Field Note looks at therecent application of such an approachin Vietnam.

Rural Poor AsCustomers, NotBeneficiaries

Emerging evidence from Vietnam suggeststhat when using a market-based approach,it is possible to not only accelerate accessto sanitation for the unserved in rural areasand enhance the sustainability of thesanitation services delivered, but alsodeliver services more efficiently than whenusing a non-market approach.

From September 2003 to December 2004,the international NGO InternationalDevelopment Enterprises (IDE) implementeda rural marketing project1 targeting about54,000 households in the provinces ofThanh Hoa and Quang Nam on the centralcoast. According to the government’scriteria, nearly one-fifth of the householdsin the two provinces are “poor”2 and thusreceive social assistance. This povertysituation poses a significant challenge todelivering sanitation services in the area.

Executive Summary

In 2003, the international NGO International Development Enterprises

(IDE) launched a project to stimulate the acquisition and use of hygienic

sanitation in villages in two provinces in Vietnam. IDE developed a range

of options that were affordable and appealing to potential customers. IDE

then developed, through capacity building, business development

support, and credentialing, a local network of masons to deliver these

options. To better understand the drivers of sanitation demand, IDE and

the masons assessed the consumers’ willingness to pay for and

perceived benefits of sanitation and then used the assessment results to

promote the benefits and availability of the sanitation options through

appropriate media channels and tailored messages. Within a year of the

project, there was a 100 percent increase in sanitation access compared

to the pre-project access rate. Unlike traditional sanitation projects, no

capital cost subsidies were employed to stimulate demand. Households

of all income levels accessed sanitation, which was greatly facilitated by

the masons offering flexible household financing terms. The project

highlights the importance of never underestimating a population’s

willingness to pay for sanitation, provided that quality products and

services are offered and are effectively communicated.

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Harnessing Market Power for Rural Sanitation

The project examined two researchquestions: (a) whether rural families willinvest in latrines when a range of low-costmodels are available from local privatesector suppliers; and b) to what extenttargeted promotional campaigns caninfluence consumers’ decisions to investand change sanitation practices (SeeBox 1 for the project timeline).

Unlike the conventional approach normallyapplied in Vietnam, the piloted approachwas fully market-driven, offering customersno capital cost subsidies and usingexternal resources for catalyzing marketimprovements for sanitation and promotionof improved hygiene behaviors. Briefly, itfocused on stimulating weak ruralsanitation markets and helping thesemarkets become viable (Box 2).

The Potential ofa Dormant RuralMarket

In spite of an enormous potential to deliversustained service improvements, theexisting rural market for sanitation servicesin 2003 in the two provinces remainedundeveloped. IDE conducted itspreparation phase from January to August2003. The situational survey conducted atthe beginning of this phase showed thatonly 16 percent of the rural households inthe project area owned hygienic latrines,demonstrating a potential market forsanitation. However, the demand forsanitation was undeveloped and highlyseasonal, varying with agricultural incomeflows. Communication and transportation

facilities were poor, leading to increasedtransaction costs, and small-scale sanitationoperators lacked access to support servicesto run their businesses profitably.

IDE’s initial market assessment showeddemand constraints—the lack of reliableproduct information to influence spendingdecisions as well as the lack of desirableproduct options and suppliers. Less than10 percent of the respondents in thebaseline survey were aware that sanitationfacilities could cost less than VND1 million(approximately US$65). Even if they knewthe price, less than 10 percent werewilling to spend that amount to acquire

latrines. Seventy-seven (77) percent ofthose without a latrine said that they had“other spending priorities,” such as atelevision or a karaoke set. Yet, by the endof 2004, after 1 year of projectimplementation, more than 37 percent ofthe households had each invested up toVND1 million in building or upgrading theirhousehold latrines.

Supply-side constraints were morenumerous. The community had fewcompetent and reliable masons to buildsafe and hygienic latrines. IDE’s initialassessment of private sector suppliers(including 541 masons) revealed that most

Box 1: TIMELINE OF PROJECT ACTIVITIES

(1) Perform situational assessments

(2) Perform market assessments

(4) Build localsupply network

for low-costsanitation

(5) Develop an advertisingand promotion campaign

(3) Formulate marketable solutions

(6) Link supplyand demand

(7)Implementpromotionactivities

(8)Broadcast

communicationcampaign

Projectpreparation:

8 months(January 2003 to

August 2003)

Projectimplementation:

16 months(September 2003

to December 2004)

Provincial health records showed that the rate of construction of sanitationfacilities was relatively stagnant in both the experimental and the controlgroup communes during the 4 years preceding the IDE project.

village masons could not accuratelyestimate the material costs and the timeneeded to build a double-vault or a semi-septic tank latrine, the most popularchoices in the local communities. Villagersused community health workers andmembers of mass organizations such asthe Vietnam Women’s Union as the primarysources of information regarding latrinedesigns and hygiene improvement becausethey saw village masons as lackingcredibility in this area.

Few incentives existed for village masons toenter the sanitation business in the projectareas. Sanitation was a profitable seasonalopportunity but not a regular source ofincome for them. Soon after the projectstarted, it became clear that small-scaleprivate sector operators were running theirsanitation businesses with very thin profitmargins. The lack of profits and incentivescreated a “subsistence environment” for

small-scale enterprises in rural sanitation,characterized on their part by short-termvision and decision-making and areluctance to take risks. As a result, theemerging small-scale private sector did notoffer product experimentation, advertisingof product information, or specializedtechnical assistance of any kind. Masons,therefore, seemed unable to capitalize onor stimulate market demand. There werealso no other private or public sectoragencies that were willing to undertakethese efforts on behalf of the local networkof sanitation service providers.

Awakening theMarket: The Results

To examine the project’s research questions,IDE selected experimental and controlcommunities at the outset. Using the results

of the baseline survey, IDE matched bothtypes of communities by key socio-economic characteristics and environmentalfeatures (Table 1) and selected communitiessufficiently isolated from one other so thatmarketing campaigns could not contaminatethe control group. In addition, neither thegovernment nor any other source in theexperimental and control group areasprovided capital cost subsidies forhousehold sanitation facilities during theproject timeframe.

Increased Access to ImprovedSanitation

Provincial health records showed that therate of construction of sanitation facilitieswas relatively stagnant in both theexperimental and the control groupcommunes during the 4 years precedingthe IDE project. Between 2000 and 2003,a total number of 5,985 new latrines werebuilt in the experimental group, with anaverage number of 1,496 latrines built eachyear. At this rate of annual increase, it wouldhave taken more than 30 years to achievetotal sanitation in the 30 communes.

Project implementation began inSeptember 2003. In the next 14 months,7,715 new latrines were built, entirely fromhousehold investments. Of these, 6,251were built during 2004, representing morethan a fourfold increase over what was theannual average until 2003 (Figure 1).

A comparison of the experimental andcontrol groups shows that householdaccess to hygienic latrines grew in bothgroups, but the increase was moredramatic in the experimental group. Using

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Box 2: DIFFERENCES BETWEEN CONVENTIONAL AND

MARKET-BASED APPROACHES

Heavy subsidies for capital costs

Standardization of models

Decision making by external agencies

Focus on infrastucture targets

Focus on centralized service provision

Conventional Approaches Market-based Approaches

Subsidies for market development

Full capital cost recovery from users

A range of affordable options

Users decide what and how to buy

Focus on behavioral targets

Focus on diversified local serviceprovision

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the December 2002 access rate as thebaseline, by December 2004, theexperimental group communities achievedmore than a 100 percent increase inhousehold access, whereas the controlgroup achieved only a 41 percent increase(Figure 2).

No Subsidies Needed forCapital Costs

Perhaps the most important finding wasthat the acceleration of demand among theexperimental group was achieved withoutthe use of capital cost subsidies. The

average per capita annual income in theproject area (US$126, December 2002)was appreciably lower than the nationalaverage (Vietnam’s Gross National Incomeper capita was US$480 in 2003, using theAtlas method). Yet, with locally availablemarket innovations that suited theirlifestyles, and most importantly, demandcreated through effective communication,rural households in the experimental groupdid not need subsidies to access improvedsanitation. During project implementation,rural households bought 7,715 improvedlatrines from local small-scale serviceproviders at full market cost.

Reaching the Rural Poor

Global experience shows that the affluenttend to be the first investors in sanitationimprovements and the poor often graduallyfollow their lead. Yet, this project found thateven within the first year of intervention,just over half of the “poor” population didinvest in sanitation. While the poorhouseholds constituted 19.1 percent of thetotal population in the project area, theyrepresented 10.7 percent of all the latrinebuyers during IDE’s project implementationperiod. They even spent a marginallygreater proportion of their annual incomeon sanitation than did their more affluentneighbors (Table 2).

For project monitoring purposes, IDEclassified the poor according to the Vietnamgovernment’s definition of householdseligible to receive social assistance fromthe government5, and identified as such bytheir communities. To be eligible to receivethis assistance, a household had to show amonthly income per head of less thanVND100,0006 (about US$6).

All latrine buyers in the project areainvested an average of US$66 (about


Table 1: Key socio-economic and sanitation-related indicators in the project areas

Communities Number ofHouseholds

19.1

19.7

Poor Households as% of Total Population

53,886

5.440

Experimental Group3

Control Group4

Annual Incomeper Capita (US$)

16.0

18.3

% of Total HouseholdsOwning Safe Laterine

125.7

141.6

Source: Population Monitoring Records, District People’s Committee and District Health Centre, December 2004 (Ministry of Health of Vietnam). “Poor” as defined by the Government, see footnotes 5 and 6.

2,000 4,000 6,000 8,000

Figure 1: Latrines constructed in the project area

Yearly Average 2000-2003

Total 2000-2003*

2004

1,496

5,985

6,251

Number of Latrines Built

Source: Population Monitoring Records, District Health Centre, December 2004 (Ministry of Health of Vietnam).

*IDE’s project implementation phase began in September 2003.

3 Thirty (30) communes distributed evenly among six districts (five communes each) in Quang Nam and Thanh Hoa.4 Three communes in three districts in Quang Nam province.5 “Decision of the Prime Minister approving the National Strategy for Hunger Eradication and Poverty Reduction for the period 2001-2005”(Decision number 143/2001/QD -TTg - 27th September 2001).6 “Decision of the Minister of Labor, Invalids and Social Affairs (MOLISA) on adjusting the criteria for identifying poor households for the period2001-2005” (Decision number 1143/2000/QD-LDTBXH).

11 percent of their average annualhousehold income) per household inimproving their sanitation facilities. Amongthose, the poor households invested anaverage of US$11 less. Their investment ofUS$55 represented 15 percent of theirannual household income (Table 2). Whilethis may suggest that the poor chosecheaper technologies, in reality the factorsthat influenced choice of latrine types werethe family’s need to use night soil

(composted feces) as fertilizer, the type ofsoil, and the availability of a nearby reliablewater source.

Making Sanitation Affordable

Reportedly, latrine costs ranged fromUS$32 to US$97. Loans were availablefrom the Vietnam Bank for the Poorthrough the Farmers’ Union and theVietnam Women’s Union. Yet, none of

the households in the project areaapplied for loans from these officialsources since these were for a minimumamount of approximately US$200 andentailed much paperwork. Ruralhouseholds often regarded these formalcredit sources as better suited for income-generating investments such as a fishpondor livestock.

Approximately two thirds of the poorlatrine buyers used their own savings fromagricultural earnings. The rest borrowedfrom affluent relatives and friends dwellingin the cities. The poor buyers alsoroutinely deferred payments to the villagemason, paying 50 to 70 percent of themason’s dues over a period of about 6months. In addition, many of thempurchased or progressively upgraded theirlatrines with phased investments. Theproject allowed for phased upgrading oflatrine facilities when cash was availablefrom seasonal agricultural earnings.Women formed voluntary groups toencourage members to maintain theirpayments and assist one another inmobilizing funds from informal sourceswhen necessary.

For project monitoring purposes, IDE classified the poor according to theVietnam government’s definition of households eligible to receive socialassistance from the government, and identified as such by their communities.

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Table 2: Investment in sanitation in relation to annual household spending

Population Category Per Capita AnnualIncome (US$)

592

362

Household AnnualIncome (US$)

126

77

All Latrine Buyers

Poor Latrine Buyers

Average HouseholdInvestment in

Sanitation (US$)

11.1

15.2

Investment as % ofAnnual Household

Spending

66

55


10 20 30 40

Figure 2: Household access to hygienic latrines

2002

2003

2004

% of Households with Access to Sanitation


1618.3

21.121.4

32.725.8

Experimental Group Control Group

It is important to mention that thelatrine costs stated above reflect thecosts of demonstration modelsconstructed during the formulationphase of the project. In reality, thecosts of building a latrine weresignificantly reduced, as householdscontributed their own labor to theconstruction of the facility or managedto recycle construction materialsfrom other sources. The villagemasons worked with prospectivebuyers to explore all such avenuesto reduce costs.

A Cost-effective Approach

A characteristic of the market-based modelis its ability to leverage private sectorresources and stimulate local economicactivity. Within the first year of theintervention, the market value of capitalcost investments from rural households(US$508,353) already well exceeded thetotal funds utilized to catalyze the localsanitation market (US$336,625),representing a household investment-

leveraging ratio of 1:1.5 (Figure 3). Forevery external dollar (US) spent forbusiness development support andmarketing, US$1.50 of householdinvestment was generated, of which,US$0.36 went to the local network ofmasons and the remaining US$1.14 torural construction material retailers. If onlythe marketing and promotion costs(US$142,243) are considered, thehousehold investment leveraging ratio wasas high as 3.6. Marketing and promotioncosts are more indicative of the costs ofreplicating or scaling up the program,once initial business development hasbeen completed.

At the end of the first year ofintervention, the external funds used tolaunch the local industry and begin theprivate investment process stood at 40percent of the investment generated.This can be considered as a 40 percentexternal subsidy that will fall furtherwith emerging economies of scale asmore buyers (and also sellers) enter themarket. Such a subsidy covers the one-

time business development expensesusing professional marketing expertise,which is often costly but essentialfor sustainable market development.However, once the market is set up,such a subsidy is no longer neededsince only the promotional costscontinue, and even local serviceproviders can absorb these costs asthe market grows.

Use of external subsidies forbusiness development and promotionis often more sustainable thansubsidizing sanitation hardware,because once demand is stimulatedand the market is established,suppliers take over promotion even ifexternal funds are gone. This also meansthat the consumer does not have toexperience a sudden price shock fromunsubsidized hardware, which has led tothe collapse of many past sanitationprograms. Prior to the project, IDEencountered this and other negative effectsof subsidizing sanitation hardware inVietnam (Box 3).

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100 200 300 400 500 600

Figure 3: Project investment in relation to the household investment leveraged

Project Funds

Market Value of Total Latrines Built

US$ ‘000


142 194 336

122 386 508

Marketing/Promotion Program Support Labor Invested Capital Invested

Ratio 1: 1.5

Ratio 1: 3.6

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Use of external subsidies for business development and promotion is oftenmore sustainable than subsidizing sanitation hardware, because once demandis stimulated and the market is established, suppliers take over promotion evenif external funds are gone.

The Process andLessons Learned

The project chose to develop the sanitationmarket in the project areas through threemain sets of activities:1. Promoting the availability of a range of

desirable and affordable sanitation improvements of dependable quality

2. Stimulating the demand for sanitation improvements and adoption of related hygiene practices

3. Facilitating linkages between demand and supply.

The following section further outlinesthe actions that IDE took related toeach of the three sets of activities(Figure 4).

1. Promoting the availability of a rangeof desirable and affordable sanitationimprovements of dependable quality

• Identifying and standardizing arange of options: Standard options forrural latrines existed in Vietnam beforeIDE’s project. However, the price oflatrines varied significantly according tothe local availability of constructionmaterials and building services and thesuitability of specific technologies. Theinitial assessments also found that themajority of the prospective customersbelieved the costs of latrines to bemuch higher than what the local marketactually offered.

In response, IDE developed sanitationoptions that could offer competitive

benefits at affordable costs throughstandardizing the choice, affordability,and quality of sanitation options. Itidentified a range of options that wereconducive to local livelihoods, appealingto potential customers, and that couldbe manufactured locally. IDE made theseoptions affordable through materialsubstitution, design adjustments, andpromoting the upgradeability of latrinemodels (allowing consumers to improvetheir facilities incrementally, inaccordance with what and when theycould afford). Finally, IDE systematicallytransferred these solutions to the localnetwork of small-scale private providersthrough workshops, training, and printed material.

IDE constructed several latrines as on-site demonstration models in the projectareas. These on-site trials enabled IDE togather customer feedback and assesssocial acceptability. These on-sitefacilities provided tangible evidence tothe public of achievable cost reductions,which helped dispel myths about highcosts. There was a risk of overly positivecustomer feedback from householdswho may have participated in the on-sitetrials to gain a free latrine facility.However, by involving local communityleaders and local institutions in assessingthe sustainability of the latrines, theproject was able to minimize thispotential bias.

Pour-flush, semi-septic tank, and septictank were the three different latrinetechnologies finally chosen for marketingwith variations in design. The optionsranged in price from US$32 to US$97.

BOX 3: NEGATIVE EFFECTS OF SUBSIDIZING SANITATION HARDWARE OBSERVED IN VIETNAM

• Hardware subsidies created severe distortions in vulnerable markets. Theykilled potential demand by eliminating user choice and promoting unwillingnessto pay for sanitation because they created the perception that sanitationshould be fully or partially free of payment.

• Agencies supplying subsidized technologies often had procurement rulesrequiring multiple quotations, which excluded the possibility of highly localizedsuppliers from participating.

• When the subsidized technologies were not procured from local suppliers theywere inevitably more expensive, and the exclusion of local suppliers preventedthe growth of local service provision capacity.

• Hardware subsidies often stigmatized recipients and took away the status-enhancing benefits of sanitation. Recipients were marked in the community asthe poorest members in need of charity.

• Hardware subsidies promoted misallocation of scarce resources. Subsidiescovering a fixed percentage of capital costs created incentives to purchase themost expensive option to maximize the subsidy.

Table 3 presents the cost breakdownsand how the consumers responded tothe final menu of sanitation options.

• Increasing the availability ofcompetent service providers: Underthe conventional approach employedbefore the project, beneficiaries lost theright to choose what to buy, when tobuy, and how to buy, as an externallyspecified supplier gave subsidizedmaterials to them. Under this approach,once construction was over, furtherservice and spare parts were unavailable.IDE found that the rural businesses weretrying to respond to this situation oncesanitation projects had ended by servingnew customers eager to acquiresanitation facilities and providing ownersof existing latrines with services such asupgrading or repairs. These businesses,however, were not commercially viablebeyond a very small scale and notcompetitive enough to offer products ofdependable quality.

The project facilitated supportingmechanisms for start up, expansion, andoperation of businesses for local serviceproviders. Among the supportingmechanisms, stimulating consumerdemand for sanitation options wascrucial. Without external support fromIDE, private operators would never havebeen able to develop a marketingcampaign, which involved significantresearch undertakings, communicationprofessionals, and multi-media strategies.

IDE helped small-scale private operatorsto understand the market size and adjusttheir enterprise accordingly. This

motivated new operators to enter themarket and increased the confidence ofexisting ones to tap the market morefully. This was done both by initiatinglinks between consumers and serviceproviders and between service providersand manufacturers. Through the project,masons gained social recognition ascontributors to a better environment forthe community. This prompted them tonot only enter and stay in the sanitationbusiness but also work for low profits inthe remote areas where low populationdensity meant low demand. Anothermotivating factor for masons to enter thesanitation business proved to be theadditional construction businessassociated with sanitation. For example,the hygiene promotion campaignprompted investments in otherconstruction projects such as pens fordomestic animals.

• Building the capacity of serviceproviders: The project offered training tomasons to increase the numbers oftrained masons in a given community.IDE assessed masons’ existing skills todesign affordable, safe sanitationoptions, and their interest in receivingfurther training. Almost four-fifths of thescreened participants chose to pursueIDE training for sanitation masonry andpromotion. IDE ensured that at leastthree masons per village from differentteams (latrine-building teams usuallyconsisted of two masons) participated inthe training.

IDE trained village masons in technicaland business skills, including assessingconsumer preferences and promotion,which enhanced the capacity of privateoperators to cater to and further developtheir own customer bases.

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Walls can wait -- poor buyers appreciate being abble to upgrade in phases

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IDE learned that capacity buildingneeded to emphasize learning by doing.At the beginning of the project,instruction was provided throughflipcharts of sanitation models,engineering construction plans, andlatrine mock-ups. During post-trainingmonitoring of the masons’ work, IDErealized that a significant portion of thelatrines performed poorly or wereoverpriced. IDE immediately took

corrective action to retrain masons with afocus on building practical skills insanitation masonry.

• Endorsing service providers: Providingtrained village masons with credentialsand an endorsement from relevant healthinstitutions at the local level was alsocritical. Before the project started,prospective customers had expressedconcerns regarding the technical

capabilities of village masons ascompetent providers of hygienicsanitation facilities. Exploratory researchrevealed that villagers saw thecommunity health station as the mostcredible authority in matters of healthand hygiene. By getting the healthauthorities to formally recognize villagemasons who had received trainingthrough the project, potential customers’concerns were significantly allayed.

IDE helped small-scale private operators to understand the market size andadjust their enterprise accordingly.

1. Promoting the availability of a range ofdesirable and affordable sanitationimprovements of dependable quality

a) Identifying and standardizing a range of optionsb) Increasing the availability of competent service

providersc) Building the capacity of service providersd) Endorsing service providers

2. Stimulating the demand for sanitationimprovements and adoption of relatedhygiene practices

a) Gaining an understanding of customer behavior and drivers of consumer demand

b) Developing, testing, and delivering the marketing campaign

c) Mobilizing the community for behavior change

3. Facilitating linkages between demand andsupply

a) Linking market playersb) Monitoring the quality and cost through

competition

Figure 4: Three main implementation strategies and associated activities

Material from the “Mr. Latrine” media campaign featuring the tagline“Hygiene, Civilization, and Health” and the slogan “Be an exemplaryperson in a cultured village”

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2. Stimulating the demand forsanitation improvements and theadoption of related hygiene practices

• Gaining an understanding ofcustomer behavior and drivers ofconsumer demand: The demand forsanitation was constrained by severalfactors. First, the local population did notprioritize sanitation. There were otherthings that they wanted to acquire first,such as a TV, karaoke set, or evenfurniture. Secondly, they lacked accessto dependable service providers whocould build improved latrines. Finally,they lacked sources of accurateinformation about sanitation facilities—what to buy, how much it would cost,and whom to buy from. Since fewer than

1 in 5 households had a latrine when theproject started, prospective customersfound it difficult to gather reliableinformation about costs and benefitsfrom neighbors or markets and comparealternatives. Moreover, existing latrines inthe community usually belonged to themost affluent members and were thuslikely to be more expensive. IDE focusedon removing these barriers through acommunication campaign and ruralpromotional activities.

Using the baseline research, theproject focused on identifying whatcould be the most powerful motivatingfactors for prospective customers toinvest in sanitation and hygieneimprovements. This involved testing

various concepts of benefits with targetaudiences, identifying what attractedthem most, what was not relevant tothem, what complied with local beliefsand aspirations, and what obstaclesneeded to be overcome to makebehavior change possible. The resultsidentified the most compelling reasonsfor local families to want an improvedsanitation facility or wish to adopt aspecific hygiene practice.

• Developing, testing, and deliveringthe marketing campaign: A multi-disciplinary team of advertisingprofessionals and project personneldesigned and implemented a behavior-changing communication campaign,carefully developing messages

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Table 3: Technology choices made by the total market compared with choices by the poor

Technology Options Cost of Latrines at Market Value (in US$)

43

49

73

55

22

6

15

16

24

16

10

4

Double Vault

Pour Flush

Septic Tank

Semi-septic Tank

Other (1)

Upgrades (2)

All

% of All LatrineBuyers Choosing

This Option

39

8

5

28

1

19

100

% of Poor LatrineBuyers Choosing

This Option

17

5

18

48

-

12

100

(1) “Other” refers to any facility that did not fall into the other technology categories, for example, an improved pit latrine.

(2) Investment to transform an unhygienic latrine into a safe system.

Labor Cost Material Cost Total Cost

58

65

97

71

32

10

11

containing the concepts that seemed toovercome existing barriers to purchasingimproved sanitation or changing hygienebehavior, and conveyed these throughappropriate rural channels to repeatedlyreach a substantial part of theirintended audience.

Although this approach is common inprivate sector promotion and is effectivein changing consumer behavior, theproject staff found that it was quite aliento development practitioners in Vietnam.Prevailing modes of sanitationcommunication in Vietnam were stillbased on health education or the simpleone-way transmission of informationmeant to increase recipients’ knowledgebut not necessarily change their behavior.

The project found that the status andconvenience benefits associated withhaving a latrine held a far strongerappeal for customers than did disease-prevention benefits (upon whichsanitation programs have traditionallybased their promotional efforts).Consequently, improved social statusand a more convenient lifestyle becamecentral to the strategy to engage targetaudiences and persuade them toacquire and use latrines. The projectused mass and interpersonal mediachannels in a planned and coordinatedmanner to carry the campaignmessages. Alliances were forged withthe organized private sector forsustaining the hygiene communicationcampaign (Box 4).

Communication was not the onlydimension in which social statusbecame a central strategy. Promotionalefforts targeted opinion leaders to leadchange within communities. Respectedvillagers who belonged to either thelocal government network or themass organization network were thefirst people to acquire a latrine in thecommunity, thus serving as asocial benchmark for the rest ofthe community.

To address the problem of competinghousehold priorities, promotionalstrategies deliberately reframed thevalue of sanitation in relation to otherpotential household purchases.Vietnamese households in the projectarea prioritized investment in housingand education followed by income-generating investments. The key projectstrategy was to first understand whattype of purchases a latrine competedwith and then appeal specifically to thecompeting benefits derived from thesepurchases. For example, a strategicmessage on a popular radio soap operacapitalized on the concept of socialstatus and family priorities whenhouseholds owned a TV set, but did nothave a hygienic latrine.

• Mobilizing the community forbehavior change: Central to themarketing campaign was hygienepromotion and community mobilization.Given the prominence of the communityand the political structure, mobilizinglocal leadership proved critical fordelivering the marketing campaign andfor building consensus on environmental

The project found that the status and convenience benefits associated withhaving a latrine held a far stronger appeal for customers than did disease-prevention benefits (upon which sanitation programs have traditionally basedtheir promotional efforts).

BOX 4: BEHAVIOR CHANGE CAMPAIGN LINKED TO SOAPMARKETING

As part of the situation assessment, IDE learned that despite high publicawareness of preventive practices to break the fecal-oral transmission chain,women’s hand-washing practices were far from desirable. IDE thus developed abehavior change communication framework focused on hand washing in tandemwith a communication campaign to stimulate demand for sanitation.

Through focus groups, spot checks, and structured observations, IDE identifiedbehavior gaps that became the foundation for the campaign. To sustain desiredbehavior changes brought about by the campaign, the manufacturers ofantibacterial soap and IDE forged an alliance for hygiene promotion. Besidesaiming for improvement in hygiene behaviors, the initiative also aimed to convincethe organized private sector in Vietnam that targeting the rural customer basemeans good business. Unilever Vietnam has now mobilized its own resources topilot a school hand-washing program with IDE. The alliance is based on strategicresource sharing between the partners. Unilever provides funds for promotionand in-kind contribution of soap samples while IDE contributes consumerresearch information and advice on rural outreach strategies.

sanitation as a priority communitygoal. The project incorporated hygienepromotion and community monitoringof performance against targets as partof the community managementand development plans. Peer pressurewas a powerful force for theachievement of behavioral goalsamong households.

Village contests, which were paid forby community funds, proved to be apersuasive way to mobilize community-wide action. Villages created songs andgames on the issue of improved hygiene.The winning villages from eachcommune competed at the final district-level competition, where the communehealth workers judged the contest.They awarded VND200,000(approximately US$13) to the winningvillage at the commune level and VND1million (approximately US$65) at thedistrict level.

3. Facilitating linkages betweendemand and supply

• Linking market players: The process ofacquiring a sanitation facility can be longand requires several steps, starting fromconsumer exposure to initial informationto the final construction. To influencesanitation-related decision making byhouseholds, IDE initiated ways to linkconsumers and services providers, andthus promote the flow of informationbetween them.

The village mason, as the promoter,retailer of construction materials, andservice provider, is the most critical link inthe sanitation supply chain. The masons’network built almost all of the newsanitation systems under the project,while the households themselvesupgraded their existing latrines. IDEconnected the two parties at promotionalvillage meetings, where masons

introduced the latrine options and theirvariable prices and prospective buyersobtained cost quotations. This exchangeallowed transparency of information flowbetween demand and supply.

The promotion network also served as amechanism to encourage, supervise,and guide the households during thelatrine acquisition process. Villagepromoters often belonged to massorganizations such as the Women’sUnion of Vietnam. They targetedpotential customers, organized themeeting venues, performed householdfollow-up visits, served as links betweenthe household and the mason,supervised the construction process,and monitored progress against theinitial community target. The projectoffered incentives to village promotersbased on their performance as salespromoters for sanitation.

• Monitoring the quality and costthrough competition: The quality thatproviders can offer to customersdepends on both their masonry skillsand their ability to adjust their servicesaccording to customer’s needs. Some ofthe masons took the initiatives to provideguarantees for their services andproducts for a specified future period.IDE helped build credibility for theirguarantees by monitoring customersatisfaction, collecting testimonies, andassessing the quality of the systems builtby the masons in relation to the costs.Two factors were found to reduce thepotential risk of poor masonry services:1) the mason was often a member ofthe local community and needed to

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A local mason explains latrine options to prospective customers at a village promotional meeting

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protect his reputation; and 2) malehouseholders usually monitored progressof construction.

Market Developments Resultingfrom Linking Market Players areBenefiting All Stakeholders

Linkages among players in the supplychain have improved the flow of marketinformation, which is bringing inincreasingly more benefits to allstakeholders. Examples in the projectareas include customer referrals.Cement shops provide customers withreferrals to specific village masons,who refer business to the same shops.This has enabled one-stop shopping byhouseholds who simply have to contactthe mason who will take on design,procurement, and building tasks.Cement often serves as working capitalsince it represents approximately 60percent of the entire direct cost of alatrine. The mason contracted to build thelatrine for a household may also refer thecustomer to another mason whospecializes in making cement rings.Box 5 features an example of the impactof such arrangements on the localeconomy and entrepreneurs.

These relationships have improved themason’s capacity to respond promptlyto customer demand, and due tocompetition among masons, alsogenerated cost reductions for thecustomer. Service providers in the projectarea estimate that the final retail price for aseptic tank is reduced by 10 to 15 percentwhen a local producer is available in thelocal value chain.

Linkages among players in the supply chain have improved the flow of marketinformation, which is bringing in increasingly more benefits to all stakeholders.

BOX 5: THANH SANG, ENTREPRENEUR WITH A FUTURE

Thanh Sang lives in a village in Thang Binh district, Quang Nam province. Of hiseight children aged 3 to 29 years, three work in Saigon. Before the IDE project,Sang and his wife farmed, and he made cement rings for dug wells. With manychildren to feed and farming land that was sandy and barren, combating hungerwas a perennial struggle. Then the market changed. People stopped buying wellrings as drilled wells became available. Sang migrated to find wage work likecutting forest wood and mining sand from riverbeds and beaches. However,wage work was seasonal and failed to provide sustenance for his family.

Since he was known as a former ring maker, IDE’s sanitation project invited himto attend a workshop on how to build hygienic latrines. Sang learned aboutbuilding rings for low-cost semi-septic tanks, a technology that his fellow villagerspreferred. Sang now felt confident enough to start his own business making suchrings. He registered with the local network of masons started by IDE andadvertised his availability.

Sang faced initial difficulties in building name recognition and reputation amonghis potential customers. He sold only 3 sets of rings per month (a semi-septictank needs 1 set of 6 rings), earning approximately VND270,000 (US$18) in profits.

Sang then decided to attend the promotion meetings organized by the VietnamWomen’s Union, where he found people very interested in discussing hygieneand environmental sanitation matters. Moreover, the commune health workerstreated IDE’s network of trained masons with respect and recommended him tothe villagers. After these meetings, people came to him with orders directly orthrough the Women’s Union. Customers bought the construction materials. Sangtook the mold to their houses and made the cement rings at their doorsteps. Hestarted making 10 sets a month, earning VND900,000 (US$60) monthly.

In June 2004, IDE and the local government organized another workshop in Binh Sacommune for upgrading latrine-building techniques. After that, Sang started makingand selling the rings from his home, which enabled him to produce more. He alsoworked out new payment terms with the retailers of construction materials. By getting50 percent of the cement on credit, he was able to extend credit to his customers.

With his “new way of doing business,” Sang now makes 16 to 17 sets of ringsper month, earning about VND1,300,000 (US$87) every month, an income thathas lifted him out of poverty and hunger.

The relationships forged betweenhouseholds and masons have led to anumber of informal financial arrangements.Frequently the rural household, after havingdecided to invest in a sanitation facility,invites the mason to the construction siteand requests his technical opinion. Themason in turn designs the facility,purchases all the necessary direct inputsfor building the latrine, and builds it beforeasking for payment. Another commonapproach is for householders to buy theconstruction inputs or pay an advance forthe materials to the mason. This injectsworking capital into the value chain.Another arrangement is local constructionmaterial retailers providing working capitalto the masons in the form of materials.

Conclusions

Implementation experience and arecently completed project evaluationsuggest that a market-based model wasan appropriate strategy for bringingabout rapid increases in rural householdaccess to safer latrines and improvedhygiene practices in the selected provincesin Vietnam.

• IDE’s project successfully stimulatedboth the consumers’ demand forimproved sanitation and the capacity ofthe local market to supply services inresponse. Within a year of projectimplementation, rural entrepreneurswere able to recognize the potential ofthe market and expand. The privatesector providers can now continue toserve rural communities beyond theproject duration. The masons have

shown that they can now supply spareparts and provide post-sale services toexisting customers, cater to thedemands of new customers, and evenexpand their customer base andbusiness through innovative localpromotional strategies.

• The project’s experience shows thatsimply assuming, without carrying outproper consumer research, that the poorcannot afford improved sanitation maylead to inappropriate program strategies,such as subsidizing relatively high-costlatrines. Household priorities greatlyinfluence demand for sanitation. Thoughrural households in Vietnam often lack ahygienic latrine facility, they may still beable to afford a TV set or a karaokeplayer. Both the poor and the moreaffluent can experience constraints inaccessing sanitation that are varied dueto individual motivations and priorities,which, as this project experience shows,

are fundamentally influenced by theextent to which the local sanitationmarket is developed. The challenge forsanitation programs is to offer both thepoor and the non-poor a range ofdesirable and affordable options whilepersuading customers to reorient theirpriorities, if necessary, so that improvedsanitation becomes an attractive “must-have” for every household.

• Many poor countries now rely on foreignassistance for scaling up access tosanitation to meet the MillenniumDevelopment Goals (MDGs). Full capitalcost recovery under the market-basedapproach addresses the gap insanitation financing by drawing inresources from the private sector andconsumers. The market-based approachmay represent the only viable solution fordeveloping countries to move beyondthe stalemate of poor sanitation accessand reach the MDG targets.

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A local mason turned sanitation entrepreneur

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• Full cost recovery also offersbetter hope for sustainability ofsanitation investments. Whencustomers consciously choose topurchase a facility representingmore than 10 percent of theirhousehold annual budget, thelikelihood that they properly useand maintain the facility is high. Itis not surprising that post-sale serviceshave now emerged in the localmarket in the project areas. Consumersmaking such an important investmenttend to demand increasedaccountability from the serviceproviders. Full capital cost recoverymay thus finally end the embarrassinglegacy of dysfunctional andabandoned latrines that top-downconventional approaches haddelivered free of cost or atsubsidized costs.

East Asia and the PacificJakarta Stock Exchange BuildingTower 2, 13th Floor.Jendral Sudirman Kav. 52-53Jakarta 12190Indonesia

Phone: (62-21) 5299 3003Fax: (62-21) 5299 3004E-mail: [email protected]: http://www.wsp.org

February 2005

WSP MISSION: To help the poor gain sustained access toimproved water and sanitation services.

WSP FUNDING PARTNERS: The Governments of Australia, Belgium,Canada, Denmark, Germany, Italy, Japan,Luxembourg, the Netherlands, Norway,Sweden, Switzerland, and the UnitedKingdom, the United Nations DevelopmentProgramme, and The World Bank.

ACKNOWLEDGMENTS:This publication is based on the work doneby the International DevelopmentEnterprises (IDE) in Vietnam. Special thanksare due to Nghiem Thi Duc, Nguyen Dong,and Tran Quoc Binh from IDE and TheDistrict Health Centre staff from QuangNam and Thanh Hoa provinces forgenerously sharing data and insights fromproject implementation records andsurveys. We are grateful to peer reviewersPeter Kolsky, Caroline van den Berg, DanSalter, Chris McGahey, and Richard Pollardfor their incisive queries and thought-provoking comments. Sincere thanks aredue to Elisa Knebel for copyediting. For allremaining errors and omissions, theauthors claim responsibility.

PREPARED BY:Jaime FriasNilanjana Mukherjee

Cover Photo by Tran Quoc Binh and Nguyen DongLayout by 2+3 visual communicationPrinted at Subur Jaringan Cetak Terpadu

The findings, interpretations, and conclusions expressed are entirely those of the author and should not be attributed in any manner toThe World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the companies they represent.

ABOUT THE SERIES:

WSP Field Notes describe andanalyze projects and activities inwater and sanitation that providelessons for sector leaders,administrators, and individualstackling the water and sanitationchallenges in urban and ruralareas. The criteria for selection ofstories included in this series arelarge-scale impact, demonstrablesustainability, good cost recovery,replicable conditions, andleadership.

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Cairncross, Sandy. 2004. The Case forMarketing Sanitation, Water and SanitationProgram, Africa. (WSP-AF).

Frias, Jaime. 2003. Improving Health Standards in Rural Thanh Hoa and QuangNam: Creating a Health PromotionMarketing Framework for Sustainable RuralSanitation, International DevelopmentEnterprises, Hanoi Vietnam.

Heierli, Urs, Hartmann, Armon, and Munger, Francois. 2004. Sanitation is aBusiness, Approaches for Demand-Oriented Policies, Swiss Agency forDevelopment and Cooperation (SDC) andWater and Sanitation Program.

Mehta, Meera, and Knapp, Andreas. 2004. The Challenge of Financing Sanitation forMeeting the Millennium DevelopmentGoals, Water and Sanitation Program,Africa. (WSP-AF).

Mukherjee, Nilanjana. 2000. Myth vs. Reality in Sanitation and HygienePromotion, Water and Sanitation Program,East Asia and the Pacific (WSP-EAP).

Mukherjee, Nilanjana. 2001. Achieving Sustained Sanitation for The Poor, Policyand Strategy Lessons from ParticipatoryAssessments in Cambodia, Indonesia,Vietnam, Water and Sanitation Program,East Asia and the Pacific (WSP-EAP).

Oyo, Anthony. 2002. Creating Successful Private Sector Supply Chains: A ResourceGuide for Rural Water Supply andSanitation Practitioners (Draft), Water andSanitation Program.

Water and Sanitation Program, East Asia and the Pacific (WSP-EAP). 2002. SellingSanitation in Vietnam, What Works?

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