wsp: microfinance within sanitation marketing
DESCRIPTION
MTRANSCRIPT
Sanitation Business; What we have learnt.
Private Sector Development, WSP
CONTENTS
The Problem 5 myths of the Sanitation Business
• Demand Side• Supply Side
Microfinance
NA
SSA
LAC
EA
SAR
ME 128
22
333
Oceania
13
35
599
31
1,005
170
E. Asia
484
SE. Asia
184
Source: JMP, 2012
1317
35
35118
333
333
599
31 2231
1,005
170
128 484
184
71
4
Water supply Sanitation
SE.ASIA
4
A Market Out of Exclusion2.5 billion people lack access to improved sanitation780 million people lack access to water supply
5 MYTHS ABOUT THE BUSINESS OF SANITATION
SUPPLY SIDE MYTHS
Myth #1 The Sanitation Market is SmallFirms catering to poor households are mostly micro-firms because
the market is small
• Market estimate is $300 m/year• Potential market: $2.6 b
Rural areas: $ 1.9 b Market below poverty line:
$700 m
$155 M$240 MPERU
TANZANIA$450M
BANGLADESH
$1,700 MINDONESIA
The sanitation market is largepotential could double the market
Myth #2 Sanitation is a Low Margin BusinessMargins in sanitation are so small, micro-firms find it hard to add value
and expand
To manufacture & installation of toilet facilitiesFrom manufacture & sale of rings and slabs
Typical Unit Margin per Product or Service Delivered
0% 20% 40% 60%
Tanzania masons
Bangladesh installers
Indonesia construction firms
Indonesia pit emptiers
Margin levels are like in other constructionfirms are increasing margins with value adding
Myth #3 Policies Promoting Sanitation Stimulate Private Investments
Policies that promote sanitation motivate the private sector to invest
• Nearly all firms in Bangladesh said they did not know about sanitation standards and rules
• 55% of firms in Peru said rules were not clear
• 50% of firms in Tanzania also said rules were not clear
• Asked about whether promotion programs were well publicized, same types of responses were obtained
The impact of current policies is limitedneither hindered nor helped private initiative
• Nearly all firms in Bangladesh said they did not know about sanitation standards and rules
• 55% of firms in Peru said rules were not clear
• 50% of firms in Tanzania also said rules were not clear
• Asked about whether promotion programs were well publicized, same types of responses were obtained
The impact of current policies is limitedneither hindered nor helped private initiative
DEMAND SIDE MYTHS
Myth #4 People Without Sanitation Can’t Afford itLow interest in sanitation is driven by the lack of money
65% of those without improved sanitation are non-poor
29% of Indonesians defecating in the open are non-poor
85% of rural non-poor Tanzanians do not have improved sanitation
• Investment in available solutions are only 3-4%* of annual incomes of the poor
• The poor spend as much on mobile phone use a year as it would to purchase improved sanitation
*Except in Peru, where it is 7%
Even when money is not an issuesanitation is a low expenditure priority
Myth #5 People Want ‘Improved’ SanitationPeople recognize the benefits of having basic sanitation that meets the
standards
PERU BANGLADESH TANZANIA INDONESIA
Price Quoted for Ideal Solution
$78
Price Quoted for Ideal Solution
$12
Price Quoted for Ideal Solution
$41
Price Quoted for Ideal Solution$100
Wanted: bathroom
Give me finance & a
platform.
A lid and a door would
be ideal
Mmm…septic tank… but so
expensive!
The poor will pay for their ideal solutionbut they do not find anything worth buying
Sanitation supply chains are not presently geared to deliver innovations for the poor
Research and development of products
for the poor
Overcoming initial barriers: market intelligence
Reinforcing customer recognition of quality
Mass manufacture, distribution & installation
Partnership models between industry &
government to create ‘dealflow’
Financing options for the poor
Areas where work can be intensified to bring in the right kinds of investment in sanitation
The 4 Phase Approach
MICROFINANCE
Financing
FACTS
• Latrine improvements will be financed from savings, selling
produce, cash from work
• Households do not have bank accounts; prefer to save with
Chamas, to access soft loans
• They are hesitant to take loans for fear of defaulting
• Some suggested they would like to purchase on installments or
get a loan for a slab through cooperative groups
• FINANCING IS ABOUT RELATIONSHIPS…WHERE IS THE
RELATIONSHIP?
• MICROFINANCE v MICROCREDIT?
Financing
Cost Implications of Distribution Channel
Chama Hard ware (4 tier) Sacco/ MFI Hardware (3 tier)
Manufacturer Kes 2,690 + 16%
Manufacturer Kes 2,690 + 16%
Manufacturer Kes 2,690 + 16%
Manufacturer Kes 2,690 + 16%
Wholesaler + 15% margin
Distributor + 15% Sacco / MFI + 20% Wholesaler + 15%
Chama + 10% Margin Wholesaler + 15% HH = KES 3,744 Retailer + 15%
HH =Kes 3,947 Retailer + 15%
HH= KES 4,126
HH = Kes 4,745
Based on Plastic Slab in Kenya
If financing is about relationships;
• Where is the relationship for the rural household?
• Microfinance v Micro credit?
• What role can local retail outlets play in financing
sanitation?
• Have we exploited other channels of financing
sanitation at the BoP?
Financing
http://www.wsp.org
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