In response to the growing prevalence of market-based approaches to sanitation, the Bill & Melinda Gates Foundation convened a meeting between three leading sanitation development practitioners—iDE, PSI, and Water for People—to discuss their experiences in building supply capacity and demand for sanitation products and services, and possibly develop a joint understanding of the process. The result of those discussions are presented in this four-part blog series.
PART 2 of 4: Selling Sanitation: Who Does What?
We All Have a Part to Play
The group recognized that they are not doing their work in a vacuum, and that there are clear roles and responsibilities for every actor in the sanitation market:
- Regulation with enforcement
- Consumer protection
- Quality assurance standards
- Financing large-scale public services
- Creating enabling environments that encourage private sector participation and consumer uptake
- Research and development
- Underwriting risks and guarantees (delivering proof of concept for private sector to participate in market)
- Delivering competitive offerings for customers
- Lobbying government for improved market and regulatory conditions
- Filling in gaps at a catalyzing level, rooted in the framework of the market
- Market maker and loss leader
- Bringing the market to a point where private sector actors are incentivized to join the market
- Building the capacity of private sector actors, especially labor capacity and ability to access finance across the value chain
- Supporting government, ensuring a high level of collaboration between the various intervening organizations and developing a unified mutually supportive approach
- Resolve information asymmetry between buyer and seller
- Monitoring and evaluation
Note that many of the responsibilities listed above are related to facilitating an experience for the all-important fourth actor: the customer. The group recognized the importance of engaging communities from the beginning, as doing so ensures a higher likelihood that the proposed solution actually meets the needs of the users and a higher likelihood of buy-in and adoption. However, the market development approach does not advocate for the government and international development community to irresponsibly devolve responsibility to the community. Households should not be expected to design and construct their sanitation solutions under the guise of participatory design. In the developed world, we are not expected to design and construct our own toilets, so why should we expect this of communities who have even fewer advantages in education, income, and general access to resources? As part of a market-based approach, we believe in the importance of basing solutions on the needs and desires of the users. This process is based on gaining detailed input from users on their attitudes, beliefs, needs and desires; this information is used to guide experts in the design, engineering, and marketing processes. This approach manifests itself in desirable and affordable products that people are willing and able to purchase.
Working with the Private Sector
Private sector actors are as much part of the market ecosystem as the end user of the product/service. Their needs and desires have to be taken into consideration. Most obviously, market actors strive to maximize profit. However, many other considerations have to be taken into account:
- Access to capital
- Regulatory conditions
- Convenience and ease of managing product/service line
- Ease of creating and size of existing demand
- Cash flow
- Opportunity costs of other business opportunities
- Personal/family preferences
- The low social status that working in sanitation (particularly waste management) may imbue
- Education level needed
- Competitive landscape
In order to attract the private sector, development practitioners need to first get a deep understanding of all of the above considerations (and potentially others) that would drive a business to reject or pursue a business opportunity.
In addition to attracting businesses to join the sanitation sector, one must also consider how to keep them involved in the sector. Even when profits are good, the low status image of working in sanitation means that these businesses are always looking for alternatives. Working in sanitation often becomes a stepping-stone to working in something more lucrative or socially respected. Maintaining a sufficient level of private sector suppliers can be a challenge.
It is important to understand the main drivers for businesses so that can they can effectively and sustainably serve customers in the sanitation market. Businesses will try to minimize cost and maximize profit. Costs could be non-financial, such as effort required. Identifying what businesses are most motivated by will help design effective ways to engage them and keep them interested in selling sanitation products/solutions.
One common aspect of engaging with businesses across market-based interventions is intervening organizations’ dependence on businesses for record keeping of sales figures, which is often needed for donor reporting. SMEs are generally reluctant to put in the effort to complete record keeping as they do not see the immediate value in record keeping and may fear visits from tax officials. In order to incentivize businesses to complete record keeping, PSI has tied record keeping with access to capital, demonstrating that complete financial records will help businesses to access a loan. iDE has also tied continued support for demand creation to completion of sales records.
Check back for part 3 of 4 on May 18, 2017.
Water For People exists to promote the development of high-quality drinking water and sanitation services, accessible to all, and sustained by strong communities, businesses, and governments. Steve Sugden firstname.lastname@example.org
iDE creates income and livelihood opportunities for poor rural households. In the WASH sector, we design and build markets for products that have the potential to transform people’s health by preventing diarrheal-related disease. Yi Wei email@example.com
Population Services International (PSI) is a global nonprofit organization focused on the encouragement of healthy behavior and affordability of health products. PSI uses a market development approach to deliver sanitation and fecal sludge management products and services in a sustainable manner. Genevieve Kelly firstname.lastname@example.org