Join the global collaboration community of 23,429 professionals from business, government and civil society working together on the world’s most pressing challenges.
Image: A private sector operator in Dhaka, Bangladesh, providing sanitation services to low-income customers under the SWEEP public-private partnership. Credit: WSUP
Market-based solutions to sanitation can make a huge difference to the lives of the poorest urban citizens. Creating financially viable businesses is challenging, but the sector has taken real steps forward. This blog presents examples of how we can unlock the potential of the private sector to help drive progress.
As the global push towards the SDGs continues to gather pace, some areas continue to lag behind. Sanitation is one of the most striking examples. Over half the world’s population continue to lack access to a safely managed sanitation service. That is a staggering figure, which demands reflection. Why is sanitation still so far off track?
There is no easy answer. The recently published SDG6 synthesis report identifies governance, financing and capacity as three key areas where transformation is required if we are to achieve universal coverage by 2030. We absolutely agree with that analysis. But there is another aspect to this challenge which requires urgent attention – the role of the private sector.
Significant progress is being made in sanitation business development in many cities around the world. However, we are yet to succeed in unlocking financial viability for businesses that aim to serve the poorest consumers. The reality is that financially viable, low-income consumer business models are currently few and far between.
This reality needs to be absorbed and reflected upon – but the sector has taken real steps forward, creating grounds for optimism. Sanitation is a complex and challenging sector, where market-based solutions have an important role to play. Part of the solution lies in acknowledging that complexity.
In our experience, the success of sanitation businesses depends on a wide range of both internal and external factors. Unlocking financial viability means analysing the wider enabling environment, identifying barriers to private sector growth or market entry, and formulating a response, as much as it does ensuring the service model or revenue analysis stands up to growth. Direct support to low-income consumer business models will not work unless the basic conditions are in place.
This interface between sanitation businesses and the external environment was a focus of the recent University of North Carolina (UNC) Water & Health Conference. Multiple sessions identified a common set of issues, including (for example) the role of smart subsidies; marketing; blended finance; and the critical importance of public-private collaboration.
In a session co-convened with Bill & Melinda Gates Foundation, we set out our view that attention is required across many of these areas to unlock financial viability, competitive positioning and business expansion in differing emerging market contexts.
So that’s the big picture piece – complexity needs to be acknowledged, and it simply isn’t effective to plough money into a sanitation start-up without attending to the both the business model and the enabling environment. But how do we break this down into a concrete set of actions that can help to drive low-income consumer business growth?
In our experience, the key point is to be flexible and opportunistic in creating trigger points – a key mechanism, approach or activity relating to the business model or wider enabling environment – which can shift stakeholder mindsets and incentives.
We believe in the potential of market-based sanitation solutions, because we have seen the impact these trigger points can create. A leading example is the development of SWEEP, a public-private arrangement for faecal waste collection in urban Bangladesh.
SWEEP has broken new ground by becoming profitable within 5 months in two cities, while maintaining around 30% of its customer base from low-income areas. In this case the trigger point was a business model which recognised the value of middle and high-income customers in establishing and sustaining commercial viability, allied with differential pricing to facilitate the service offering for low-income customers.
The SWEEP model is symptomatic of a wider shift in the WASH sector: away from a narrow “pro-poor” only focus, and towards citywide approaches which recognise that low-income customers are sometimes best served by providers with stronger capabilities and revenues, generated through sustained engagement with a wider customer base. This applies to institutions, and it can apply to businesses too. Poor faecal waste collection services or poor-quality water is after all an issue that 90 to 95% of a city will face in some shape or form.
SWEEP evolved as a response to a particular set of conditions in Dhaka – including the availability of two vacuum tankers which the utility were not using, and which formed the basis for a lease-based agreement with the SME. In other cities, no such opportunity exists; the conditions for professional sanitation businesses to succeed have to be created.
This was the situation in Kisumu, Kenya, where informal manual pit-emptiers proliferated in low-income areas of the city, and where a lack of regulation made it impossible for “formal” sanitation businesses with safe emptying practices and higher operational costs to compete. A trigger point was needed to stimulate the market and raise standards all round.
To achieve this, WSUP worked with Kisumu County Government to develop and enforce Standard Operating Procedures to professionalise the sector. We also worked in parallel to build the capacity of Gasia Poa, a SME with the capacity and formal status to provide safe services to low-income customers. Gasia Poa’s pit-emptying business is still at a formative stage, but through the development of a regulatory framework, a fundamental barrier to private sector growth has been addressed. The conditions are now in place for the business to expand its low-income customer base.
A trigger point, that one change that makes all the difference, might come in all manner of forms - from micro-level changes to a business model, to shifts in whole institutional mindsets. Clean Team, a container-based sanitation business in Ghana, has seen its customer base and revenue increase substantially since the introduction of a mobile money payment platform, making it easier for the business and customers to track and process payments.
At the opposite end of the spectrum, the demonstration of a faecal sludge management service aimed at low-income customers in Lusaka, Zambia, has convinced the utility of the role it can play in facilitating private sector provision of sanitation services. The momentum created by the pilot service is now feeding directly into the US$ 15 million on-site component of the Lusaka Sanitation Project.
So yes, sanitation is challenging, and businesses are not yet operating at the scale required to achieve SDG 6. But there are grounds for optimism. As a sector, we are developing an understanding that business growth requires more than direct business support; it requires a better structured enabling environment.
We are gradually becoming more flexible in our approach to identifying the triggers that can unlock financial viability. And we are beginning to see the benefits, as businesses and in some cases, whole cities, evolve towards a model that includes low-income customers as part of a coordinated citywide approach.
Why not join one of the many open collaboration Challenges we are running to address pressing global issues? Join your peers, share your passion and add your expertise!
Our Challenges are made possible thanks to our Supporters and Partners. If you'd be interested in supporting a current or new Challenge, please get in touch.Learn more