Water AND SANItatION PrograM: TECHNIcaL PAPER WSP Sanitation Global Practice Team Financing On-Site Sanitation for the Poor A Six Country Comparative Review and Analysis Sophie Trémolet with Pete Kolsky and Eddy Perez January 2010 The Water and Sanitation Program is a multi-donor partnership administered by the World Bank to support poor people in obtaining affordable, safe, and sustainable access to water and sanitation services. The findings, interpretations, and conclusions expressed herein are entirely those of the author and should not be attributed to the World Bank or its affiliated organizations, or to members of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Peer review of the case studies were contributed by WSP The study was written by Sophie Trémolet (indepen- staff and World Bank task managers, including: Craig dent consultant) under the leadership and guidance of Kullman (WSP) on early versions of all case studies, Andrew Eddy Perez (Water and Sanitation Program - WSP) and Robinson (independent consultant), Rokeya Ahmed (WSP) Pete Kolsky (World Bank), who also provided in-depth and Santanu Lahiri (WSP) on Bangladesh; Maria-Angelica comments on the methodological approach, case studies Sotomayor (World Bank) on Ecuador; Peter Hawkins (WSP) and main report. on Mozambique; Ajith Kumar (WSP) on Maharashtra; Yogita Mumssem (World Bank), Pierre Boulenger (WSP), The following people peer reviewed the methodological Ousseynou Diop (WSP) and Sylvie Debomy (World Bank) approach underlying the report and formulated suggestions on Senegal; Bill Kingdom (World Bank), Alan Coulthart for the choice of case studies: Jonathan Halpern (World (World Bank), Joseph Gadek (WSP), Hoang Thi Hoa Bank), Guy Hutton (WSP), David Schaub-Jones (Building (WSP) and Le Duy Hung (WSP) on Vietnam. Partnerships for Development), Vivien Foster (World Bank), Andreas Knapp (WSP), Brian Stewart Smith (World Bank), Overall peer review of the final report was provided by Guy Barbara Evans (independent consultant), Peter Hawkins Hutton (WSP), Isabel Blackett (WSP), Caroline Van den (WSP), Isabel Blackett (WSP). Gabriela Prunier (inde- Berg (World Bank) and Oscar Alvarado (World Bank). pendent consultant) and Steve Sugden (London School of Almud Weitz (WSP), Jan-Willem Rosenboom (WSP) Hygiene and Tropical Medicine) also provided initial input and Barbara Evans (independent) also provided additional into the methodological note. comments. Research and writing for the country case studies were This document is dedicated to the memory of Ousseynou contributed by the following authors: Shafiul Azam Ahmed Diop who was the chair of the WSP Sanitation GPT when (Bangladesh), Patricio Arrata, ICA Consultores (Ecuador), this research was conceptualized and initiated. Rajiv Raman (Maharashtra), Alan Malina (Mozambique), Chimère Diop and Ousseynou Guène (Senegal) and Cu iv Water and Sanitation Program Financing On-Site Sanitation Foreword Promotion of household investment in sanitation is a cost- The present study offers evidence on alternative financ- effective public health intervention, in terms of the ratio ing approaches for on-site household sanitation from of public cost to estimated health benefits.1 Good sanita- case studies in six countries: Bangladesh, Ecuador, India, tion confers on its users other important benefits: dignity, Mozambique, Senegal, and Vietnam. This evidence can privacy, and time savings. For these reasons, the World help identify the best-performing approaches and the rele- Summit on Sustainable Development in 2002 included vant factors and issues to consider in designing a sanita- sanitation as part of the Millennium Development Goals tion financing strategy. The study systematically compares (MDGs). Target 10 of Goal 7 includes a commitment to alternative financing approaches based on a set of common halve the fraction of the world’s population without access indicators, including in terms of the effectiveness in the use to improved sanitation relative to that in 1990. of public funds and targeting. The team chose to focus on those projects recognized as successes to obtain a reason- Progress towards the sanitation target has been uneven. While able representation of the better practices in sanitation some countries, including Bangladesh and Vietnam, are well programs. The study identified a number of useful examples positioned to meet the target, others, such as India and most and tentative lessons about finance which should help to countries in Sub-Saharan Africa, are unlikely to do so by advance the design of sanitation finance at the outset of a 2015. Despite the benefits, sanitation specialists have been project. Replicating such experiences will require a better unable to mobilize sufficient funding, attention, and politi- understanding of what drives household investment and cal will at the local, national, and global levels to achieve the what the key constraints limiting such investment are, in sanitation target. Even where investments are made, they are both financial and non-financial terms. often relatively ineffective or do not reach the rural and urban poor who have the least access to sanitation and are thus most The sanitation challenge continues to grow with popula- at risk. The financial crisis and its associated impact on the tion, as does the cost of failing to meet it. We believe this global economy are putting governments’ budgets under study is a worthwhile contribution to addressing the chal- stress, in developed and developing countries alike. lenge of how to pay for sanitation. Three crucial questions in all development activities financed by the World Bank are “How much will it cost?” “How will it be paid for?” and “Who pays what?” To help answer these questions, the World Bank undertook a study of utility subsidies in water supply and electricity.2 Although sanita- tion was supposed to be included, the authors quickly found an almost complete lack of data on the topic. As a result, the Water and Sanitation Program (WSP) and the Water Anchor of the World Bank have collaborated in managing this study as a first step to painting a full picture of finance and costs in sanitation. 1 Jamison et al. 2006. 2 Komives et al. 2005. www.wsp.org v Financing On-Site Sanitation Executive summary 1 The problem: Sanitation, large fraction of the cost. In addition, economists and sector economics, and finance professionals are generally skeptical of subsidy schemes, Forty percent of the world’s people do not have access to having seen how inefficient and counter-productive some a basic level of sanitation; one in five of us practices open poorly designed programs can be. defecation.3 This crisis in sanitation has clear consequences. Diarrhea kills over 1.5 million children each year, and 88 The challenges of finance – the practical decisions about percent of these deaths are attributed to fecal contamination who pays how much for what, when, and how – thus lie at from inadequate sanitation, hygiene, and water supply.4 The the heart of the world’s efforts to promote health, dignity, lack of sanitation spreads many other diseases, pollutes both and a cleaner environment through sanitation. Yet despite water and land, and robs the poor of basic dignity. The cost the importance of the topic, past efforts to gather meaning- of these problems is high in economic as well as human ful data on sanitation finance have largely failed. A land- terms. In a series of studies, the Water and Sanitation mark report on subsidies in water and power7 was originally Program (WSP) estimated that inadequate sanitation costs intended to include sanitation but could not do so because the economies of four Southeast Asian countries the equiva- of the lack of readily available data. At the start of this lent of approximately 2 percent of their GDP5; these results study, few if any credible data were available to describe the echo similar findings elsewhere about both the costs and numbers and experience of sanitation finance. benefits of sanitation.6 Given this human and economic toll, why is progress still so slow? 2 Objectives and some key questions of this study Sanitation solutions are not cheap for the poor, who make up This study aims to improve understanding of the finance the vast majority of those without sanitation. In the six coun- of on-site household sanitation through careful analysis of tries described in this study, the capital cost of household practical field experience in a wide range of projects. The sanitation varied between US$17 and US$568, costs