Financing Sanitation

Financing is a critical dimension of sanitation provision and determinant of demand. For solutions to go to scale they have to blend savings, subsidies and loan finance. The financial design dimension of sanitation programmes has not been evaluated in sufficient detail to date, when this can be a critical determinant of the sustainability and scalability of particular programs. How can subsidies be targeted most effectively to avoid perverse incentives, or capture by the better-off? How can loan finance address the inability of the poor to offer security and the lack of an income stream from household sanitation?

The sector has not been able to mobilize sufficient public financing for increasing sustainable access. This is not aided by the fact that confusion reigns on the most appropriate use of public funds. Hardware subsidies in the sector have often been discredited (either due to capture or wastage, when hardware subsidies fund service levels that people simply do not want). The costs of software activities (including for demand promotion, sanitation marketing, capacity building, etc) are not adequately accounted for, resulting in a lack of clarity on how much such activities cost and how they can be scaled up. Unless the most appropriate use of public funds can be identified, it will be difficult to increase fund allocations to the sector. In a context of limited public funds, priority should probably be placed on public programs that are best able to leverage additional resources, from households themselves, but also commercial banks or entrepreneurs.