Are we there yet? Sanitation marketing financing and businesses

Published on: 16/05/2019

The National Sanitation Marketing Guideline section 6.4, Business and consumer financing, states that sanitation product and service providers, and households might need access to financial services to finance their sanitation business and needs respectively.

 Households (HH) might need credit to access and use sanitation products and services.
 Producers might need credit to buy raw materials for manufacturing sanitation products.
 Retailers might need working capital to increase their stock so as to accommodate demand.

Also, the guideline explains that development partners and government need to advocate the finance sector not only to mobilize resources for sanitation marketing but also to make available financial products for sanitation. In addition, development partners and Government are encouraged to support the Micro Finance Institutions (MFIs) in developing sanitation lending methods, tools and resource mobilization, and linking them with creditworthy clients. Moreover, there are other financing options such as health care financing, public financing and community based financing that need to be explored further to increase improved sanitation coverage through sanitation marketing.

Financing

1. Micro Finance Institutions (MFIs)
Micro finance Institutions have been one of the most prominent instruments in the development programs and strategies used in the country. MFIs are responsible to create access to financial products for sanitation product and service providers and households. According to the National SM Guideline, MFIs have the responsibility to:

 Mobilize financial resources for saving and credit services for sanitation marketing, and promote and provide these to new and existing businesses that are interested to enter into sanitation marketing, and to households who are interested in upgrading or installing an improved latrine.
 Conduct capacity building activities on financial management to sanitation product and service providers.
 Manage revolving funds provided to sanitation product and service providers and ensure that these should be used for sanitation marketing only.

2. Community Based Organizations
Community Based Organizations have an important and traditional role at kebele level in the following roles:
 Facilitate credit system for poor HHs amongst their members.
 Promotion for improved sanitation and hygiene demand creation amongst their members.
 Provide information to members about sanitation products.

Micro and Small Enterprise Development Agencies

Regarding the business aspect, the guideline states that Micro and Small Enterprise Development Agencies now called the Food Security and Job Creation Agencies are responsible for promoting sanitation marketing as a business with existing and new entrepreneurs and establish linkages with microfinance institutions. According to the National Sanitation Marketing Guideline section 7.1.5. Micro and Small Enterprise Development Agencies now called Food Security and Job Creation Agencies are encouraged to:

 Promote the linkage between sanitation marketing and job creation and include sanitation marketing as one of the focus business areas
 Facilitate the provision of basic training on entrepreneurship and business management and administration related to sanitation marketing.
 Facilitate and link sanitation product and service providers to access technical training and support from TVETs and to credit and saving services from microfinance institutions.
 Organize exhibitions, bazaars, road shows and other public annual events for the promotion of sanitation marketing products and services.
 Facilitate the provision of working and selling premises for micro and small enterprises.

Businesses

1. Private Sectors
According to the guideline, the private sector, including importers, industries, factories, wholesalers, retailers, distributers, etc. is responsible for production, transportation, distribution, retailing, and promotion of improved sanitation products and provision of services. The private sector is encouraged to:

 Brand and promote sanitation products, following standardization of improved sanitation products and services.
 Develop an effective supply chain for improved sanitation products and services.
 Innovate sanitation product types based on customer's preferences, demands and government standards.
 Use microenterprises and other outlets with an established credit system as partners for selling the products and sanitation marketing packages.

2. Local producers
Local Producers who are to be involved in sanitation marketing can come from a diversity of backgrounds, and include artisans, masons, potteries, black smiths, weavers, carpenters, hide producers and others that are interested or have a stake in sanitation marketing. They are encouraged to closely work with sanitation product and service providers, Health Extension Workers (HEWs) and Health Development Armies (HDAs) to avail production and promotion of a standardized improved sanitation product or delivery of service.

Having the above conditions clearly stated on the National Sanitation Marketing Guideline, an MoU has been singed among Health, Micro and Small Enterprises Agency/Job Creation and Food Security Agency, TVET and MFIs at regional and woreda levels. The assumption has been, these sectors work collaboratively as per their respective responsibilities towards achieving increased improved sanitation. However, in most cases these allies are not fully functional; they don't even have aligned plans. In some places Health, Micro and Small Enterprises Agency/Job Creation and Food Security Agency and TVET work together, however the enterprises fail to be sustainable mostly due to financial issues related to lack of loan and low profitability.

Way forward

Even though the guideline outlines the above financial means and types of businesses the achievement of improved sanitation coverage through sanitation marketing is not as expected at the moment. Thus, members of the National sanitation Marketing tried to brain storm on the way forward of the main challenges focusing on the these questions:

 MoU is signed among Health, Micro and Small Enterprises Agency/Job Creation & Food Security Agency, TVET and MFI for sanitation marketing implementation. Are these sectors fulfilling their responsibilities based on the MoU signed? Are they collaborating?
 Are the sanitation marketing enterprises sustainable? If not why and what can be done?

Enabling environment

In the discussion, lack of clarity in MoU signed by SM TWG, lack of coordination, lack of accountability, and less political commitment for sanitation were mentioned as barriers for enabling environment and the following were suggested as way forwards:

 There should be a standard Sanitation Marketing Technical Working Groups (TWG) MoU across the regions that ensures ownership with accountability
 Need to create service providers
 Monitoring and follow up is important for the enterprises
 FMoH needs to strengthen political commitment and good governance
 Localized design
 Joint quality assurance is vital the owner of the task being the Technical and Vocational Education and Training (TVET)
 Advocacy to bring sanitation on the agenda of political leaders

Finance

The following were the main challenges discussed:

- Inability to pay
- Dependency syndrome
- System in differentiation for government, private, community, NGO
- Low loan uptake due to limited awareness for the community
- MFI are not willing to give sanitation loan
- No government policy to avail loan for HH sanitation facility
- No guarantee to MFIs to give sanitation loans
- Collateral issues in MFIs for sanitation loan
- Sanitation loan is not profitable loan
- Limited sanitation technologies and business model
- Limited technology options
- Enterprises have loan phobia
- Loan diversion
- Limited interest of the FMoH to implement sanitation financing through health care financing
- Absence of national sanitation fund for low income groups who can't afford
- Absence of effective sanitation supply chain

Way forward
 Provide sanitation to people who can't afford through national subsidy policy
 Business integration with awareness raising and promotion and access to the facilities
 Establish different roles for different stakeholders
 Business integration with awareness raising and promotion
 Business integration with awareness and show profitability, guarantee
 Develop a policy that encourages HH loan
 Allow institutions/system to provide guarantee
 Promote HH latrine through group guarantee
 Awareness raising to MFIs to show that it is generating profit; show casing, experience sharing
 Diversify product options
 Business integration with awareness raising
 Follow up, and
 Indicate curtailing mechanisms on article of associations
 Immediate discussion on this with regions
 Establish national sanitation fund
 Establish effective sanitation supply chain through targeted intervention in small businesses

This activity was carried out by USAID fund.

This is an ongoing series of blogs and publications by IRC under the USAID Transform WASH project. Please click here for all IRC’s work on this project.

USAID TRANSFORM WASH sets out to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing access to and sustained use of a wide spectrum of affordable WASH products and services, with a focus on sanitation. It does so by transforming the market for low-cost, high quality WASH products and services: stimulating demand at community level, strengthening supply chains, and building the enabling environment for a vibrant private market.

USAID TRANSFORM WASH is a USAID-funded project implemented by PSI in collaboration with SNV, Plan International, and IRC. The consortium is working closely with government agencies including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the National WASH Coordination Office and regional governments.