Making the chain more fluid with sustainable sanitation financing

Published on: 30/10/2018

Areas of demand

SB: The Toilet Board Coalition aims to accelerate the sanitation economy. What are the current most relevant areas of demand in the sanitation economy?

CH: In terms of finance we see three main areas of demand:

1. A toilet economy in which businesses depend on people having toilets. Ensuring that people have access is already a great incentive.
2. Organic, biological resources, such as nutrients and energy, going through the system are becoming really valuable and can all be found in the system. This opportunity is currently very much untapped.
3. Just as in other parts of the economy that are monetizing data, we can also do that in sanitation systems for health information for instance. It could allow the health sector to provide more user-centred and less costly care. 

This is all with respect to cost recovery and eventual revenue generation. In terms of the financing that has to underpin these, we're always looking for opportunities to move away from reliance on grants for businesses or aid for large projects.

Innovating finance partnerships

SB: What's the role of the private sector in this ambition?

CH: We're looking at ways to involve the private sector, to explore innovative business models that are all about driving alternative finance into sanitation. We do this in order to have systems that are not exclusively reliant on government funding. If businesses find assets and business opportunities in the system, they will invest, generate revenue and provide some cost recovery for governments.

Accelerating sanitation entrepreneurship

SB: Through the Toilet Accelerator programme you work with entrepreneurs selling and servicing toilets, working in waste management and resource recovery and working with digital or health applications. How do you apply finance solutions to these contexts?

CH: We look at their business models to see where they can have alternative revenue streams that will take them into the real economy and therefore make them eligible for commercial investment versus donations. This is one area of finance that we're really interested in. The other area is microfinance. These solutions are really important for entrepreneurs in terms of bringing up the affordability angle for citizens by actually addressing financial inclusion. 

We're in many parts of the chain. Conversations during World Water Week 2018 were encouraging because we see separate blocks coming together. Instead of hearing a little bit over here and a little bit over there, real flows of finance are now getting connected. Whether it's microfinance or small and medium enterprise (SME) financing, what is important is making the system more viable from a commercial point of view.

This is the journey that is starting to take off which is quite exciting!

Addressing gaps, an aspiration and some good advice

SB: Have you heard things in the finance conversations during World Water Week 2018 that should be addressed differently in your view?

CH: What is obvious is that there is still an information gap. The businesses we work with often don't even know that microfinance is available for their customers. So we have to discuss how we're going to get better at linking these things up. What surprised me is that Monetary Financial Institutions (MFIs) are moving into financing the SME space much more strongly, which is some new movement that we heard here.

SB: Anything that inspired you?

CH: I was inspired by an accelerator programme I saw here, Imagine H2O. They started 10 years ago and are supporting innovation in water. They have secured millions of dollars in investment for water entrepreneurs. We'd love to see more of that in sanitation as well.

SB: What would be your advice for the sector from your position as an organisation that is bringing in private sector financing so well?

CH: I think this is already the direction the sector is going in, but we need to always keep in mind that there has to be a long term financial vision in place. We can't just be funding one part of the chain and not care about what happens next. The more we understand where financing starts, where it's going and where it enters a self-sustaining cycle, the better off we are. I think that's always the intention but the practice is more difficult. It's encouraging that it's starting to happen but we need more of it. 

We have to make sure we're not a break in the chain, but we actually make it more fluid.