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The challenges of financing sanitation

Public finance in sanitation has focused on subsidies for household and public toilets and given grants to build sewerage networks and treatment facilities. However, across the world there are many examples of unused facilities –households not connected to available sewerage systems, defunct treatment plants and toilets used for storage. The Millennium Development Goal challenge of providing sanitation to an additional 2.4 billion people by 2015 demands a new finance strategy which responds to need and mobilises all available resources.

A report from the World Bank Water and Sanitation Program (WSP) reviews global experience and shows that while the critical need for sanitation promotion is universally accepted, there is still no consensus on the right approach and strategy. Focus has been mainly on innovations, without sufficient consideration of scaling up to achieve country or citywide coverage.

As the benefits of on-site sanitation are mainly private or localised it makes economic sense to target greater household and community resources. However, public resources disbursed through appropriate subsidies and grants are justified where there are public benefits of total coverage. They should also be used to target subsidies for the poor and vulnerable and to support access to credit which helps increase affordability.

However, there is increasing recognition of the possibility of mobilising greater household and community resources through full or partial cost sharing for toilets, user fees for public toilets and sanitation-related taxes or surcharges. The researchers cite examples of success in leveraging household and community resources for sanitation:

Sector wide Approaches (SWAps) for water and sanitation are being developed in Uganda and the Indian state of Tamil Nadu.
In Bangladesh and India ‘total sanitation’ campaigns are community-led and use a people-centred approach with local governments and NGOs.
In the Indian city of Pune, community toilets are funded through local authority resources and managed by communities and NGOs.
In Ouagadougou, Burkina Faso, sanitation promotion is funded through a local sanitation surcharge which also enables partial subsidies to improve household pit latrines.
In Lesotho a well-established, non-donor dependent scheme has extended sanitation coverage to half the population by encouraging the private sector and providing no subsidies to individual household latrines.

The researchers stress that sanitation promotion must be situation-specific. It is essential to arrive at a local consensus on the methods and approach to be used in promoting sanitation and attracting resources. A shift from simply financing sanitation facilities to increasing funding for sanitation promotion would be welcome, as would moving from a focus on curative to preventative health.

The researchers urge policymakers to:

facilitate the work of small private service providers, community-based financial institutions, micro-finance institutions and non-governmental sanitation supply organisations
resolve urban tenure issues which inhibit investment in sanitation facilities
promote acceptance of ‘polluter pays’ charges and ensure that revenues generated are exclusively used within the sanitation sector
resolve institutional fragmentation – especially where decentralisation processes are underway – by clarifying mandates across ministries and different tiers of government. Projects succeed where lead institutions and champions are clearly identified
identify all potential sources of finance, both public and non-public, create reliable and predictable cash-flows, provide fiscal incentives for promoting sanitation and ensure appropriate targeting of needed subsidies and grants
establish performance monitoring frameworks that allow measurement of cost-effectiveness and benefits and allow for mid-course corrections.

Regional and global support agencies also have a crucial role to play. they can fund the initial steps in developing a public finance strategy, offer technical design support, disseminate global experiences and fill critical knowledge gaps related to the cost-effectiveness of various methods of sanitation promotion. Harmonisation of donor support can help enhance comprehensive and consistent sanitation promotion programmes.

Source(s):
‘The challenge of financing sanitation for meeting the Millennium Development Goals’ by Meera Mehta and Andreas Knapp, Water and Sanitation Program, World Bank, commissioned for the 12th Session of the UN Commission on Sustainable Development, New York, April 14-30 2004 Full document.
‘Meeting the financing challenge for water supply and sanitation: Incentives to promote reforms, leverage resources and improve targeting’ by Meera Mehta, Water and Sanitation Program, World Bank, 2003 Full document.

Funded by: Norwegian Ministry of the Environment

id21 Research Highlight: 28 February 2005

Further Information:
Meera Mehta and Andreas Knapp
Water and Sanitation Program - Africa
P.O. Box 30577
Nairobi
Kenya

Tel: +254-20 322-6000
Fax: +254-20 322-6386
Contact the contributor: mmehta@worldbank.org ; aknapp@worldbank.org

World Bank Water and Sanitation Programme Africa

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