Economic Benefits of Market-Based Sanitation

Introduction

Over the past decade, the market-based approach to sanitation has become an increasingly popular modality for improving sanitation outcomes in emerging economies. Proponents have declared this approach as a sustainable way to grow the market for key sanitation products in underserved areas and reach bottom of pyramid consumers. The approach appears to not only improve the state of sanitation within these areas, but also to have positive knock-on effects for the local economy. Although a substantial and growing body of evidence supports these claims, a model to estimate the economic benefits of market-based sanitation has yet to be developed. This leaves donors and developing country governments with incomplete information to go on when deciding whether to invest in such programs or to continue funding sanitation programs, which provide households with the same products for free or at a subsidized cost.

To this end, this paper suggests a model to estimate the economic benefits of market-based sanitation programs. The model should not be understood as a definitive yardstick, which can be applied to all market-based programs or as a comprehensive ‘whole economy model’ which accounts for all market interactions resulting from a given program’s activities. Rather, the model should be viewed as a conceptual framework for how to think about the economic benefits resulting from market-based programs. This includes both the downstream economic benefits to households that purchase sanitation products and services as well as the upstream economic benefits to the market actors that produce them. The application of the model will vary according to the specific nature of the program being assessed, and the accuracy and robustness of findings is highly dependent on the availability of data for a given program and the area in which it operates. It is hoped that the model will provide those working in the WASH sector with a new tool for assessing market-based sanitation programs, which can be tailored to different contexts and improved over time.

This paper provides a Conceptual Framework for the model and then applies it to WaterSHED’s Hands-Off sanitation marketing program in rural Cambodia. The paper also applies the model’s concepts to a subsidy-based sanitation program. This yields comparable metrics between the two approaches, which can help donors and policy makers make more informed sanitation investments.