Market Access - Innovative Finance -Environment & Sustainability

How to Leverage the Private Sector to Build Markets for Rural Sanitation

Article | April 22, 2021

Globally, one in three people lacks access to sanitation services, resulting in hundreds of thousands of preventable deaths and billions of dollars in government healthcare expenses each year. Most people affected by the sanitation crisis live in sparsely populated rural areas, making it difficult for governments and aid organizations to develop and maintain cost-effective infrastructure to address the problem.

But sanitation innovators are finding creative ways to adapt, with products and services that don’t require extensive infrastructure development and that are affordable enough to appeal to low-income customers.

In Tanzania, Resonance worked to strengthen markets and distribution channels for rural sanitation, including supporting sanitation innovators in scaling their products and services to the rural areas that need them most. Through USAID’s Tanzania Water Resources Integration Development Initiative (WARIDI), we partnered with organizations across the value chain to generate customer demand, reduce startup costs, and stimulate organizational growth. The outcome? Thirteen new water, sanitation, and hygiene (WASH) products and services extended across 20 rural and peri-urban districts; nearly 500 microenterprises trained as WASH retail partners or distributors; and three promising WASH product companies provided with extensive coaching and funding, leading to larger awards or private sector investment.

Many of the lessons we learned from WARIDI are specific to Tanzania, but a few apply more broadly to sanitation challenges in rural and peri-urban areas. At the close of this five-year project, we’ve developed four key insights about partnering with the private sector to build markets for sanitation in emerging markets worldwide.

Four ways to engage the private sector to build dynamic markets for sanitation:

1. Engage community-based retailers as the front lines for sanitation services. 

High-quality, low-cost WASH products exist; the trouble, we’ve found, is getting them to the communities and people who need them most. Through WARIDI, Resonance built cross-sector partnerships with promising WASH companies, helping them build out their rural distribution channels to increase sales outside of major cities. Collectively, they provided nearly 25,000 Tanzanians with direct access to LIXIL’s SATO latrine and many more women and girls with feminine hygiene products and services from Kasole Secrets and Anuflo Industries

However, many communities that could benefit from critical, low-cost sanitation products cannot find them at local stores. In rural areas, one small retail shop—i.e., a hardware store or a pharmacy—may be the only place for miles around to purchase necessities like medicine, domestic products, or building materials. And though sanitation products certainly qualify as necessities, shop owners can be reluctant to take on the financial burden of investing in new products that are unfamiliar to their customers.

Yet these small, community-based retail stores, if adequately incentivized, can play a critical role in delivering sanitation products to millions of people who don’t have access to alternative distribution channels. Rural people are more likely to trust neighborhood shop owners—who often already provide them with short-term credit—than new project teams, especially when they consider trying out new products. As a continual presence in the region, shop owners can ensure the continuous uptake of sanitation products over time. And because the shops are nearby, consumers can take advantage of reduced travel and transport costs to purchase needed products. 

The most promising incentive structures acknowledge the need for store owners to strengthen their businesses holistically before they can purchase and effectively sell new WASH products in their communities. On WARIDI, we provided basic business training in marketing, business plan development, and finance and accounting to nearly 500 small retailers spread across rural communities in Tanzania.

Throughout, the training program emphasized the potential of WASH products and connected community-based retailers to promising WASH companies in Dar es Salaam who sought to build out their distribution channels and expand rural sales. This approach—combining WASH education and connections with essential and desirable business development services—can be applicable elsewhere. With coaching and support, small retailers can be encouraged to stock and sell sanitation products, as well as other transformative goods and services—and are better equipped to persuade their customers of the benefits.

2. Expedite the WASH product supplier-retailer matchmaking process.

While rural retail shop owners are based in remote locations, most WASH product and service companies are based in cities. With few employees and pressure to grow, these WASH product companies are challenged to expand to rural areas where the population is more dispersed. Most don’t have the resources to travel to individual retail shops scattered across vast distances to build relationships with outlets that each serve relatively few customers.

Here, the global development community can leverage its networks to play matchmaker, helping connect WASH product companies with the rural retail shop owners who could sell their products. On WARIDI, we leveraged our networks with rural retailers and WASH companies to facilitate business-to-business (B2B) matchmaking sessions where everyone gathered in one place. This approach minimized resources and gave WASH product suppliers a chance to pitch their value proposition efficiently and effectively. Through the B2B sessions on WARIDI, Kasole Secrets, LIXIL, and Anuflo Industries entered into a total of 82 distribution and pricing agreements with distributors, wholesalers, and retailers to expand their products into rural and peri-urban areas.

3. Partner with financial service providers to extend tailored financing across the WASH value chain.

Tailored training may help rural retail shop owners gain the skills they need to add new WASH products to their shelves, market them effectively, and develop an overall business plan; yet, they still need access to credit to continue to purchase WASH products and grow their business. The same is true for WASH product and service companies.

Usually, suppliers and retailers cover the working capital costs of stocking inventory for new products: The supplier either lends the product on credit and waits to be paid back, or a retailer purchases the product upfront and waits until a customer buys it. While larger WASH product suppliers may have more leeway to offer credit to their retailers, smaller WASH enterprises don’t often have the cash flow to provide credit to a network of rural retail shops and wholesalers. Finally, customers may also be limited in their ability to purchase more expensive WASH products and lack financing options to purchase a product in installments.

Financial service providers can play a pivotal role in helping WASH suppliers and retailers grow their operations and impact. They can extend tailored loan products to WASH product suppliers to grow their businesses; to small retailers, to encourage them to take the risk in purchasing and stocking new WASH product offerings; to customers, to help them invest in sanitation services and products for their homes, businesses, or communities; and to local water utilities, to help them invest in community WASH infrastructure. When products are developed in partnership with WASH enterprises, programs are more likely to succeed and create a long-term, sustainable market for WASH products. In our experience, developing effective financial services to support WASH suppliers, retailers, and customers involves building strong and profitable partnerships between WASH companies and financiers, as well as structuring tailored loan products.

4. Enlist local government to drive WASH uptake and support sanitation market development. 

Good design and marketing have the potential to generate substantial demand for WASH products and services. But government endorsement can cement community uptake, particularly in rural regions where much of a community’s activity flows through its local government. 

In Tanzania, as in other countries experiencing rural sanitation challenges, the government oversees a national sanitation campaign to increase consumer access and uptake across the country. Wards and villages that implement local activities as part of the campaign are encouraged to partner with the private sector to generate demand for WASH products and manage logistics, product supply, and quality control. Meanwhile, governments can also generate demand for WASH products, pass laws to increase the use of improved sanitation, and help enterprises expand into new markets.

We’ve found that working with the private sector, primarily at a local level, is critical to the success of sanitation marketing campaigns. It also improves the likelihood of building a sustainable distribution network and supply chain of sanitation products. One recommendation is to ensure that all activities—local promotion, products promotion, and private sector engagement—are well-planned and coordinated with the government.

Cross-Sector Collaboration to Promote Markets for Sanitation

By engaging community-based retailers, suppliers, financial service providers, and local government, WASH program leaders can significantly improve consumer access to sanitation products and services in the rural regions that need them most. Harmonizing the needs of so many stakeholders is no simple task, but we think the results are well worth the effort. As WARIDI has demonstrated in Tanzania, leveraging the private sector’s strengths paves the path toward lasting market-led sanitation solutions. 

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If you'd like to learn more about engaging the private sector to promote robust local markets for WASH, contact Nick McClure directly.

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