Urban Sanitation: potential for a pro-poor market?

1. Urban Sanitation: potential for a pro-poor market? Lessons learned from a pilot project in Jakarta, Indonesia

2. Action Research Questions • How to enable access to sustainable sanitation for large number of urban poor? • Can we enable access through development of a pro-poor market? • Can market providers be those from the low-income communities themselves? • What is the potential for employment and small/micro sanitation business development?

3. Indonesia – Access to Sanitation • 52% (94 mil) without access to adequate sanitation • Health impact + Economic impact (>50,000 death/yr from diarrhoea, 2.3% GDP) • Scale of public investment required - $150 billion • National mandate: sanitation is no longer just a private matter • Strides in rural sanitation – CLTS + communal septic tank systems • Urban challenges, and opportunity? 50% urban population + high urban growth rate Land tenure, housing density, free riders Market potential?

4. Jakarta – Access to Sanitation • Sanitation infrastructure: <2% covered by centralised sewerage • 2.2 million HH without access to adequate sanitation • Private communal systems: Private/housing estate sewerage systems • On-site decentralised sanitation: Septic tanks + bio-filter + Soak pits • 2 WWTPs, publically operated • Sludge trucks – mix of public/private (insufficiently regulated) Health issues: water supply Environmental issues: flooding/drainage

10. Open defecation

11. Communal latrine blocks (MCK)

12. Private latrine + soak pits

13. Market niche? 2.2 million un-served by existing market

14. Viable sanitation enterprise? On-site treatment options now geared to upper end of the market: >10 million IDR, large volume, black + grey -high ongoing O&M costs Low-cost septic tank/treatment option – technically viable? Economically viable? -Small business opportunities: manufacture, installation, servicing (de-sludging)

15. PUSH – Program UntukSehatdanSanitasi/Hygiene Formal objectives – modest: • Pilot low cost, sustainable, and replicable infrastructure model • Promote awareness of the economic benefits of improved sanitation for urban poor communities Informal objectives – ambitious! • Demand and supply side interventions • Sanitation service chain – installation + treatment + O&M Multi-stakeholder partnership: Mercy Corps Indonesia/iNGO, IATPI MFI/cooperative, PD. PAL, West Jakarta govt, community, local entrepreneurs 2009-2011 – ongoing project

16. Sanitation service chain

17. Demand & Supply side interventions Demand side: • Building demand – sanitation marketing/hygiene awareness • Regulatory environment • Supporting financial systems – enabling access to finance Supply side: • R&D - Testing a new sanitation product for urban poor households • Building capacity of market to provide – local construction firms/entrepreneurs, business development skills • O&M service market – de-sludging, private/public partnership

18. Supply: Research & Development • black water septic tank + bio-filter (upflow/ anaerobic) • meets municipal treatment standards • Pre-cast modular units - fit in small houses (2.5m2) • service/empty every 1-2 years • >60% less expensive than current models

20. Supply: Small business support Existing small construction businesses • Training in production & installation • Financial support for marketing • Market assessment Options for customers: • Black vs. black &grey WWT • Maintenance packages

21. Supply: Public/Private partnerships Sludge removal, transport, treatment Micro-business or community organisation + Public municipal wastewater treatment company

22. Building demand – market development • Hygiene promotion + Peer group marketing • Rates of diarrhoea >20% incidence • Target households who just received piped water connection Prices still high relative to income: • $212-425 USD = 150-250% of HH mthly income • Affordability – only 13% WTP for product without any subsidy • 81% WTP for ongoing O&M costs 55% of HH – monthly income <$112 USD (1 million IDR);

23. Building demand: Access to finance • Accessible loan products: 1% interest, 12-24 mth repayment issued by local MFI/cooperative • Currently, financial guarantee is made by project, but only until end of 2011 – a role for government? • Trying to promote loan product to be offered by other MFIs, who currently see loans for non-income generating activities as risky, high rates of non-performance

24. Action research results • Piloted 250 units, with financial contribution of 10% of total cost and 100% O&M • Treatment standards achieved • Affordability? Not without some level of subsidy • Demand is flexible = financing, social pressure, enforcement of govt regulations, + guaranteed removal services Still high risks for entrepreneurs entering the market

25. Remaining questions • Role of regulation? Enforcing existing regulations on treatment/effluent quality – starting with the middle/upper income groups! • How to work with landlords, enforce adequate sanitation provision in rental houses/blocks • How to decrease risk to sanitation entrepreneurs – manufacturers/installers and sludge removal • Role of targeted subsidies? What level of public/private investment? • Government (or private) loan guarantees for financial institutions who provide loan products?

26. COP Discussion Question The challenge facing local governments in Indonesia – how to invest in improving access to sustainable sanitation, in rural and urban areas? Current donor attention: private sector role and market potential • Building local capacity to manufacture appropriate infrastructure + marketing and business skills development + targeted subsidies and financial services to create demand