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| Last Updated:26/02/2014

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A supply side solution to rural sanitation

Live Mint, 25 February 2014


Research shows that the solution to India’s rural sanitation problem may primarily lie on the supply side


According to the 2011 Census, 67% of rural Indian households (116 million households) do not have toilets. Photo: Pradeep Gaur/Mint

Sanitation is a major global issue with over 1 billion people defecating in the open, and 2.7 million dying annually because of lack of access to hygienic sanitation, including many children. The issue is even more acute in India—of all the people who defecate in the open globally, a majority (600 million) lives in India, and over half of India’s population defecates in the open. In fact, according to the 2011 Census, 67% of rural Indian households (116 million households) do not have toilets. The government of India recognizes this issue and has approved subsidies to increase rural sanitation penetration, but this initiative has not had the desired impact.


One school of thought suggests that rural Indians do not want toilets and prefer to defecate in the open, and that, therefore, sustained demand generation is what’s needed. But extensive customer and value chain research shows that the solution to India’s rural sanitation problem may primarily lie on the supply side.


Contrary to popular belief, demand for toilets exists in rural India—for example, 84% of households surveyed in rural Bihar want a toilet and 38% of these households could actually describe exactly what they wanted including detailed costing, which gives confidence that this is genuine demand, not just “stated” demand. Moreover, health is not the primary driver of demand for toilets. Safety (such as from animals or assault), convenience (particularly for the elderly or unwell) and privacy are the main drivers of demand. Only 1% of customers cite health as the driving factor.


So if demand for toilets exists, why are Indians not buying them?


Rural customers, even in areas like Bihar, aspire for septic tank-like options, which cost well over Rs.20,000, and are beyond their reach. In their minds, these are the only high-quality, long-lasting toilet options. But the experience of various organizations across India indicates that it actually would be possible to construct and deliver quality, aspirational and long-lasting toilet options in the price range of Rs.7,000 to Rs.12,000 by making judicious design choices.


However, availability of a more reasonably priced product by itself may not be sufficient to drive significant toilet penetration due to low incomes and irregular income patterns in rural areas. Only 6-8% of rural households may be able to purchase such a toilet outright.


Financing could enable an additional 10-12% of rural households without a toilet to afford one and supplementing financing with the government subsidy (Nirmal Bharat Abhiyan or NBA) of Rs.4,600 would enable a further 40-45%. That’s a total of around 60% of the rural population, representing a potential Rs.50,000-70,000 crore opportunity to deliver toilets.


A few pioneering microfinance institutions (MFIs) in India have added sanitation loans to their portfolio and are seeing strong uptake—one of them is giving 1,000 loans a week. These loans require monthly instalments of Rs.250-500 and are seeing high repayment rates (often around 99%). Additionally, sanitation loans are met with high levels of gratitude from customers. As such, sanitation presents not only a business opportunity for MFIs—potentially Rs.30,000-45,000 crore—but also helps position them as having significant social impact. Supplementing the NBA subsidy with additional subsidy from the government’s rural job guarantee scheme yields a total subsidy of around Rs.9,000 and could enable the remainder of around 40% of the rural population to purchase toilets.


The NGO Population Services International (PSI) is piloting a couple of business models in Bihar, leveraging these insights. It is playing a “market-maker” role—getting the models started, hand-holding key value chain players, coordinating marketing activities, etc. Elsewhere, other NGOs, MFIs and even cement manufacturers are “making the market”—a role critical to establishing the model in the initial period.


The pieces of the puzzle are on the table and if more “market makers” can drive similar models forward in various parts of rural India, we may be able to end open defecation in rural India within our lifetimes.