SS-DPSP Main Activity Lines
Sustainable Services Through Domestic Private Sector Participation, SS-DPSP, proposes interventions along three main lines of activities:
I. Building Water and Sanitation Business Models for the Poor;
b. Sanitation Business Development
II. Public-Private Partnerships in Non-Traditional Markets
III. Banking the ‘Unbanked’ Water and Sanitation Providers.
Building Water and Sanitation Business Models for the Poor
Capacity-building is a key component for developing a cadre of credible local private providers in emerging markets. In undeveloped markets, know-how is usually vested in the public sector because of its traditional role in providing services, as in the case of Mozambique and Rwanda, or because markets do not provide the private sector incentives to invest in delivering certain critical services.
In the Philippines, know-how is already in the hands of the private sector – there is a vibrant engineering and business support industry – but not enough are investing in services that cater to small water providers, hence, their services remain inaccessible.
Capacity building programs are focused on enhancing the business of water and sanitation entrepreneurs, tackling issues such as technical and financial management, marketing and investment planning. The content and approach differs depending on the level of market maturity and type of providers.
b. Sanitation Business Development
Unlike water supply, demand for sanitation is relatively low, which explains the market’s low delivery of sanitation goods and services. While public programs, such as Community-Led Total Sanitation (CLTS), can generate demand, the sustainability of changing behaviors rests on the availability of affordable sanitation options that address consumer demands, particularly the poor.
The following are key for developing sanitation markets:
- Demand: Understanding consumer preferences, particularly key motivators for deciding to purchase sanitation facilities;
- Supply: Supporting local private entrepreneurs to develop and deliver demand-responsive sanitation goods and services, from production to marketing; and
- Financing: Linking sanitation entrepreneurs with financing institutions to support investment financing or to provide consumer financing to their low-income customers.
Public-Private Partnerships (PPPs) in Non-Traditional Markets
Non-traditional markets, such as sparsely populated and dispersed settlements, are a challenge to making private sector participation a commercially viable proposition because of economies of scale and affordability issues. The experiences in Cambodia, Mozambique, Mali, Rwanda, Senegal, the Philippines, and Uganda have shown, however, that given the right allocation of risks, interest is generated from the private sector to venture into these waters.
In the African countries, the private sector role is mostly confined to that of an operator of rural water supply schemes, which generally refer to small piped water schemes serving households through a combination of private connections and standpipes. Meanwhile, in India, the private sector is involved in higher-value-added services, such as processing and disposal of solid waste.
A key focus is to demonstrate success not just by helping develop PPP arrangements but also by strengthening the enabling environment (legal, regulatory, financial and institutional).
Banking the ‘Unbanked’ Water and Sanitation Providers
The introduction of commercial financing in service providers’ capital structure brings potential to expand services, plus market regulation.
However, in many instances, even viable local private providers lack access to financing because they are considered by commercial financing institutions as being higher risk than other investment opportunities.