Building inclusive sanitation markets for the poor

The “Alternative Pro-poor Sanitation Solutions in Peru” (APSS) initiative [1] proposes a market approach to sanitation based on the interaction of: a) a demand who gives priority to sanitation, because identifies tangible benefits (e.g. value of their housing investments and their social status), b) a competent, articulated and profitable local-national supply, able to provide an integrated sanitation package (sanitation options, installation and maintenance services, financial facilities and post-purchasing advice and support), c) a micro-credit system which includes financial products for sanitation; and d) key local actors committed to sustainable sanitation management, as well as to the promotion and regulation of this market.

The APSS initiative pays special attention to the active involvement of the private sector in sanitation supply, promoting it as a business opportunity to benefit local development as well. It is a strong market - driven approach which implies moving from the vision of the poor as “beneficiaries” to the vision of the poor as “customers”. The implications of this shift are crucial. While beneficiaries have necessities to be fulfilled by either the state or the municipality, with little concern about their visions and preferences, customers have the “right to choose” among different alternatives, they are responsible for good decision making and have the power to shape supply.

The objective of this paper is to present the potential opportunities and challenges of involving the private sector in the improvement of sanitation for lower income groups in Peru. The paper describes the findings of the baseline studies that support the APSS initiative, and provides a description of the model. Furthermore, it presents some initial outcomes and makes a reflection on the challenges faced in enhancing sustainable sanitation solutions with the sustained involvement of the private sector.

This new approach to sanitation in Peru faces some important challenges; it implies a change of paradigm and renewed roles for different actors; it opens opportunities to explore the potential of incorporating market mechanisms in development strategies. It could also be a good opportunity to find new ways to reach sustainable and quality sanitation services based on social inclusion, equality and solidarity.

[1] APSS is a public-private alliance headed by the Peruvian Government through the Vice Ministry of Construction and Sanitation of Peru (VMCS), Lima’s public water utility (SEDAPAL), the National Direction of Environmental Health (DIGESA) of the Ministry of Health, the World Bank, the Swiss Agency for Development and Cooperation (SDC), the United States Agency for International Development (USAID), the Americas Fund (FONDAM), the Ensemble Foundation and the Water and Sanitation Program administrated by the World Bank (WSP). APSS is implementing in five pilot zones of Peru. These localities are representative of the diverse cultural, geographical and social conditions of the country: the urban marginal areas, rural areas, small towns; the coast, the highlands and the jungle regions.

[Paper to be presented at the IRC symposium Sanitation for the Urban Poor, Delft, The Netherlands, 19 - 21 November 2008]