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Small-Scale Water & Sanitation

Across the developing world, millions of people rely on the private sector for their daily water and sanitation needs. In the majority of cases, the providers of these essential services are not the large multinational corporations often associated with private participation in the water sector. They are local entrepreneurs operating on a small scale, who see selling water and sanitation services to the poor as market opportunities like any other.

These “base-of-the-pyramid” markets grow out of exclusion and the challenges of finding sustainable solutions for small communities and settlements. They are the markets of the unserved—people that public services have failed to provide for and for whom internationally recognized notions of improved services are out of reach. 

The paradox is that this large market is dominated by small, local enterprises. Once viewed as opportunists profiting from people’s most basic needs, these private sector enterprises are now recognized as offering valuable services. Domestic private entrepreneurs are increasingly being seen as part of the solution to increasing access to water and sanitation.

 

Issues

  • Policy rationale for small scale PPPs

    Rural and periurban areas seem an unlikely place to start with private sector provision of water and sanitation services, but in many countries the lack of sustainable service in rural areas has been a driver of change. For example, in West...

    Rural and periurban areas seem an unlikely place to start with private sector provision of water and sanitation services, but in many countries the lack of sustainable service in rural areas has been a driver of change. For example, in West Africa governments realized that the community-based management model was not delivering on performance or sustainable services, with their schemes rapidly falling into disrepair.  In Ouagadougou, Burkina Faso, and Maputo, Mozambique , the state agencies have promoted the provision of safe piped water services in informal settlement areas or small systems where they were urban utility was not permitted or unable to reach.

  • Delegated management to the local private sector

    Many countries, such as Benin, Senegal  and Cambodia have adopted the approach of formally delegating the delivery of water services in small towns and rural areas to the local private sector. ...

    Many countries, such as Benin, Senegal  and Cambodia have adopted the approach of formally delegating the delivery of water services in small towns and rural areas to the local private sector.  In these markets the customer base is low, populations are poor and distribution systems serve from a few hundred to several thousand connections. Small local private providers are meeting people’s basic water needs.

    By delegating public provision of services to the local private sector, services can be maintained and expanded in markets not traditionally considered to be commercially viable. Many unique business models have developed around these markets to deliver much needed services. Capacity building for local firms and support for marketing are important. For both households, firms and small utilities in the developing world, access to finance is often a key constraint. Firms selling to the base of the pyramid need funding for both working capital and infrastructure investments, yet commercial institutions are often not willing to invest in such unknown markets.

    Effective private sector approaches to water and sanitation require creative approaches to providing financing and de-risking projects. Governments can create a supportive enabling environment and use public resources strategically to attract suppliers and lenders into this market.  

  • Going to scale

    The process of developing and structuring PPPs is complex and if used in rural areas would need to be applied to many hundreds of small systems for the approach to go to scale in a country. Therefore clustering of villages and small towns into...

    The process of developing and structuring PPPs is complex and if used in rural areas would need to be applied to many hundreds of small systems for the approach to go to scale in a country. Therefore clustering of villages and small towns into single PPPs is a useful way to achieve economies of scale. Clustering enables transaction costs to be reduced, more and less profitable sites can be grouped to create a package that is financially viable and attractive to the private sector, and ensures equity of access to all. Larger transaction size is also more attractive to private operators with bigger water sale volumes and more likely to interest commercial banks.

Tools & Guidance

    • 2013
    • Aquaya, International Finance Corporation (IFC)

    Water Business Kit Kenya

    A guide to starting your own water treatment and vending business

    This toolkit has been developed to provide small and medium enterprises and entrepreneurs with a step-by-step guide to developing a water treatment and vending business in Kenya.

    • 2016
    • Mouhamed Fadel Ndaw
    • World Bank Group (WBG)

    Private Sector Provision of Water Supply and Sanitation Services in Rural Areas and Small Towns

    The Role of the Public Sector

    Many developing countries are about to prepare their new strategies on how to achieve the Sustainable Development Goals (SDGs) for universal and equitable access to water and sanitation by 2030.These new roadmaps need to put a focus on rural growth centers and small towns where the majority of those without access to water and sanitation reside.

    • 2016
    • Iain Menzies
    • World Bank Group (WBG)

    Delivering Universal and Sustainable Water Services

    Partnering With the Private Sector

    The performance of water and sanitation utility companies varies greatly, but many are underperforming. This is due mainly to systemic issues, which can include weak governance, lack of accountability, poor management, inadequate or aging infrastructure, and insufficient funds for operations and maintenance. In many cases the public sector water and sanitation service providers seek support to overcome the challenges. Public-private partnerships (PPPs) can be an important option for implementing sector reform strategies and can address the key challenges to providing universal and sustainable service access.

    • 2014
    • Victoria Rigby Delmon
    • World Bank Group (WBG), International Finance Corporation (IFC)

    Structuring Private-Sector Participation (PSP) Contracts for Small Scale Water Projects

    The purpose of this toolkit is to provide guidance to water authorities who intend to contract private operators and sector professionals assisting such authorities, on how to structure a contract and bidding documents for private sector participation (“PSP contract”) in small scale water projects.

Projects & Case Studies

Lessons & Analysis

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