Optimizing smart subsidies to drive toward 100% market-led rural sanitation coverage in Cambodia
Since 2009, iDE has developed and piloted a market-based approach to household sanitation in Cambodia that has proven very effective in boosting rural latrine sales. The key elements of the approach are a well-designed and packaged product that offers customers one-stop shopping and easy installation, an aspirational marketing campaign, and dedicated sales teams using proven 'human-centered sales' techniques. By late 2014, latrine businesses supported by iDE successfully sold more than 140,000 latrines to rural Cambodians.
While iDE’s market-based approach to sanitation has increased rural households’ adoption and use of latrines, a recent willingness-to-pay trial conducted by IDinsight has found that it is possible to achieve a further four-fold increase in sales with an innovative consumer financing product piloted with PATH and VisionFund. iDE and its partners are now focusing on the best strategies to scale up access to sanitation finance and smart subsidies in conjunction with the market-based sanitation approach.
While finance promises to further boost sales, the willingness-to-pay study also offers a sobering statistic: even with finance, only 50% of non-latrine owners are likely to purchase a latrine at current prices. Assuming baseline coverage of roughly 30%, this means only 65% coverage can be achieved with a combination of sanitation marketing and sanitation finance. To reach all households with improved sanitation may require some type of 'smart' subsidy. This project will test a 'smart' subsidy approach that would leverage the government’s ID Poor designation to identify the most vulnerable households for a partial subsidy in a way that would reinforce, instead of undermine, the commercial market. The question is then what is the most cost-effective strategy that incorporates sanitation marketing, finance and smart subsidy to reach the maximum number of households with the least cost, while reducing market distortions.
The current study seeks to answer three primary questions:
- What is the optimal amount of subsidy, while offering finance options, for WASH products to achieve the maximum amount of sales to the poor?
- What effect will a smart subsidy to the ID poor have on sales to non-ID poor within the same communities?
- What is the most effective operational strategy to roll out a large-scale smart subsidy program alongside cash-only and financed purchases (for both the program and for the potential finance partner)?