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An integrated segmentation approach to sanitation markets and
financingMarch 19, 2009
1. Context2. Market opportunities3. A new strategic perspective4. Preliminary results5. Lesson learned
Contents
The Context: Big gaps, poor quality access
Inhabitants: 28.2mPBI $114.5mPBI per capita $4,043Annual inflation 6.22%Extreme poor: 16%Bank rate 27%
Child mortality: 8.3%Diarrhea: 24%Chronic malnutrition: 24%HDI: 0.767
Water access: 76%Sanitation access: 59%WW treatment: 23%
Opportunities: Development of the sanitation
market Market Size. 12 million without access.
70 % in rural areas and 30 % in urban areas.
Poor quality. Only 3 out of 10 have quality sanitation. 6 out of 10 are not satisfied with what they have.
Willingness to invest. 7 out of 10 are willing to invest to improve their sanitation. 52 % in dry bathrooms and 61 % in water options
Low bank rate. 12 % has been granted a credit in the last year. 5 % in rural areas and 21 % in urban areas.
Ownership. 50 % have title deeds. 43 % in rural areas and 59 % in urban areas.
Multi-stakeholders alliances
INCENTIVES AND REGULATION
FAMILIES AND COMMUNITIESuse and maintain
services that meet their expectations
SANITATION MICRO-ENTERPRISES
have profitable and responsible businesses
Provide inputs, services, financing and advice
FINANCING OPTIONS
require sanitation information and options
SANITATION MARKETS
A new strategic perspective:Market for the poorest?
Leadership promotion demand
Strengthen local-national
supply
Multi-stakeholders platform:
A win-win scenario for allPublic SectorEfficiency
Capacities & knowledge
Acceptance
Population Access to services and opportunities
Knowledge and capacities Rights and accountability
Empowerment and inclusion
Private sector Access new markets
Loyalty Best products
Image
Civil Society Capacities
Knowledge sharing Access to new opportunities
Cooperation Efficiency
Sustainability
Central governmentRegional governments
Local governmentsGovernment programs
NGOs and CBOsSchools
Technical institutionsUniversities
Financial institutionsSanitation enterprises
Hardware storesService providers
Adverstising companyOthers (Netsle/Gloria)
WSP - WBSDC
USAIDFondo de las AmericasFoundation Ensemble
Market profile:A strategy for each market
segmentUpper poor Medium poor Very poor Extreme poor
Percentage
Financing
18.4% 20.6% 23.4% 22.3%
Banks
Regulated MFIs Non-regulated MFIs
Subsidy Program
Regulated MFIs
Subsidy Program
Product Dry toilets
Water toilets
Distribution
Home format sale
MultiCasa
Community sales
MultiCasa
Community sales
Home format sale
MultiCasa
Community salesCommunity sales
HH Connections
Dry toilets
Water toilets
HH Connections
Dry toilets
Water toilets
HH Connections
Dry toilets
Water toilets
The product: An integrated package
Sanitation technologies• Without water• With water without
sewerage systems• With access to
sewerage systems
Quality services• Construction
and installation• Emptying • Fixing
Financial facilities• Individual loans
Communitarian loans• Credit cards• Saving groups• Government subsidy
programs (Juntos & Techo propio)
Education & advice• Use and maintenance
education• Credit education• Sanitation awareness
The circle of quality
Financing: A variety of products
KIND OF FINANCIAL INSTITUTIONS
Banks Micro financial institutions
Non regulated institutions
KIND OF FINANCIAL PRODUCTS
Credit cards
Individual loans
Saving groups
Subsidy gov. programs
Communitarian loans
Communal Sales Promoter
Distribution: Channels and key actors
Consumer
Financial Operator
Artisans
Relationships that the initiative is seeking to build
Sanitation micro-enterprises
Hardware Stores
Distributor
Provider inputs
Services
Multi-stakeholders platform
Why are we engaged? Market knowledgeReduction of period for return of investment (ROI) Risk decreasing, shared through the partnersDecrease of barriers for banking clients New business opportunities
How did we decided on the product offering?Credit cards upon co-branding strategy (Maestro)New channel distribution (correspondent tellers)Agreements with utilities (Sedapal)
What are the business risks?Increasing of the delinquent portfolio
Financial Operator
Preliminary Results USAID HIP’s M&E approach
Since the promotion campaign was launched six months ago, there are some pilots zones which have achieved 6% of the potential market (people without or with bad conditions sanitation services).
Despite the crucial role of credit in reducing barriers of entry for access to sanitation, people feel a big fear face up the financial system.
People want to have an integrated solution, but the total price is perceived as a barrier. They prefer to construct in stages and pay in cash.
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Pachac
Cajam
Indepen
Chinche
Market share by pilot zone
Percentage of sales by kind of payment (cash - credit)
Credit 34%
Cash66%
Lessons Learned
The poor are heterogeneous. The segmentation strategies need to be improved. Build upon the drivers
Women are the key target. They trigger the decision process.
An articulated supply chain. It includes a referring system, a platform of partners under clear rules for action, as well as standards that improve this quality circle.
Incentives system, that allow faster the market mechanisms, and at the same time improve the scenario win-win in the supply chain.
The market access triggers the wealth flow. Promotes inclusion and allow people to go up the ladder of the quality of life improvement.
Business Model Partners