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