Almost 23% of people in Ghana do not have access to any sanitation facility, and only 15% use improved unshared sanitation facilities.¹ Several challenges exist both on the demand (households' ability and willingness to pay) and the supply side (capacity of the private sector to meet the demand).

This article presents the findings from two studies conducted for Water and Sanitation for the Urban Poor (WSUP) and The World Bank:

Analyzing the customer base for sanitation financing products: This study focuses on the accessibility of toilet loans in Ghana. It generates evidence on some of the areas that prevent financial institutions from effectively catering to the current and potential demand for toilet loans in Ghana.

Supply-side assessment of the MSME sanitation ecosystem: This study presents the challenges faced by MSMEs (Micro, Small and Medium Enterprises) in constructing toilets for households. It identifies actionable solutions to support quicker implementation of the Greater Accra Metro Metropolitan Area (GAMA) Sanitation and Water Project, as well as broader sanitation interventions in Ghana.

1. Customers segmentation for sanitation financing products

Under USAID's Sanitation Service Delivery program, WSUP implemented a sanitation market project in Accra and Kumasi. It sought to catalyze the market for sanitation products and improve access to adequate and safe sanitation for households and groups of households sharing a compound.

Financial barriers are a major issue affecting toilet uptake. People are deterred by the apparent high costs of building a toilet facility and may back away from making a purchase due to actual/perceived lack of affordability. Thus, bridging the finance gap is critical to achieve the country's household toilet coverage goal.

Athena supported WSUP to examine financing models that could help address this financing issue.

An Ideal Toilet Loan: Flexible and Accessible Repayment Plans, Easier Applications

Using data collected through household surveys, we were able to build a profile of some of the key features of an ideal toilet loan:

• Easy payments - the loan should be both flexible in terms of repayment and offer different repayment methods (such as mobile money).
• Simpler application process - the loan application process should have low documentation requirements as these are onerous and often a barrier for loan applicants. Our study also found applicants travel around 8 hours just to obtain information about sanitation loans.
• Lower interest rates - toilet loans should be offered at a lower interest rate to make them more accessible to the economically disadvantaged. This may not be possible in the short term given Ghana's recent history of high interest rates.

2. Supply-side assessment of MSME ecosystem in sanitation

Athena also worked alongside WSUP, supporting the World Bank's GAMA Sanitation and Water Project. The project intends to expand the number of households with access to toilets and aims to support provision of 12,500 toilets by the end of May 2020. The project is providing an asset-based subsidy of 70% to stimulate and encourage households to construct toilets. A network of contractors, empanelled by the Local Government Project Coordinating Unit (LGPCU), is helping households identify and build the most appropriate toilet technology.

Challenges Facing MSMEs: Finance Flows

The major challenges faced by MSMEs center around financing and processes. Smaller MSMEs face limited cash flows, which affect their ability to finance toilet construction operations. Four major constraints hindering MSMEs' ability to finance operations include:

• MSMEs didn't account for the cost of borrowing in their contract with LGPCU, affecting their ability to scale-up.
• Differences in site conditions generate additional costs that are in practice borne by the MSMEs, rather than by the beneficiary and the project.
• The current caps on beneficiary costs, which have been established to ensure demand creation, have not been evolving in alignment with construction costs.
• The lack of standardized WASH loan products makes it challenging for sanitation MSMEs to identify loans that are suitable to their needs and capacity to pay.

Conclusion

These studies consider both sides of the toilet construction and usage ecosystem in Ghana: the issues facing the end user and loan accessibility, and the issues faced in providing subsidies for construction and construction support. For the end user, ensuring that loans become affordable and attractive is key to ensuring toilets can actually be constructed. At the supply side, re-examining finances - such as ensuring regular cash flows and improving MSMEs' access to finance - will help improve construction rates among beneficiaries. The studies propose a wide range of actions from partnerships to technological adoptions and capacity building to achieve these objectives.

You can find the Practice Note for these studies here.

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References:

1. UNICEF, 2015. "UNICEF Ghana internal statistical bulletin - Basic Sanitation".