This report by the Water and Sanitation Programme (WSP) draws attention to the fact that a very high percentage (40%) of the population in the world does not have access to basic level of sanitation, which has serious health consequences and puts a considerable economic burden on the poor. The report explores the issue of what can be the most appropriate financing mechanisms to meet the sanitation needs of the poor.

Sanitation solutions are not very cheap for the poor and the issue of effectiveness of public funding for sanitation to the poor and of the most appropriate finance mechanisms to meet the sanitation needs of the population continues to be debated.

The Water and Sanitation Programme (WSP) conducted case studies from six developing countries. The case studies aimed at:

• estimating the costs of providing access to on-site sanitation (hardware and software),
• the role, appropriateness and relevance of the public sector in supporting such initiatives
• the appropriateness of other ways of investing and exploring innovative means of promoting household sanitation financing.

The study found that:

• different financing strategies adopted in the different regions had a profound influence, on equity, scale, sustainability, levels of service, and costs.
• hardware subsidies played a critical role in all six case studies.
• all of the case studies included a significant publicly funded software component (promotion and community mobilisation).

For example, in Maharashtra, community mobilisation was found to be a motivating factor for household investment, monetary rewards were found to be very effective at the village level and outcome based subsidies at the village and household level helped in meeting the needs of the poor and improved the programme.

The study concluded that subsidy targeting methods needed to be tailored to country circumstances. Early planning and careful design of financial arrangements for sanitation could go a long way in promoting realistic goals and sustainability. It was necessary to look beyond the semantics of simplistic “subsidy vs. no subsidy” debates to defining an appropriate level and form of public investment in sanitation.