Water and Sanitation Program. End of Year Report, Fiscal Year 2014

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1 Water and Sanitation Program End of Year Report, Fiscal Year 2014

2 End of Year Report, Fiscal Year 2014 Water and Sanitation Program The Water and Sanitation Program (WSP) is a multi-donor partnership administered by the World Bank to support poor people in obtaining affordable, safe and sustainable access to water and sanitation services

3 Message from the Manager This year has been one of transition and renewal for the Water and Sanitation Program (WSP) and the broader water community at the World Bank Group. As the World Bank reorganizes itself into 19 global practices and cross-cutting solution areas, it is increasingly clear that the change process will provide an exciting opportunity to integrate WSP s work more closely with World Bank operations and amplify our impact. As the deadline for the Millennium Development Goals (MDGs) draws closer, we are reminded that although the access targets for water supply have been met in most countries, we are still far from reaching the goals set for sanitation or universal access to water supply. As work continues on establishing the Sustainable Development Goals (SDGs) as the successor to the MDGs, the water community is taking a more comprehensive look at what access truly means. At WSP, we have worked not only to provide access to water and sanitation for the poor, but also focused on ways to increase its quality and sustainability. The SDGs will provide governments and donors with clear metrics to define success in these areas, and we look forward to aligning our work with the SDGs under the next business plan to expand affordable, equitable water and sanitation access for all. Expanding Quality, Sustainable Access for the Poor Despite the strong economic growth achieved by the developing world in the past decade, there are persistent and structural inequities in water and sanitation coverage. Widening inequality makes access to basic services even more challenging for the poor. Over 385 million who live without sanitation live on less than US$ 1 a day and almost two in three people without clean water live on less than US$ 2 a day. Access for the poor is often hampered by weak governance and institutions, leading to inadequate design and implementation of policies and programs. WSP provides evidence-based knowledge and technical assistance to help strengthen national and subnational systems through sector reform that helps the poor obtain affordable, safe and sustainable access to water and sanitation services. Holding institutions accountable is another important element in achieving more equitable access. This year, WSP continued exploring innovative technology solutions to help citizens interact with governments and to provide customers with more effective ways of sharing feedback with service providers. For example, a study on the potential of prepaid meters serving urban poor communities in Africa added important input in the dialogue on new approaches. Drawn from eight case studies and extensive literature reviews and customer surveys, aother stakeholders with evidence to inform decision making on the suitability, risks, introduction and management of such meters. The study shows that prepaid systems can allow service providers reach poor households and help customers manage their water usage and budgets. However, they cannot compensate for management shortcomings and poor financial management in a utility. Instead, this technology is an instrument to be used in line with policies, and the study provides strong messages for policy makers, regulators, the suppliers of prepaid meters and service providers. In another example of an innovative technology solution, Kenya s largest water utility used mobile phone-based software over the past year that helped increase customer feedback tenfold. Statistics collected through the software have been integrated into internal staff performance assessments and are already helping drive management decision-making. The software is now being adopted by other utilities across Kenya. WSP also launched the Country Poverty Diagnostic for Water Supply, Sanitation, and Hygiene (WASH) this year. This work aims to facilitate a better understanding of where the poor live, the level of service they receive, the impact of poor services, and key constraints and potential solutions to improve service delivery to the poor. The diagnostic will inform country strategies, mainstream poverty analysis into the sector, and help target

4 programs in a better manner to reach the poor. Diagnostics will begin next fiscal year in twelve pilot countries and will be scaled up through the Water Global Practice, in partnership with the Poverty Global Practice, during the next business plan. Leveraging World Bank Financing to Enhance WSP s Global Impact As the current WSP business plan draws to a close, this transition period lets us reflect on the results we ve achieved in the current business plan, and to seize the opportunity to dramatically increase our impact through deeper collaboration with colleagues in the Water Global Practice, as well as other partners. The World Bank is undergoing its most ambitious organizational transformation in decades, reorienting its portfolio around global practices and cross-cutting solutions areas. By bringing water experts from across the World Bank under a single umbrella, the newly-launched Water Global Practice will provide industry-leading knowledge and experience to address the most critical challenges for the sector. The creation of the Water Global Practice will foster a deeper collaboration between WSP and World Bank operations, and knowledge sharing with other groups within the World Bank, including the health and private sector practices, and the Public-Private Partnerships Cross-Cutting Solutions Area. Technical assistance and analytical work provided by WSP and the global practices, combined with World Bank investments, will accelerate our progress. Through WSP s unique position as a multi-donor partnership within the World Bank, we are able to test bold, new approaches to strengthen the institutions that provide water and sanitation services, helping them better serve the poor. We are also able to incorporate the most effective approaches into a portfolio of over US$ 15 billion in World Bank lending for water and sanitation, exponentially increasing the impact of WSP s work. There are already several examples of WSP enhancing the impacts of its activities this year through the World Bank lending, a trend that will continue to accelerate over the next WSP business plan. WSP Service Delivery Assessments and the Economics of Sanitation Initiative, which helps quantify the costs of poor Thank you, sanitation, have influence the development of a new World Bank project in Nicaragua. This work has also helped shape sector policy in Indonesia, Lao PDR, and Papua New Guinea. Based on WSP s technical expertise in urban sanitation, WSP and the World Bank operation collaborated on a US$ 150 million Greater Accra Sanitation and Water Project in Ghana, which WSP led the design of the component to expand access to sanitation for tenants in low-income communities, including local fecal sludge management services. This year, WSP s International Benchmarking Network (IBNET) was adopted as the national performance assessment instrument for the water and sanitation sector in Belarus, Honduras, Mozambique and Nigeria, where new World Bank lending projects using the tool were recently approved. In addition, the World Bank Danube regional project scaled up the use of IBNET as a regional monitoring tool for utilities supported by the project. As the water community broadens its focus beyond basic access to issues of quality, sustainability and universal access, the next business plan will enable us to clearly define WSP s role in achieving these goals. We want to thank Jaehyang So for her successful leadership as the Global Program Manager in WSP over the last four years. We wish her well in her new assignment as the Director of Trust Funds and Partnerships in the World Bank Development Finance Unit. We would also like to welcome Jyoti Shukla as Senior Manager of WSP. Jyoti brings significant experience in World Bank operations in South Asia and Latin America and the Caribbean, and also served as the Program Manager for the Public Private Infrastructure Advisory Facility (PPIAF). Most recently, she was the Senior Manager in the South Asia Sustainable Development Department. The support and partnership of our council is critical to the success of our work at WSP, and we thank our council members for the opportunity to work together to expand access to quality, equitable water and sanitation services for the poor. William Rex Acting Manager, Water and Sanitation Program

5 Table of Contents Introduction Global Knowledge Scaling Up Rural Sanitation and Hygiene Creating Sustainable Services Through Domestic Private Sector Participation Supporting Poor-Inclusive Water and Sanitation Sector Reform Targeting the Urban Poor and Improving Services in Small Towns Adapting Water Supply and Sanitation Delivery to Climate Change Impacts Delivering Water Supply and Sanitation Services in Fragile and Conflict-Affected States Global Communications and Knowledge Management Administration and Finance Annex: Fiscal Year 2014 Disbursements by Country

6 6 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

7 Introduction The Water and Sanitation Program (WSP) is a multidonor partnership administered by the World Bank to support the poor in obtaining affordable, safe and sustainable access to water and sanitation services. WSP works directly with client governments in 38 countries across the world today and plays a vital role in achieving the World Bank s goals of eliminating extreme poverty and boosting shared prosperity. From testing hand pumps and latrines in the 1980s to working with innovative technology to address customers concerns and needs currently, WSP has been a leader in the water and sanitation sector over the last three decades. The program shares best practices across regions and forges partnerships with academia, civil society organizations, donors, governments, media, private sector, among others, helping influence regulatory and structural changes needed to drive reform in the water and sanitation sector. WSP s work is organized into six closely-related business areas under the current business plan. Each of these tackle an important global challenge in water and sanitation and work to identify and scale up solutions that help bring long-term water and sanitation access for the poor. This report begins with the Global Knowledge section, which highlights the importance of technical information and new learning developed by WSP. Business Area Highlights details the approach, implementation status and results of each of the six business areas. Each section, listed below, also reviews lessons learned and identifies opportunities to strengthen our work. Scaling up Rural Sanitation and Hygiene: About 2.5 billion people live without access to improved sanitation around the world today, with a majority of them in rural areas. This underscores the continuing need to scale up and sustain efforts to increase access to rural sanitation. To address this challenge, WSP is working with governments and local private sectors to build all the components needed to develop and institutionalize large scale, sustainable rural sanitation programs. Creating Sustainable Services through Domestic Private Sector Participation: The public sector alone lacks the resources to provide universal access. By partnering with the private sector, governments can access new sources of financing, encourage innovation in the sector and use competition to drive down prices. WSP helps client governments strengthen the ability of the domestic private sector to provide the poor with sustained access to better and more cost-effective water supply and sanitation services. Supporting Poor-Inclusive Policy Reform: WSP works closely with countries across the world to support poor-inclusive sector reform and develop propoor policies that align with the World Bank s primary Water and Sanitation Program: End of Year Report, Fiscal Year

8 goal of eliminating extreme poverty. WSP also strives to strengthen the voice and capacity of citizens, especially the poorest, to demand greater accountability and responsiveness from public officials and service providers. Targeting the Urban Poor and Improving Services in Small Towns: More than half of the world s population, or about three billion people, live in cities or towns and this number is expected to reach five billion by 2030, pointing to a rapidly growing demand for water supply and sanitation services for the urban poor and those living in small cities and towns. WSP is identifying new ways to expand sustainable access to water and sanitation to these areas and working with national and municipal governments to bring services to the bottom 40% of poor households living in slums and other urban areas. Adapting Water Supply and Sanitation Delivery to Climate Change Impacts: WSP is stepping up its mitigation, adaptation and disaster risk management work, even as the climate change business area continues to evolve as knowledge is developed on the links between water, sanitation and climate change. Delivering Water Supply and Sanitation Services in Fragile and Conflict-Affected States: Fragile States face a great need for better policies and infrastructure post-crisis, and WSP plays a particularly important role in this area. The program collaborates with partners to encourage client countries to prioritize water and sanitation services, and helps them as they go through this process. This year, WSP worked with donors in several fragile states to prioritize water and sanitation as part of the reconstruction process. Finally, the section on Global Communications and Knowledge Management outlines WSP s strategic global communications and knowledge management efforts and Administration and Finance summarizes WSP s use of donor funds for the year. 2 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

9 Global Knowledge Knowledge produced by WSP will be integrated into the Water Global Practice to support increased access with a stronger emphasis on equity and sustainability. In the current phase of the Economics of Sanitation Initiative, user-friendly software is under development to enable more detailed economic analysis. WSP s knowledge work provides evidence that informs key policy issues and supports project design, implementation, monitoring and evaluation. WSP s unique, decentralized nature and in-country presence enable enables the creation of knowledge through analytical work, rigorous research and partnerships with critical stakeholders and sector experts. With the World Bank s recent reorganization, WSP s role as a global thought leader in the sector is more valuable than ever. WSP will help integrate sector knowledge into the Water Global Practice, and will continue to produce research that informs cost-effective and innovative policies for scaling up quality, sustainable access to water and sanitation services for the poor. WSP and the Water Global Practice will be poised to offer new evidence-based knowledge that will help close gaps that have already been identified and support the decisionmaking process for governments, operational teams and NGOs across the developing world. Expanding the Economics of Sanitation Initiative The Economics of Sanitation Initiative helps countries understand why and how they need to invest in scaling up sanitation. Using a common methodology across countries, the initiative uses secondary country data to assess the economic consequences of poor sanitation. Currently, under the Economics of Sanitation Initiative, user-friendly software, called the ESI Toolkit, is under development to enable more detailed economic analysis. In the future, the toolkit will be applied in WSP programs, World Bank lending operations and by other sector partners, building a stronger base of evidence to inform decision-making in the sector. This work will help address knowledge gaps on financing, cost-effectiveness of interventions, market failures, efficiency and private sector engagement. For example, as a part of the second phase, the Economic Assessment of Sanitation Interventions in Southeast Asia 1, a study conducted in Cambodia, Indonesia, Lao PDR, the Philippines, Vietnam and China s Yunnan Province compared sanitation options to help planning agencies understand the costs of expanding coverage. The study found that dry pit latrines did not consistently have higher returns than wet pit latrines despite a lower investment cost for the former and that the assessment of septic tanks in rural areas showed lower net return compared to low-cost pit latrines. Recent WSP Work on Behavior Change The improvement of sanitation in rural communities can trigger noticeable health and economic benefits, but requires changing people s behavior and achieving sustained quality of water and sanitation facilities. A recent study in Tanzania 2 found that communities involved in information campaigns or direct consumer contact are more likely to construct new private toilets that meet the standards for better sanitation. An impact evaluation conducted in Indonesia 3 showed that a total sanitation and sanitation marketing program helped reduce open defecation, mainly by helping households without toilets gain access to them, and reducing the tendency to practice open defecation. 1 Hutton, G., Rodriguez, U. P., Winara, A., Anh, N. V., Phyrum, K., Chuan, L., & Weitz, A. (2014). Economic efficiency of sanitation interventions in Southeast Asia. Journal of Water, Sanitation and Hygiene for Development, 4(1), Promoting Handwashing and Sanitation: A Crossover Randomized Experiment in Rural Tanzania (2014). 3 Cameron, L., Shah,M., and Susan Olivia. (2013). Impact Evaluation of a Large-Scale Rural Sanitation Project in Indonesia. Impact Evaluation Series No. 83. The World Bank. Water and Sanitation Program: End of Year Report, Fiscal Year

10 Implementation of such programs and the extent of their impact are largely in the hands of local government and other partners. Knowledge build through large-scale impact evaluations helps improve design features of these types of programs when implemented at scale and under institutional challenges that prevail in certain countries. Additional research undertaken in the past year 4 highlights the key elements in successful behavior change and shows that effective programs depend largely on those who implement them, such as local governments, communities and other partners, making it important to work closely with them. In particular, one study 5 showed how cognitive and behavioral constraints relate to the design of hygiene and sanitation promotion interventions. Linking Health, Nutrition, and WASH Health issues and inadequate nutrition are often consequences of poor water, sanitation and hygiene conditions. WSP has been leading analytical work and impact evaluations to further establish this link, laying the groundwork to support interventions in the sector that foster healthy early childhood health development. In a recent policy research working paper 6, the World Bank and WSP found that there is a 47% reduction in diarrhea among children living in households and villages covered by improved sanitation facilities where children can access them easily. About 25% of this reduction can be explained by a direct benefit of households moving from open to fixed-point defecation, or from unimproved to improved sanitation. The remainder is due to the external gains of improved sanitation in the neighborhood. This year, WSP continued its partnership with the Strategic Impact Evaluation Fund (SIEF), a bank executed fund managed by the former Human Development Network, to generate knowledge in promoting WASH and early childhood nutrition, health and development. Two new SIEF impact evaluations supported by WSP will take place in Nicaragua and the Philippines. In Nicaragua, an evaluation is being conducted to test innovative mechanisms for building technical capacity at the municipality level and to measure the effectiveness of rehabilitated water and sanitation systems in promoting sustainability. An assessment in the Philippines is focused on the key barriers poor households face in acquiring adequate sanitation. Both evaluations will test the effectiveness of these interventions based on human development outcomes such as decreasing open defecation, behavior-change, and improved health. 4 Wijesekera, S., & Perez, E. (2014). Crossfire: Feasible or not feasible: the application of impact evaluations in WASH programming. Waterlines, 33(1), 6-12 and Borja-Vega, C. (2014). The effects of the Total Sanitation and Sanitation Marketing programme on gender and ethnic groups in Indonesia. Waterlines, 33(1), Coville, A., & Orozco, V. (2014). Moving from efficacy to effectiveness: using behavioural economics to improve the impact of WASH interventions. Waterlines, 33(1), Andres, L. A., Briceño, B., Chase, C., & Echenique, J. A. (2014). Sanitation and externalities: evidence from early childhood health in rural India. 4 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

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12 Scaling Up Rural Sanitation and Hygiene WSP helped 37 million people gain sanitation services this year 7 and helped governments leverage US$ 530 million in financing for rural sanitation. Research in Cambodia, Lao PDR, Vietnam and Tanzania showed open defecation harms the physical and cognitive development of children, even in households with regular toilet use. Today, one billion people still practice open defecation, while nearly three quarters of the people around the world who still lack access to improved sanitation lives in rural areas. WSP is working closely with local and national governments, non-governmental organizations (NGOs), and the domestic private sector in countries where rural sanitation is a critical need. WSP s Scaling Up Rural Sanitation and Hygiene business area (SURS) provides knowledge and assistance to support governments, and helps make transformational changes in policies, institutions, and programs that are vital to accelerate access to better sanitation for those in rural communities. To meet this need, WSP focuses on three critical areas: building demand for improved sanitation through behavior change and a communityled total sanitation approach, supporting the market for sanitation products and services to meet demand, and fostering an environment that allows both sides of the market to interact effectively. Across 13 focus countries, WSP has made significant progress in supporting governments to expand access to sanitation in the past year. The SURS results framework tracks progress across eight enabling environment dimensions needed for scaling up and sustaining rural sanitation initiatives. These include program methodology, policy, strategy and direction, institutional arrangement, financing, implementation capacity, monitoring and evaluation, availability of products and tools and cost-effective implementation. The framework also provides a method for determining the proportion of total access that was a result of WSP s direct contribution. Based on estimates from the framework, on average, the program contributes to about one-third of the results achieved, with government clients responsible for the remaining increases. In 2014, 10 out of the 13 countries reported significant progress, particularly in program methodology, policy, strategy and direction and institutional arrangements. Program Methodology Program methodology describes the specific activities needed to achieve rural sanitation at scale. To be effective, a country s program methodology should be clearly articulated and supported by all stakeholders. WSP works closely with governments to adopt global best practices into appropriate program methodologies for their own countries. This year, WSP-supported governments made the most progress in this area. In Lao PDR, WSP provided direct support to the National Center for Environmental Health and Water Supply to develop operational guidelines on scaling up rural sanitation, which were approved by the Ministry of Health and agreed upon by WSP s partners. The guidelines defined key principles and roles that are vital in creating demand and strengthening all aspects of the process from consumer research to service delivery. These guidelines are being integrated into Lao PDR s National Plan of Action on Rural Water Supply, Sanitation and 7 19 million people gained access to improved sanitation and 18 million peopled stopped defecating in the open. 6 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

13 FIGURE 1: PROPORTION OF SANITATION ACCESS CONTRIBUTED BY WSP ACTIVITIES Individuals (Thousands) Total: 107, 900 Pakistan 29% 71% 8,088 India 32% 68% 49,982 Vietnam 44% 56% 1,412 Philippines 46% 54% 871 Lao PDR 33% 67% 455 Indonesia 53% 47% 21,253 Cambodia 35% 65% 371 Uganda 23% 77% 4,032 Tanzania 25% 75% 11,815 Senegal 100% 5 Niger 42% 58% 372 Kenya 30% 70% 478 Ethiopia 29% 71% 8,777 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Individuals who gained sanitation as a result of WSP contribution Individuals who gained access to sanitation as a result of other factors (i.e. natural increases, support due to other development programs, government programs) WSP works with client governments to achieve access to sanitation at scale. Since the baseline was established, focus countries have helped more than 107 million individuals achieve access to sanitation. Based on the methods for contribution defined in the results framework, about one-third is due to WSP s work, although the amount varied across countries. Water and Sanitation Program: End of Year Report, Fiscal Year

14 FIGURE 2: FINANCING LEVERAGED FROM NATIONAL AND LOCAL GOVERNMENTS, FY14 1,000,000, ,000,000 10,000,000 1,000, ,000 Leveraged Funds ($US) 10,000 1, Ethiopia Kenya Niger Senegal Tanzania Uganda Cambodia Indonesia Lao PDR Philippines Vietnam India Pakistan Estimation of government finances leveraged is based on either increases in national and local government spending on rural sanitation, or on the amount of sanitation funds that are now spent on a more cost-effective rural sanitation service delivery methodology. Hygiene to be used as a technical tool for implementation thus helping to establish a unified approach among all stakeholders. Policy, Strategy and Direction A shared vision and strategy for sanitation, along with the political will to implement an ambitious program, is the key to achieving nationwide scale. Reaching scale also requires appropriate policies that allocate resources effectively and support implementation. In Indonesia, officials in the province of West Java committed to supporting a national strategy on rural sanitation development and implementing it on a province-wide basis. The adoption of this strategy strongly influenced other stakeholders to incorporate it into their programs, further establishing a shared vision supported by policy and political will across the region. Institutional Arrangements Scaling up rural sanitation requires effective institutions with the resources to carry out their roles. In addition, there must be regular opportunities for coordination and partnership between the government, private sector and civil society. In Pakistan s Sindh Province, the Department of Local Government and Rural Development was assigned 8 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

15 FIGURE 3: REGIONS REPORTING PROGRESS IN INTERMEDIATE OUTCOMES IN FY14 Program Methodology 24 Policy, Strategy and Direction 24 Institutional Arrangement 21 Financing 20 Implementation Capacity 19 Monitoring and Evaluation 18 Availability of Products and Tools 18 Cost effective implementation Number of projects reporting progress in intermediate outcomes The results framework tracks progress across critical areas needed for scaling up and sustaining rural sanitation initiatives. the role of providing sanitation services, following a constitutional amendment. In parallel, the Sindh Health Department was working on strategies to achieve its own public health mandates. WSP was instrumental in coordinating a partnership between the two agencies, resulting in the development of integrated health, nutrition and sanitation projects. With WSP s assistance, these projects are now financed with both public sector and World Bank funds; creating a stronger and more diverse resource pool, which contributes to the adaptability and sustainability of the projects. Implementation Capacity Institutions at all levels must have the capacity to carry out their roles and responsibilities, and their capacity includes adequate human resources, systems and procedures needed for program methodology, and the ability to continually monitor program effectiveness. WSP works with partners to enhance implementation capacity at all levels. WSP assisted Indonesia s Ministry of Health in overcoming challenges in rural sanitation by creating a training curriculum and modules based on a communitybased total sanitation program. The training is designed for government and organization staff currently working on sanitation. WSP also created three mandatory courses, which includes field work, for students training to be future sanitation officers. The Ministry of Health integrated the curriculum into all 24 government health schools, and with support from the environmental health school network, 6 private health schools. So far, 1,500 students are enrolled in the courses. Graduates from the courses will be a critical asset to building up the human resources needed for the rural sanitation programs to reach scale. Availability of Products and Tools Households choose to adopt improved sanitation based on the availability of products that meet their needs and the use of effective tools to change behavior and motivate investment in Water and Sanitation Program: End of Year Report, Fiscal Year

16 better facilities. Many WSP-supported governments are working to increase the availability of new products and to develop evidence-based tools to encourage behavior change. In Kenya, new, affordable products that match consumers design preferences have been manufactured as a result of WSP s work with the International Finance Corporation (IFC). Two manufacturers have launched a new range of plastic slabs and updated previous designs with sector and consumer feedback. Sales and marketing strategies for these slabs have been created based on sector data analysis to address supply chain barriers. The new plastic products are currently being certified in Kenya, with over 600,000 potential customers and an estimated annual market size of US$ 8 million. The sanitation marketing campaign focuses not only on the supply of plastic slabs, but also on small changes households can make to upgrade and maintain their latrines using locally available materials. This has contributed to an increase in the availability and diversity of sanitation goods for Kenyan consumers, especially the poor. In Vietnam, WSP supported initial research on consumer demand and supply chains in Hoa Binh and Mekong provinces, and provided technical input on discussions with the country s Health Environment Management Agency on supply chain issues and the availability of tools and training materials for rural sanitation. This discussion will be integrated into the national capacity building framework, with a focus on building the capacity of the local private sector. Financing Without sufficient financing for programmatic costs such as training, salaries, transportation and supplies, rural sanitation programs will likely be ineffective. WSP helps government clients expand the outreach of rural sanitation programs by encouraging additional government and private funds. WSP supported Uganda in developing and coordinating the Uganda Sanitation Fund Project by helping prepare the proposal for additional funding from the Global Sanitation Fund, and set up the necessary project oversight mechanisms. This year, funding under the project enabled 15 districts to implement at scale, leading to rapid improvements in access to sanitation in these districts. Cost-Effective Implementation As developing countries contend with limited resources and competing demands, rural sanitation programs must demonstrate that they are make cost-effective use of resources. WSP conducted an impact evaluation on community-led sanitation and sanitation marketing methodologies in Tanzania, which was adopted by the government under the National Sanitation Campaign. WSP is also supporting the Ministry of Health and Social Welfare in conducting an evaluation on cost effectiveness. While the evaluation is still under development, WSP is working with the Ministry to adopt a benchmarking method that incorporates inputs, process and outcome indicators that will help track and improve the cost effectiveness of existing and future sanitation programming. Monitoring and Evaluation Large-scale sanitation programs require regular monitoring and periodic evaluation. Policymakers must also be willing and able to use monitoring processes to make rapid adjustments to any program. Effective monitoring identifies strengths and weaknesses in the program methodology, implementation arrangements and cost efficiencies. Overall monitoring responsibility must be at the highest level of the program, but based on information collected at the local government or community level. In the Indian state of Meghalaya, each district has a system to monitor the construction and use of latrines. However, there is a need to strengthen the system and move toward sustainability monitoring. WSP has taken steps such as supporting the development and implementation of strong monitoring and evaluation systems, organizing exposure visits to various good examples for state and district level officials, participating in meetings including field reviews, launching sustainability monitoring as part of the future system development, strengthening the Ministry of Drinking Water and Sanitation s verification and evaluation systems at the national level and helping district teams improve monitoring systems locally with community involvement, helping districts better understand how latrines will be used over the long term. In Pakistan s Azad Jammu and Kashmir province, WSP supported the development of mobile phone-based monitoring and evaluation system for all 10 districts, providing the government with a tool to benchmark services and conduct equitable and efficient planning and budgeting. Provincial government capacity to take over the monitoring and evaluation system was developed, including the responsibility of updating the database every two to three years, improving both the sustainability and quality of data collected. 10 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

17 Lessons and Opportunities This year, research supported by WSP produced strong evidence that open defecation harms the physical and cognitive development of children, including those living in households that use toilets themselves. Building on research conducted in India, studies that examined Cambodia 8, Lao PDR 9 and Vietnam 10 and Tanzania 11 found that children living in communities where community members defecate in the open, or use unimproved sanitation were, on average, shorter than children who lived in communities with greater access to improved sanitation. In Tanzania, for example, children living in communities where open defecation took place were 2.5 centimeters shorter than children living in communities where all households have improved sanitation. These findings were mirrored in the Cambodia, Lao PDR and Vietnam studies, which concluded that the extent of open defecation in a community is more important than whether the child s own household practices open defecation. In addition, the Vietnam study confirmed that the most affected households were the poorest living in remote areas. These findings demonstrate the challenge in rural sanitation WSP will face in the coming years. To prevent stunting and many of the other health effects attributed to the unhygienic disposal of human feces, an entire community must have access and use improved sanitation. Because of this, WSP s next business plan will work to support the SDG vision of universal access to sanitation by At the same time, WSP is making a concerted effort to ensure that an increase in access to sanitation does not exclude the poorest populations. As a critical part of the Water Global Practice, WSP s knowledge and research will be used to inform and influence lending for sanitation to increase the focus on the rural poor. Additionally, WSP research and programs are highlighting the links between sanitation and other sectors, including nutrition and education. To lay the groundwork for universal access, WSP will continue to work to build links across sectors and integrate sanitation into other sector programs. 8 Investing in the Next Generation: Growing Tall and Smart with Toilets, November Investing in the Next Generation: Children grow taller and smarter in rural villages of Lao PDR where all community members use improved sanitation, August Investing in the Next Generation: Children grow taller and smarter in rural mountainous villages of Vietnam where community members use improved sanitation, August Improved Sanitation Can Make Children Taller and Smarter in Rural Tanzania, August 2014 Water and Sanitation Program: End of Year Report, Fiscal Year

18 12 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

19 Creating Sustainable Services through Domestic Private Sector Participation At the end of 2013, firms supported by this business area helped nearly one million people gain access to water and sanitation services and invested an additional US$11.7 million. This year, the number of poor people benefiting from DPSP increased by 59% compared to last year. A global flagship study on the market for water and sanitation for the poor highlights the significant opportunities available if better coordination of supply chains and public policies that stimulate market development are in place. The domestic private sector is a powerful ally in expanding access to water and sanitation for the poor. Engaging the domestic private sector not only leverages public funds, but also encourages partnerships that help serve the poor more efficiently while developing innovative approaches and encouraging lasting services over the long term. WSP s Sustainable Services through Domestic Private Sector Participation initiative (DPSP) made significant progress in achieving these goals in the past year. With the DPSP business area s support, the local private sector expanded access to water and sanitation services for over 950,000 people and improved the level of service for an additional 700,000 beneficiaries across 14 countries this year. Additionally, DPSP catalyzed US$ 11.7 million in direct investments from small and medium enterprises, and influenced an additional US$ 27.5 million in public water and sanitation project design to be more market-oriented. In addition to achieving results on the ground, WSP s continues to build evidence to support key theories of change for bringing sustainable access to water and sanitation for the poor through markets. DPSP continued to refine its theory of change and develop a body of evidence through action learning and research. To understand the key factors influencing market development and build evidence for the theory of change, the business area developed a set of seven success factors which define the preconditions needed for pro-poor water and sanitation markets at scale. The WSP country monitoring tool provides an opportunity to track each of the success factors and learn about the theory of change in a systematic way. WSP is also making progress in consolidating knowledge on private sector approaches. Communities of practice, known as clusters, were established to encourage crossproject cooperation. Clusters are currently consolidating lessons from implementing domestic private sector projects into operational guidelines and tools to help replicate successful approaches in other countries. By encouraging the formal adoption of these tools under the new Water Global Practice, WSP will be able to more effectively incorporate private sector approaches into the design of World Bank loans. WSP launched a flagship study on markets for water and sanitation, Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor, which examined private sector provision of piped water services and on-site sanitation services in rural areas and small towns. The study examined rural piped water enterprises in Bangladesh, Benin, and Cambodia and enterprises providing on-site sanitation in Bangladesh, Indonesia, Peru, and Tanzania. In the last 10 years in the countries studied, the estimated revenues generated at the base of the pyramid for sanitation US$ 20 million per year and US$ 270 million per year for water. The future potential market is expected to grow even larger driven by improving incomes, changing preferences and public policy support for private provisioning. Country-level market briefs were completed this year to engage governments and private actors such as firms and financial institutions in dialogue on private sector participation in water and sanitation. Water and Sanitation Program: End of Year Report, Fiscal Year

20 FIGURE 4: DPSP THEORY OF CHANGE Testing the Market & Plausible Model Critical Mass & Momentum Embedded Change Cost of Goods Sold Market Opportunity Enhance operating environment Viable product & business model Public sector support Firm-level capacity Industry-level capacity Access to finance Breakeven Volume Market output Providing access to clean water and sanitation at scale requires much deeper involvement from the private sector, due to the significant gap between the funding available for service provision and the investment needed to expand coverage. The private sector can bring the resources to help fill this gap. Additionally, the private sector is potentially better positioned to provide efficient, innovative and sustainable service delivery. However, sustainable private sector services must be profitable. Currently, too few products and services desirable to the poor are offered at prices they can afford, due to limited competition, innovation, and the high costs associated with serving these market segments. By engaging new market entrants, supporting appropriate public policies and addressing the key bottlenecks driving up costs, DPSP helps build markets that are better able to serve the poor. These markets and institutions help DPSP achieve the outcome of expanded access to water and sanitation, which ultimately results in the impact DPSP is trying to achieve healthier households and lasting poverty reduction. Expanding Access to Water and Sanitation with the Private Sector In the 13 countries with DPSP water projects, 224 million people still lack access to improved water. Last year, 662,700 new beneficiaries benefitted from improved water supply through WSP projects, surpassing the annual estimated target. In the years prior, and since starting in 2011, more than 582,000 beneficiaries have been helped, bringing the number of people that WSP has supported to more than 1.2 million new beneficiaries, surpassing the target for total additional and new access for the program. In the five countries with DPSP sanitation projects, 189 million people still lack access to improved sanitation. This indicator measures the total number of new beneficiaries with access to sewerage, improved toilets or hand washing facilities. The total number of people gaining access to improved sanitation and hand washing facilities rose 159% from 109,000 new beneficiaries to more than 290,000 this year. The poor are much more likely to lack access to water and sanitation services and face serious impacts on their health, time and quality of life. To address this issue, WSP activities have a strong emphasis on expanding water and sanitation services for the poor. Since 2011, DPSP-supported water providers have helped 1.67 million people, while sanitation providers are benefitting at least 519,000 persons. 14 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

21 The total number of people living below their respective national poverty lines and benefitting from DPSP-assisted water and sanitation services increased to more than 908,000 this year. In total, 59% more poor beneficiaries were served this year compared to a year ago. Poor beneficiaries, as a percentage of total beneficiaries, dropped slightly from 46% to 42% this year, possibly due to an increase in the number of new firms entering the market in several countries. New entrants are likely to focus on less-poor customers who are relatively easier to serve, before moving into poor market segments as they gain additional experience. DPSP s intermediate outcomes link activities with the ultimate goal of expanding access, and measure the business area s contribution to increased private sector participation and track indicators such as investments by the private sector, revenues and numbers of firms, and the capacity of service providers and public sector institutions, all of which help track market growth. The amount of donor and government funding influenced by WSP activities is also monitored to measure the impact of knowledge on the sector. Expanding Investment by the Private Sector Investment is a key metric for private sector interest businesses and financial institutions are unlikely to invest if they do not believe there is an opportunity for financial return. Cumulative Investments by Small and Medium Firms in Water and Sanitation In Kenya, an urban water service provider was able to access US$ 1.2 million in financing to expand to poor urban areas. WSP is now working with three leading local banks and the Ministries of Finance and Water to navigate legal hurdles under the new FIGURE 5: CUMULATIVE INVESTMENTS BY SMALL AND MEDIUM FIRMS IN WATER AND SANITATION 40 Private Sector Investment (US$ Millions) Archieved Target DPSP mobilized US$ 11.7 million in new investments from small and medium-sized enterprises compared to US$ 9.5 million mobilized in the previous year and is well on track to achieving the program-end goal of US$ 34 million in direct investments by the private sector. constitution that prevent county government-owned utilities from borrowing without a national government guarantee. By identifying innovative, new ways to address this challenge, DPSP is helping expand access to services in peri-urban areas by letting these utilities access the resources they need to grow. Through a comprehensive capacity building program in Bangladesh, private operators of rural piped systems invested an additional US$ 258,000 in their networks. With WSP and World Bank support, the government established a costsharing policy for private water operators to finance and Water and Sanitation Program: End of Year Report, Fiscal Year

22 operate rural piped water supply schemes. The initial capital is generating additional investment for the sector as firms reinvest profits to expand their businesses. WSP piloted sanitation microfinance projects with two NGOs, ide and PATH, in Cambodia and conducted a loan performance assessment. The pilot supported 39 additional latrine producers interested in providing sanitation services by training them to develop their business plans, making them more creditworthy. Growing Market Served by Domestic Private Sector While investment measures the willingness of the private sector to enter the market for water and sanitation for the poor, growth in revenue demonstrates that the market is actually viable. One particular outcome measures increased market share for domestic private sector provision of water and sanitation services, either through an increase in water schemes transferred to private operation or the growth in sales by firms providing sanitation services. The volume of revenues generated by private schemes and sanitation providers increased 143% to US$ 19 million this year from US$ 7 million a year ago. To date, WSP has helped firms generate over US$ 34 million in revenues, surpassing the end-program target of US$ 22 million. New piped water schemes coming under private management increased by 102 in 2014 while the number of new sanitation providers increased by 331. In Burkina Faso, a successful WSP-supported approach of using domestic private operators in the informal urban settlements of Ouagadougou has resulted in a 7% increase in coverage. This approach will be replicated in 13 new sites including eight in cities outside Ougadougou. In Nicaragua, the introduction of a new rural ceramic bowl, and an innovative lower-cost, lower-maintenance septic tank available for public and private sanitation projects are helping support growth in the local sanitation market. WSP observed plastic tank providers competing in price, product differentiation and on the level of customer services. Robust markets usually generate an active industry of support services that reinforce growth, efficiency and innovation. This year, the number of business support service providers and financial intermediaries working on water and sanitation increased from 86 to 101. These support service providers are estimated to provide assistance to 700 domestic enterprises working on water and sanitation. Improving Operational Capacity of Service Providers Many firms serving the base of the pyramid lack the technical and managerial skills needed to provide affordable, high-quality service at scale. This year, the emphasis on building capacity of providers continued to shift from supporting individual providers and actors to developing institutions that support industries. In Cambodia, WSP helped establish the Cambodia Water Association, a membership organization of private operators with 58 members. This year, the association launched a business development service program that will initially assist 30 members. In the Philippines, WSP continues to support the regulator to promote long-term sector improvement through a program of accrediting technical service providers. This year, new advisors were accredited, five private banks were trained to evaluate water investment projects, and 10 additional water utilities accessed the program, helping a total of 60 utilities with the development of a performance improvement plan. To help local operators become eligible to bid on clusters of schemes and improve their operational performance in Benin, WSP engaged business support services from neighboring Cameroon and is now planning to begin accrediting business support firms in-country. There is a critical need for innovative sanitation products, which balance low cost with high durability and aspirational positioning, to meet the needs of the base of the pyramid. WSP has consistently supported the development of such products in different countries. In Bangladesh, WSP is developing sanitation and standardizing options at different price points in a catalogue to simplify consumer decisions. In Peru, the National Industry Association supported a partnership of fifteen leading construction firms, logistics companies and microfinance institutions to develop and 16 Water and Sanitation Program: End of Year Report, Fiscal Year 2014

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