21 February 2014: Public resources are insufficient to meet improved water supply and sanitation service needs, presenting an opportunity for domestic enterprises in these growing markets, according to ‘Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor,’ a publication by the World Bank’s Water and Sanitation Program (WSP).

The publication highlights a multi-country study that found cooperation between public and private water and sanitation sectors holds huge market potential for businesses and enormous development dividends for millions at the “Base of the Pyramid” (BOP).

The study examines private sector provision of piped water services in Bangladesh, Benin, Cambodia and on-site sanitation services in Bangladesh, Indonesia, Peru and Tanzania. Among the countries studied, the market for rural piped water schemes is projected to increase from US$23 million in 2012 to US$90 million annually by 2025, underscoring “the sheer scale of the market potential” for water and sanitation services, according to the book’s findings.

The study aims to answer questions related to: poor households’ circumstances and preferences; enterprises’ service performance; and factors that influence enterprises’ actual or perceived risks and costs. Highlighted findings include: the central role played by the private sector in meeting water and sanitation goals; a large, increasing market potential for water and sanitation services; and the poor’s willingness to pay for products and services they view as valuable.

Constraints discussed in the study include: limited incentives to market services to the poor; perceptions that the poor are not ideal customers; fragmented supply chains that increase costs for customers and suppliers; and limitations that hinder expansion of micro and small enterprises, such as public programmes and policies in Bangladesh and Benin, and inadequate access to investment financing and lack of security to operate in Cambodia. The study also discusses policy and institutional obstacles, such as applying for permits, participating in public tenders, license insecurity and lack of effective dispute-resolution mechanisms.

Recommendations focus on stimulating demand by the poor, encouraging innovation, improving firm viability and business models, and improving the investment climate and sectoral policies. For instance, to stimulate water demand, the report recommends improving affordability by: ‘right sizing’ the design and building of assets appropriate for small-scale networks; and smoothing and subsidizing expenditures so that poor rural households can spread connection payments and usage charges over time.

WSP is a multidonor partnership administered by the World Bank that aims to support the poor in accessing affordable, safe and sustainable access to water and sanitation services. [Publication: Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor] [WSP Website]