Getting to know PSI’s market-based sanitation work in India: Part 3 – The supply-and-demand see-saw

Tuesday, May 13, 2014

The 3SI project is currently offering three toilet designs (standard, deluxe and super deluxe) at three different price points: INR 19,000, 25,000 and 29,000 (US $316, $416 and $483, respectively).

With focus on quality and aspirational design, these toilets provide excellent value for money; however, the capital cost overall remains too high for many of the households we’re trying to reach, especially without availability of good finance options.

The project team, in collaboration with our partner PATH, is continuing to innovate around design and is hoping to produce a simpler, but still aspirational option, for INR 12,000 (US $200). A challenge for the project will be to position these toilets as desirable for consumers and avoid creating a perception that the cheapest option is somehow “inferior.”

In order to facilitate the market for toilets, there are both supply and demand-side challenges to be addressed. On the supply side, the providers of cement rings and other building materials require access to credit to expand their businesses in order to respond to the growing demand. On the demand side, consumers need to be able to access credit to cover the upfront costs of purchasing a toilet.

Micro-finance institutions are present in Bihar, but they typically offer loans for income-generating (IG) enterprises, rather than for sanitation. The typical interest rates for consumable goods such as toilets are currently too high for the poorest households. When capital among these institutions is limited overall, it is the IG loans that tend to be given preference.

There is a huge opportunity to accelerate the building of toilets by identifying capital to support the provision of loans specifically for the building of toilets. Currently, consumers are accessing credit with an interest rate of 22-24 percent, a rate too expensive for many households.

Source: impact (link opens in a new window)

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