Small Private Sector Providers
in Water Supply and Sanitation –
an overview and some experiences from the
World Bank and WSP
Meike van Ginneken
Sr. Water and Sanitation Specialist, World Bank
With thanks to Ede Ijjasz & Ella Lazarte (WSP) & Mukami
Kariuki (World Bank)
OECD Global Forum on Sustainable Development
Paris - November 29-30, 2006
Overview
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Why bother?
What kind of SPSPs are where?
What good practices do the World Bank &
WSP have working with SPSPs?
What are the policy implications of what we
have learned?
Water PPPs by country income categories
Water projects with private participation by income group, 19902005
Projects
45
40
35
Low income
Upper middle income
China
30
Low er middle income
25
20
15
10
5
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
The context: Service levels
Urban water supply by type of service by region
source: Global Water Supply and Sanitation Assessment 2000 Report
Many with house connection still require
small providers: India as an example
Accessibility to Water Supply in India:
 In 2001 74% of the population had access to a piped water
supply
 Water availability is at average of 2.9 hours per day
 Connections with 24/7 service in Delhi is 1% (compare to
90% in Jakarta, 88% in Manila, 60% in Colombo)
Source: Bridging the Gap between Infrastructure and Service, World Bank 2006
The water market in an African city
Why focus on SPSPs?
The “ultimate goal” - a household connection for all depends on much more than service expansion. What
to do in the meantime or in the long term?
 Ignoring the problem has not made it go away – in
some countries coverage/access has declined. Is the
best the enemy of the good?
 Put all the cards on the table –you can only “regulate
it” once you recognize it
 Work with what you have - for the unserved or underserved the gaps is being filled by self provision or
SPSPs. Reaching the MDGs through SPSPs?

But there is a lot to do…..
Price of Water by Type of Service Provider
$5.00
$4.50
US$ per Cubic Meter
$4.00
Public
Private
$3.50
Piped
Unitized
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Public Utilities
Private
Networks
Point-source
Vendors
Tanker Trucks
Carters
Kariuki, et al, Small-Scale Private Service Providers of Water Supply and Electricity
A Review of Incidence, Structure, Pricing and Operating Characteristics, 2004
Overview




Why bother?
What kind of SPSPs are where?
What good practices do the World Bank &
WSP have working with SPSPs?
What are the policy implications of what we
have learned?
Typology of SPSPs
Groundwater/surface water
Dependent SPSPs
1.Piped network operator
2.Point source
3.Mobile distributor
Utility
Independent SPSPs
4. Piped network operator
5. Point source
6. Mobile distributor
2
1
3
4
5
Consumers
6
SPSP Typology – main policy issues
Dependent
•Bulk price from utility?
tariff structure/pricing,
•Ownership of assets - laid
at operators cost?
•Hold contract/licence? –
regulation by utility
•Quality of water at point
of sale (utility)
•Authority to connect new
customers – utility or
operator
Independent
•Exclusivity/Monopoly –
what regulation, who
monitors?
•Develop own source–
groundwater abstraction
permit?
•Licensed to sell? –
authority to connect new
customers
•Quality of water – testing
frequency, monitoring
Estimated SPSP Coverage
Percentage of households relying on SPSPs
Source:Kariuki et al., 2004
WSS Coverage Levels and SPSP Activity
Source:Kariuki et al., 2004
Additional characteristics
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Motivation? – for profit or non-profit, own use
(community) or business
Organisational form? -cooperatives, self help
groups, company, sole proprieter, family
business
Legal status? – license, permit, contract with
utility, registration with chamber of commerce
Financing? – savings, family, commercial
bank, loan shark, member fees, customers,
micro-credit
Overview
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Why bother?
What kind of SPSPs are where?
What good practices do the World Bank &
WSP have working with SPSPs?
What are the policy implications of what we
have learned?
good practices from the World Bank & WSP
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Fostering “subdelegation” from utilities to SPSPs
 Kisumu, Kenya; Medellin, Colombia; Manila, Philippines
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SPSPs for construction & operation of sanitation
facilities
 Ulaanbatur, Mongolia; Mumbai, India
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Fitting SPSPs in longer term sector policies
 Paraguay
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Using consumer surveys to inform reform choices
 Sri Lanka
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Fostering SPSP associations
Subdelegated management models in Kisumu,
Kenya
Water Services Coverage
Nyalenda
Existing situation in Kisumu, Kenya
Spaghetti Network
Water contamination risks
Metered
Connections
Illegal
Connections
Unaccounted for Water
Situation after project in Kisumu, Kenya
Utility network
Bulk supply, metered
600m
Secondary
branch Private
master operator
Household Meter
Chambers
Focus on interface
between SPSP &
utility:
 Utility sells bulk
water to a
community private
operator
 The selected
operator acts as
agent for utility
 Performance-based
contract
 Profit-making social
enterprise
 Reduced tariffs/fees
Initial results include increased access to
water and decreased prices…
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Estimated 2,000 people
served by the new
operators
Monthly consumption is
high at 30 cubic meters
due to HH reselling
Fees have been reduced
significantly
Old
charges
New
Charges
Household meter rents
2.12
0.99
Household meter deposit
25.40
14.10
Connection fees
56.41
21.16
0.03 or
1.41/cu.m
.02 or
.92/cu.m
Cost of water to end
consumer
in US$ (1USD=71KES)
Project developed jointly by WSP and AFD, in support of € 20M infrastructure project
Key lessons emerge for scaling up the model
in Kenya and rest of Africa…
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Institutional: financial and technical
support to operators
Increase confidence among
stakeholders: utility-master operatorcommunity
Marketing and (utility) communication
strategy crucial
Encourage prepayments from
community to minimize risk
The Contratación Social Program of Medellin
public utility
Model:
 Institutional: direct
relationship between utilitycommunity - contract
managed by newly-formed
local organization that is run
like a firm
 Social: intensive capacity
building
 Financial: partly financed
by the municipality’s Social
Funds
Source: WSP-LAC Seven Cities Project
Results (after 5 years):
 Approximately 41,400 users
in five years
 149 Contracts with
community organizations
 Total investment from 19982000: USD11.4 M
 16,900 hours of training to
the communities
 6,900 jobs with an average
duration of four months
10 years of experience in subdelegation in Manila
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1997: two concession contracts signed for Manila metropolitan area
2005: 80% piped network coverage (12 million people)
Since 1997, 1.1 million reached through sub networks (third party
provision)
 2005 survey of 183 small providers and 271 of their customers in 5
locations within Manila:
 60% had access to piped water supply (38% of these rely on utility
network); 6% neighbors; 7% deep wells
 Prices are 1.4% - 6.2% higher (compared to 10 - 20% in literature)
 Prices have fallen since 1997 (tankers from $4/m3 to $2/m3)
 Small piped networks offer lowest price
 Water reselling business is on the rise - treated (bottled) water
 Most small providers licensed
 58 - 68% SPSPs feel they’ll still be operating in 5 years
Source: World Bank/BNWP report, forthcoming
World Bank support to water and sanitation
SPSPs in Ulaanbatar, Mongolia
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Ulaanbaatar Services Improvement Project (1997 2004) resulted in more reliable water supply services
to about 140,000 people by connecting water kiosks
to the network
 Second project (from 2004) – broaden approach to
sanitation:
 Social assessment showed on-site sanitation is very high on
the list of priorities for residents in the Ger areas
 World Bank sponsored city wide sanitation plan based on
stakeholder consultation (a novelty)
 Now pilot in some Ger areas: support to create enabling
environment for scaling-up of implementation of low cost
sanitation by community groups
Source: World Bank, 2006a
Going to scale in Mumbai, India: CBO
operated community toilet blocks
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55% of Mumbai 14M population lives in slums
IBRD/IDA $192 million Bombay Sewage Disposal Project (19952003) with 6% to Slum Sanitation component provided sanitation
services for 400K slum dwellers
 Model:
 municipality provide capital to build blocks, community groups
pay for O&M
 Community Based Organizations (CBOs) were created;
Municipality issues a building permit after 50% of the
community contribution collected and sound plan endorsed by
the community
 MOU municipality - CBO as service provider: defines standards
 CBOs can decide: direct user involvement or use private operator
 Most of the CBO are performing well, raising enough funds
within their communities to efficiently manage the toilet blocks
Source: World Bank, 2006b
Paraguay: how to fit SPSPs into longer term
sector strategy
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Traditionally strong presence: 400 aguateros serving 30% of
population
World Bank Project in rural & town WSS support
transformation of SPSPs to formalized operators
 Aim to attract private sector managers – aguateros, others
 Competition for small settlements, simplify bidding process/contracts
 provide financing - output based aid
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Urban areas: 2000 law ensures that small systems can be
integrated in normal grid
 SPSPs get 10 year license from regulator; at end of license period, state
can appropriate infrastructure to include in grid
 SPSP tariffs are regulated
 Idea is to provide SPSPs clear framework: Jury still out
Source: World Bank/BNWP report, forthcoming
Sri Lanka: how consumer surveys can inform
reform choices
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2003: Government planned PSP in Negombo and Kalutra-Galle
study of 1,800 households to inform the design of the transaction
Key findings from the study:
 60% of poor households rely on wells; 28% on private connection
 Poor use “unsafe” sources but treat water, quality not judged a problem
 Poor do not consume significantly less due to free groundwater source
 Diversity among the poor necessitates service differentiation
 Uptake rate (willingness to connect) with connection fee: 50% overall,
27-32% among poor)  instead of 95% assumed
 Without connection fee: 70% uptake among poor
 Conclusion: Access to and use of alternative to piped water as well as
household perceptions and attitudes are critical in determining whether a
household will connect to the network
Source: Van Den Berg, 2005
SPSP associations can play an important role:
mutual support, voice to govts, utilities & donors
Association of standpost
operators in
Ouagadougou, BF
 Provides small grants to
its members who are
celebrating a wedding or
baptism
 Extends credit to
members who
temporarily cannot pay
their water bill
 Will help members deal
with troublesome clients
 Organizes members’
participation in city-wide
events
Association of tanker
drivers in Kathmandu,
Nepal
 first created to help
members confront
police harassment
 also supported
members involved in
accidents
 assisted tankers to get
registered
 Tried to install a shared
borehole and treatment
plant – but this failed
and led to the
association dissolving
Source: World Bank/BNWP report, forthcoming
Association of 150 SPSPs
in Bandung, Indonesia
 fee varies according to
size
 association revenues
are used to improve
road conditions and
traffic control ; support
members emergency
medical care or suffer
work-related accidents
related accidents; and
support community
events
Overview
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Why bother?
What kind of SPSPs are where?
What good practices do the World Bank &
WSP have working with SPSPs?
What are the policy implications of what we
have learned?
Policy implications: Understand the market
and consumers preferences
Review existing service delivery arrangements
 What sources do the poor currently use – are they likely to
move from existing sources to utility service
 Who provides them with WSS services – is the utility well
placed to offer better services
 How well are these services being provided – “drinking” water
quality is a priority for poor
Assess customer preferences
 What are they willling to pay for an improved service – both
consumption and connection
 What is the nature of “improvements” they seek (if any) affordability, volume, service level, reliability, in house
facilities
utility expansion may not be the logical next step!
Policy implications: Understand the utility’s
supply constraints
Review the “primary” utilities plans and constraints – what
is a realistic timeframe for meeting the goal of universal
piped water supply?
 Expansion plans – need to increase production capacity,
extend distribution network
 Performance with respect to improving cost recovery,
revenue generation, achieving 24/7 service, reducing
NRW
 External constraints – slum policy, land tenure, subsidy
policy, etc., - and options for sidestepping them
 Financial implications for accelerating service coverage –
who will pay for expansion
Policy implications: Understanding small
scale service providers

Third party provision can be a useful means of scaling up
services
 As a short to medium strategy, plan for and involve existing
service providers, but find ways to improve their efficiency to
the benefit of customers
 Distinguish between various providers:
 Independent/dependent
 Motivation? – for profit or non-profit, own use (community) or
business
 Organisational form? -cooperatives, self help groups, company, sole
proprieter, family business
 Legal status? – license, permit, contract with utility, registration with
chamber of commerce
 Financing? – savings, family, commercial bank, loan shark, member
fees, customers, micro-credit
Policy implications: what can we do more?
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Sanitation, sanitation, sanitation
Establish appropriate country framework – Policy, legislation,
regulations, standards  allow for and regulate SPSPs
Build capacity for engaging small-scale providers – contract
design, training, competition, guarantees
Improve quality and use of information collected - household
surveys often not qualified (secondary sources)
Foster community participation - Adapt to local context,
involvement in planning & monitoring, tap local resources
Enable monitoring - regulation or facilitation, establish
benchmarks to improve service quality
Thank you !
This is work in process, more info:
www.worldbank.org/watsan
www.wsp.org