In 2014, the Indian Government embarked on a major programme to end open defecation. The government allocated significant public funds to ensure that the goal is reached by the year 2019. The Swachh Bharat Mission (SBM) programme for rural sanitation is ambitious and probably no government has ever attempted to tackle sanitation at this scale and with such a large financial commitment. The main objectives of this paper are to assess sufficiency of financial commitments for SBM and to review efficiency and effectiveness in fund utilization against its stated objectives. In a large country like India, the programme achievements are not even. Some states are on track while others will need more attention and more funds to ensure that the goal is reached by 2019. An important challenge is to ensure sustainability of open defecation free (ODF) villages and communities. Supplementing public finance with innovative financing is needed to ensure that lack of finance does not become a constraint in achieving the ODF status and to ensure sustainability.

Swachh Bharat Mission (SBM) for urban areas of the Government of India has put an emphasis on access to sanitation in urban areas. Under this, the Government of Maharashtra has initiated its Swachh Maharashtra Mission for Urban Areas. The partial incentive subsidy provided under these missions is only 25% of the cost of a toilet in urban areas. With a demand based model adopted in Maharashtra access to household credit becomes important in realizing the SBM and SMM objectives of universal access to toilets and open defecation free cities. Though microfinance institutions have generally taken lead in sanitation credit, it can also be provided by several other financing institutions in urban India such as banks, cooperative sector, and housing finance institutions. This paper provides highlights of credit options available for households in general and in the two project cities in Maharashtra. It also discusses the options for achieving scale, including strategies ranging from initial origination support to specific FIs to better implementation of policies such as sanitation in priority sector lending by the Reserve Bank of India.

The Government of India has set a rather ambitious goal of eliminating open defecation by 2019. For urban areas, this implies providing toilets to about 22 million households. This column contends that it is possible to achieve this goal if the limited public funds are leveraged to facilitate innovative financing mechanisms, through a demand-led scheme for toilets.

Access to water and environmental sanitation services is an important component of living conditions in human settlements. In general, it is also an important part of poverty alleviation efforts, as access to improved services constitutes an important element of real income of the poor households. It both helps to reduce the costs of availing these services as well as better health conditions help to lower costs and improves productivity. Over the last decade there has been an increasing recognition of the role of private and community sectors in the provision of these services, especially to make them more efficient and effective, and, to enhance their coverage. The purpose of this short study is to assess the potential role of private sector in providing these services and to review the constraints to effective public-private partnerships (PPPs) by reviewing the current state of PPPs in water and environmental sanitation in India.

More than 2.4 million people die every year from diarrhea and other water-related illnesses because they don’t have safe, sustainable water and sanitation. This crisis persists, in part, because the financial services that could help vulnerable populations pay for water and sanitation remain largely unavailable to the poor. A 2008 study, Assessing Microfinance in Water & Sanitation: Exploring Opportunities for Sustainable Scaling Up, commissioned by the foundation’s Water, Sanitation, & Hygiene initiative, examines the potential market for expanding small-scale banking and credit services to the poor, enabling them to pay for sustainable water and sanitation. The study draws its information from the following sources: • Global datasets and activities in 38 countries throughout Asia and sub-Saharan Africa. • Interviews with nearly 100 practitioners from the microfinance and water, sanitation, & hygiene sectors. The study includes the following details: • Some nongovernmental organizations (NGOs) have sought to overcome the financial barriers to the poor through microlending schemes. While preliminary evidence suggests that these approaches can work, there is limited understanding about whether they present a long-term solution that could be scaled to benefit millions. • The potential market size is estimated to be $12 billion over the next 10 years. • Examples from around the world show what is—and isn't—working to achieve sustainability and scale.

This paper discusses the possible role of microfinance in financing small water supply and sanitation (WSS) service providers. The paper explores three central questions: How does the level of development of the microfinance sector in Sub-Saharan Africa affect the potential for financing small WSS service providers?; What is the nature of latent demand for finance from small WSS service providers?; and What role can governments and development partners play? Based on studies in selected countries in the region, some key features are: Market size and penetration; Outreach; Financial performance; Products; and Donor support.

Increasing recognition on how sanitation directly impacts health, improved living conditions, education outcomes, and poverty reduction, has intensified the advocacy for markedly improved sanitation access. The inclusion of direct sanitation targets in Millennium Development Goals (MDGs), and an understanding that improved sanitation is essential to achieving targets for health, education, and environmental sustainability has given further impetus in addressing the challenge of financing scaled up sustainable sanitation. Conventional public finance in sanitation in the past, had generally focused on subsidies for household, and public facilities, and grants for urban sewerage, and solid waste systems. Traditionally, the approach to providing access to sanitation had been supply driven, and focused on financing facilities. A review of emerging thinking, and practice suggests that a shift in sanitation financing is required, i.e., from financing subsidies and grants for sanitation facilities, to funding sanitation promotion and leveraging resources. It is thus further suggested that, while the critical need for sanitation promotion is universally accepted, there is still no consensus on the right approach, and strategy. In addition, the focus has been mainly on innovations, although a few emerging experiences point to possible approaches for accelerated, and large scale implementation to achieve country, or citywide coverage. The report indicates that implementation of this shift in sanitation policy at scale, can be achieved in practice by evolving an appropriate public finance strategy, that supports sanitation promotion, and focuses on leveraging resources. There are six critical elements that require attention in its design: consensus building on approach; clarity in institutional mandates; sources and allocation of financial resources; 'fundable activities' and financing mechanisms; addressing tradeoffs in public allocation; and, monitoring and continuous feedback. Key challenges are: institutional fragmentation, trade-offs in the allocation of public resources, and, long-term commitment.

Small-scale providers of water services are no longer seen as merely temporary substitutes for formal utilities. In many developing countries governments and donors increasingly view them as long-term partners in the work to extend and improve water services, particularly as governments accelerate efforts to meet water targets associated with the Millennium Development Goals. But a host of problems complicate efforts to make small-scale providers productive partners, including their lack of access to finance. In Kenya, a collaborative program is bringing together community-based organizations and microlenders to provide better water services to poor people—and generating lessons for similar initiatives.

In recent years, several countries have come together to identify and agree on development goals for reducing poverty and increasing welfare. These are reflected in the Millennium Development Goals (MDGs), which include targets for sustainable access to safe water and sanitation services. For the water supply and sanitation (WSS) sector, even after the major achievements in the past two decades, approximately 1.2 billion people lack access to an adequate water supply, and about 2.5 billion people have inadequate sanitation facilities. Achievement of these goals requires considerable additional resources, beyond those currently flowing to the sector.