1. An integrated segmentation approach to sanitation markets and financing March 19, 2009

2. 1.Context 2.Market opportunities 3.A new strategic perspective 4.Preliminary results 5.Lesson learned Contents

3. The Context: Big gaps, poor quality access Inhabitants:28.2m PBI $114.5m PBI per capita $4,043 Annual inflation 6.22% Extreme poor: 16% Bank rate 27% Child mortality: 8.3% Diarrhea: 24% Chronic malnutrition: 24% HDI:0.767 Water access: 76% Sanitation access: 59% WW treatment: 23%

4. Opportunities: Development of the sanitation market Market Size. 12 million without access. 70 % in rural areas and 30 % in urban areas. Poor quality. Only 3 out of 10 have quality sanitation. 6 out of 10 are not satisfied with what they have. Willingness to invest. 7 out of 10 are willing to invest to improve their sanitation. 52 % in dry bathrooms and 61 % in water options Low bank rate. 12 % has been granted a credit in the last year. 5 % in rural areas and 21 % in urban areas. Ownership. 50 % have title deeds. 43 % in rural areas and 59 % in urban areas.

5. Multi-stakeholders alliances INCENTIVES AND REGULATION FAMILIES AND COMMUNITIES use and maintain services that meet their expectations SANITATION MICRO- ENTERPRISES have profitable and responsible businesses Provide inputs, services, financing and advice FINANCING OPTIONS require sanitation information and options SANITATION MARKETS A new strategic perspective: Market for the poorest? Leadership promotion demand Strengthen local-national supply

6. Multi-stakeholders platform: A win-win scenario for all Public Sector Efficiency Capacities & knowledge Acceptance Public Sector Efficiency Capacities & knowledge Acceptance Population Access to services and opportunities Knowledge and capacities Rights and accountability Empowerment and inclusion Population Access to services and opportunities Knowledge and capacities Rights and accountability Empowerment and inclusion Private sector Access new markets Loyalty Best products Image Private sector Access new markets Loyalty Best products Image Civil Society Capacities Knowledge sharing Access to new opportunities Civil Society Capacities Knowledge sharing Access to new opportunities Cooperation Efficiency Sustainability Cooperation Efficiency Sustainability Central government Regional governments Local governments Government programs NGOs and CBOs Schools Technical institutions Universities Financial institutions Sanitation enterprises Hardware stores Service providers Adverstising company Others (Netsle/Gloria) WSP - WB SDC USAID Fondo de las Americas Foundation Ensemble

7. Market profile: A strategy for each market segment Upper poor Medium poor Very poor Extreme poor Percentage Financing 18.4%20.6%23.4%22.3% Banks Regulated MFIs Non-regulated MFIs Subsidy Program Regulated MFIs Subsidy Program Product Dry toilets Water toilets Distribution Home format sale MultiCasa Community sales MultiCasa Community sales Home format sale MultiCasa Community sales HH Connections Dry toilets Water toilets HH Connections Dry toilets Water toilets HH Connections Dry toilets Water toilets

8. The product: An integrated package Sanitation technologies Without water With water without sewerage systems With access to sewerage systems Quality services Construction and installation Emptying Fixing Financial facilities Individual loans Communitarian loans Credit cards Saving groups Government subsidy programs (Juntos & Techo propio) Education & advice Use and maintenance education Credit education Sanitation awareness The circle of quality

9. Financing: A variety of products KIND OF FINANCIAL INSTITUTIONS Banks Micro financial institutions Non regulated institutions KIND OF FINANCIAL PRODUCTS Credit cards Individual loans Saving groups Subsidy gov. programs Communitarian loans

10. Communal Sales Promoter Distribution: Channels and key actors Consumer Financial Operator Artisans Relationships that the initiative is seeking to build Sanitation micro-enterprises Hardware Stores Distributor Provider inputs Services Multi-stakeholders platform

11. Why are we engaged? Market knowledge Reduction of period for return of investment (ROI) Risk decreasing, shared through the partners Decrease of barriers for banking clients New business opportunities How did we decided on the product offering? Credit cards upon co-branding strategy (Maestro) New channel distribution (correspondent tellers) Agreements with utilities (Sedapal) What are the business risks? Increasing of the delinquent portfolio Financial Operator

12. Preliminary Results USAID HIP’s M&E approach Since the promotion campaign was launched six months ago, there are some pilots zones which have achieved 6% of the potential market (people without or with bad conditions sanitation services). Despite the crucial role of credit in reducing barriers of entry for access to sanitation, people feel a big fear face up the financial system. People want to have an integrated solution, but the total price is perceived as a barrier. They prefer to construct in stages and pay in cash.

13. Lessons Learned The poor are heterogeneous. The segmentation strategies need to be improved. Build upon the drivers Women are the key target. They trigger the decision process. An articulated supply chain. It includes a referring system, a platform of partners under clear rules for action, as well as standards that improve this quality circle. Incentives system, that allow faster the market mechanisms, and at the same time improve the scenario win-win in the supply chain. The market access triggers the wealth flow. Promotes inclusion and allow people to go up the ladder of the quality of life improvement.

14. Business Model Partners