WILLINGNESS AND ABILITY TO PAY FOR SANITATION LOANS IN RURAL KENYA

Josphat Martin Muchangi1, Dr. George Kimathi1, Vincent Ouma1, David Makau1

1. AMREF Kenya

Outline

• Background information• Objectives• Methodology• Results• Discussions• Conclusion• Recommendations

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Definition of terms

• Community-Led Total Sanitation (CLTS): - integrated approach to achieving and sustaining open defecation free (ODF) status.

• Contingent valuation: - is a survey technique for the valuation of non-market resources, such as environmental preservation

• Sanitation: - Provision of facilities and services for the safe disposal of human urine and faeces.

• WTP:- The maximum amount that an individual state are willing to pay for good or service (DFID, 1997)

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Background Information • Diarrheal due to poor sanitation practices is a

major cause of death in Africa accounting for 11% of under 5 mortalities (Lui et al, 2000)

• Sanitation scale up through CLTS is challenged by poor construction standards of sanitation facilities (WSP,2012)

• Innovative programmes have been developed to address the social-economic determinants of sanitation through financial inclusion and direct sanitation marketing.

• Estimated, 50% Kenyan household are willing to invest in improving sanitation (WSP, 2006).

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Objectives• Broad Objective

– To estimate the Willingness and Ability to Pay (W/ATP) for sanitation loans in Busia County - Kenya.

• Specific Objectives– To determine the willingness of communities to

borrow and repay loans for improved sanitation.

– To assess the link between willingness and ability to pay for different sanitation systems

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Methodology(1)• Study was conducted in Busia covering all the

sub-counties• Study design was a descriptive cross-sectional• Sample size was 532 households calculated:

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2

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383205.0

)53.01(53.02

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5327199.0

383

Methodology (2) - Sampling

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86

49

62

91

72

95

77

Villages selected

BUSIA 743,946

Bunyala68,521

Butula120,262

Samia86,700

Nambale127,254

Teso. N100,684

Teso. S132,848

Busia107,676

Sample size

8

4

6

9

7

9

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Methodology (3)• Data collection instruments were semi-structured

questionnaires and interview guides based on principles of contingent valuation method (CVM)

• Data was analysed using both quantitative techniques using SPSS Vs 18

• To test for significance, p-value was set at 0.05• Interviewee were preferably the household head

alternatively consenting adult was considered

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Results (1) Demographic and other Characteristics

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Demographic and other Characteristics

N= 532 N=285 N=247 P Total (100%)

Male (53.6%)

Female (46.4%)

Education levelNo education 67(13%) 21(4%) 46(9%)

0.001

Primary 307(58%) 170(32%) 137(26%)Secondary 128(24%) 75(14%) 53(10%)College 22(4%) 15(3%) 7(1%)University 4(1%) 4(1%) 0(0%)Others 4(1%) 1(0%) 3(1%)Employment StatusEmployed 47(9%) 31(6%) 16(3%)

0.001Unemployed 146(27%) 60(11%) 86(16%)self employed 339(64%) 194(36%) 145(27%)Monthly income<500 72(14%) 34(6%) 38(7%)

0.371

501-1000 97(18%) 49(9%) 48(9%)1001-2000 87(16%) 40(8%) 47(9%)2001-3000 82(15%) 48(9%) 34(6%)3001-4000 54(10%) 32(6%) 22(4%)4001-5000 45(8%) 26(5%) 19(4%)≥5001 95(18%) 56(11%) 39(7%)

Results (2) Saving characteristics, willingness to pay and sources of payments for sanitation loans

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•Majority of the population in the area of study 369(69.4%) did not belong to any saving and lending groups with no significant difference between male and female P=0.752•However, 84.4% were willing to take up the sanitation loans•68.3% of the respondents were willing to repay the loans at a rate of 1000Kshs per month•The main source of repayment for loans would be farm produce at 47%

Results (3) The link between willingness and ability to pay

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Parameter Estimates

willingness to take a loan to construct an improved latrine

B Std. Error

Wald Df Sig. Exp(B) 95% Confidence Interval for Exp(B)

Lower Bound

Upper Bound

yes Intercept 1.628 1.265 1.657 1 .198

sex .608 .263 5.345 1 .021 1.837 1.097 3.076

Employments status

-.583 .526 1.226 1 .268 .558 .199 1.567

Income 1.531 .792 3.740 1 .053 4.625 .980 21.832

Education -.108 1.242 .007 1 .931 .898 .079 10.253

•No single factor isolated to significantly link ability and willingness to pay for sanitation loans (P>0.05)•The relationship between willingness and ability to pay is a complex interaction of multiple factors mainly the value of a product.

Discussions • Most of the people in the area earn less than a

dollar daily which conforms to earlier findings (Busia county factsheet, 2011)

• The study notes majority had low education levels. Low education levels inversely affect the ability to pay Todd R. Stinebrickner (1998)

• The high level of willingness to pay contradicts results by McKenzie, and Woodruff (2009a) which show that willingness to pay is influenced by a perception of affordability

• Associations between willingness and ability was weak which conforms to studies (Baron, 2007)

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Conclusion• The study notes that additional elements to socio-

economic and demographic profiles are needed to estimate willingness and ability to pay more accurately.

• The contribution of the on going sanitation socio-marketing campaigns for improved sanitation may have by far influenced the willingness for improved sanitation facilities

• The high levels of willingness provides an opportunity to explore sanitation businesses further.

• Key to this would be appropriate demand and supply sides development

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Recommendations

• Development of a variety of sanitation loan products and repayment tariffs responding to socio-economic and geographical differences in the area.

• Development of market strategies based on deep analysis of demand and the supply side for sanitation; while observing the principles of making markets work for the poor

• Further research to explore definitive predictors of willingness and ability to pay in the area 14

To the banks and lending institutions

To the sanitation promotion practitioners

Acknowledgement

• Mr. Fwamba1

• Public health officers in Busia county1

• Community Health workers involved in data collection2

• Marjolein Ooijevaar3

• Valentin Post4

• Royal Dutch Government

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Thank You