Overview
water (if only for parts of the year), including wells, springs, and boreholes; therefore, they are able to dynamically manage their water demand. Poor people’s purchases are limited by cost and by their assessment of the value of network water with respect to alternatives. Although poor households seem to prefer cheaper water to good-quality water, they also value the convenience of piped water. If operators can ensure good-quality service, the availability and opportunity cost of alternatives will likely shift incentives in favor of networks. Nearly 200 million people in Bangladesh, Indonesia, Peru, and Tanzania alone have unsatisfied sanitation aspirations. Sanitation is a relatively low-priority expenditure for poor households, and cost is an important factor in their decision making. But cost is not necessarily an insurmountable barrier—as the widespread use of other consumer products, such as cellphones, by these households suggests. Poor households are willing to incur a cost to obtain attractive products and services. The problem is that the sanitation options currently on offer are not particularly appealing.
The Market Is Dominated by Small Enterprises That Are Financially Viable but Find It Hard to Scale The base of the pyramid in the water and sanitation markets is dominated by micro- and small enterprises Most of these enterprises are able to make a profit, but they face many constraints in expanding. For water supply enterprises in Benin and Bangladesh, opportunities are limited by the public programs and policies under which these enterprises currently operate; in Cambodia, inadequate access to investment financing and the lack of security to operate as going concerns are key barriers. In sanitation, the risk of unsteady demand and the inability of small enterprises to invest in research and development and marketing limit their ability to realize the sizable market potential.
Commercial Realities Affect Enterprises’ Attitudes toward Investing and the Poor Cambodian water firms—which invest and operate autonomously on commercial terms—display a strong orientation toward serving the poor. In contrast, few firms in Bangladesh or Benin—where investment is largely or wholly funded by government and donors—consider the poor to be their target market, and many believe that the policies under which they currently operate do not provide the poor with equal access to their service. In all countries, firms believe that costs are beyond the reach of the poor and that no incentives exist to reach these markets. Sanitation enterprises in all countries recognize that the market for sanitation is growing, but they are concerned about the regularity of demand. Perceptions of the poor as an attractive customer segment vary. In Bangladesh and Indonesia, a majority of enterprises consider the poor as target customers. In contrast, in Tanzania, most do not. More than three-quarters of Bangladeshi enterprises are concerned that the poor do not pay on time, a view shared by smaller majorities Tapping the Markets • http://dx.doi.org/10.1596/978-1-4648-0134-1
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