IFC Global Clean Water Access Survey

Joe Brown, University of AlabamaThomas Clasen, London School of Hygiene and Tropical MedicineTom Outlaw, Kenan-Flagler School of Business, University of North CarolinaMark Sobsey, University of North Carolina School of Public HealthSimon Spooner, Atkins Global Consultants (UK)Kari Leech, University of North Carolina School of Public HealthJianyong Wu, University of North Carolina School of Public Health

Team Planning MeetingWashington, DC

June 9, 2008

Agenda• Team Introductions & Background• Project Scope

– Phase I: Survey– Phase II: Investment Options

• Focus Countries– Kenya– China– India

• Communicating Findings– Translating knowledge into action

• Timeline and deliverables

Ex-ante Assumptions

• Access to safe water in developing countries is limited by scale of existing programs

• Investment opportunities exist for promising technologies and/or delivery models

• Scale & sustainability can be achieved without long-term subsidy

Scope

• Technologies and delivery models for scaling up

– Point-of-use/household-scale technologies• produce improved water based on WHO risk-based

criteria

– Commercial models• multinationals/domestic

manufacturers/licensees/entrepreneurs

– Financing strategies• microcredit/loan guarantees/equity investment

Scope, cont’d

• Focus on economically-viable solutions with potential to scale, given targeted investment

• Include technologies from Europe/N. America/elsewhere suitable for lower-income countries/market segments

PUR Water

Additive

Ceramic Water

Purifier

Plastic Biosand

Filter

Phase I• Project Survey:

– assess technologies and delivery models in focus countries– based on front-end research & in-country interviews/data

• Target Markets: – urban/peri-urban/rural– lower-income/Base of Pyramid

• Target Technologies: – disinfection/filtration/hybrid

• Provenance:– locally-developed/imported/licensed/hybrid

• Delivery models and organizations: – 100% commercial/private sector– public-private partnership– 100% subsidy (gov’t/NGO)– Vended safe water, decentralized technologies

Data CollectionDetailed program-specific data on…

• Region/Country• Water/water technology supplier name and type (NGO/business)• Target market: geography (urban/rural/peri-urban, on/off grid)• Target market: income (high/medium/lower)• Target intervention (POU/micro-utility water supply)• Technology description• Business model description• Value proposition (cost, quality, convenience)• Cost per liter to supplier (COGS)• Consumer cost per liter• Subsidy (or profit) per liter• Subsidy structure• Track record (profitability and growth rate)• Barriers to growth• Tools available to IFC

Phase II• Goal: Develop commercial-viability profiles of promising technologies & delivery models

• Prospective criteria:1. Technology well-characterized re effectiveness & health impact

• or a local adaptation with strong evidence of local viability

2. Economically-sustainable business model• a sound cost-recovery & reinvestment plan, without hardware subsidies

3. Well-developed supply chain (or potential, with targeted investment)

4. Technologies must be scale-able • And have a plan in place for scaling up coverage to maximize access to

safe water at the country level

Goal: Increasing Coverage Through Targeted Investment

• 3 approaches:

1. Invest in microfinance mechanisms (demand & supply side)

2. Equity investment in companies marketing effective safe water products (supply side)

3. Investment in companies with broad market reach to also manufacture/distribute safe water products (supply side)

Country-specific plans: Phase I survey

• Kenya & Uganda• China• India

• Chosen because:– Transition economies with emerging markets for safe

water technologies– Opportunities for investment and scaling-up– Low access to safe water, particularly rural areas– High incidence of diarrheal/waterborne disease

Kenya

Kenya

• Pop: 36.5m (2006), 59% rural• GNI per capita (2006): US$580• GDP per capita growth rate (1990-2006): 0%• % population < US$1/day (1995-2005): 23%• Access to improved water (2004): 61%• 28% with household connections• Access to sanitation (2004): 43%, 4% with

household connections

Uganda

Uganda

• Pop: 16.8m (2006), 88% rural• GNI per capita (2006): US$300• GDP per capita growth rate (1990-2006):

3.1%• % population under US$1/day (1995-

2005): 85%• Access to improved water (2004): 60%,

1% with household connections• Access to sanitation (2004): 43%, 1% with

household connections

Kenya (& Uganda)Country Contacts

– Manufacturing• Trojan UV• Chujio Ceramics• Vestergaard-Frandsen• Kentainers, Inc.

– Financing• K-Rep• FINCA• BRAC• Aga Khan Agency for Microfinance

– NGOs• Kenya Water for Health Organization (KWAHO)• NETWAS International, Kenya• African Peri-Urban Community, Kenya

– Donors• WSP, IFC, GTZ, USAID

China

China

• Pop: 1.31 bn (2004), 60% rural• GNI per capita (2006): US$2010• GDP per capita growth rate (1990-2006): 8.8%• % population under US$1/day (1995-2005): 10%• Access to improved water (2004): 77%, 69% with

household connections• Access to sanitation (2004): 44%, 22% with

household connections

China

• Existing partners and contacts– Kenan Institute Asia– Chinese Ministries of Environment and Water

Resources– DfID-China

• Approaches– Identifying private sector partners with national market

access and potential for scale-up; many manufacturers of safe water technologies exist

• Obstacle: most have not been independently verified for effectiveness

• Few have national reach, many for export– Microfinance institutions for rural and urban markets

India

India

• Pop: 1.15 bn (2006), 72% rural• GNI per capita (2006): US$820• GDP per capita growth rate (1990-2006): 4.5%• % population under US$1/day (1995-2005): 34%• Access to improved water (2004): 86%, 19% with

household connections• Access to sanitation (2004): 33%, 9% with

household connections

India

• Existing partners and contacts– AED– Institute of Technology, Bombay– PATH– National Institute of Communicable Diseases, India– CARE/ACCESS– Hindustan Lever

• Approaches– Microfinance investments to facilitate access to popular filter lines:

• Eureka Forbes: tabletop filters• Usha Brita• Unilever

– Connecting and mobilizing Women’s Self Help Groups (SHG) – National-level retailers who have access to urban and rural

markets with interests in health products, safe water products, consumables

Promising Technologies and Actors:

• Identify partners with key technologies and Base Of Pyramid markets

– Vestergaard-Frandsen (LifeStraw)– Proctor and Gamble (PUR)– Stefani/Pozzani/Katadyn/Doulton ceramic filters– NGOs with business models & private-sector

approaches• e.g., Cambodian ceramic water filter scale-up by IDE

– Local entrepreneurs with potential for market entry

Communicating Findings

• Connecting investors with opportunities• Post-project dissemination event in Washington DC• Final report

– 3 or 4 most-promising projects • their technologies• business models• barriers to growth• support needed • consider risk management tools (e.g., credit guarantee facilities)

• Publication and presentation of findings to academic and development communities

Deliverables

• Week 3. Detailed workplan.• Week 11. A written interim report to IFC that will

include:• a general overview of the clean water market in countries

surveyed;• analysis of available clean water technologies and delivery

models and opportunities to scale them up,

• Week 12. Interim report presentation in Washington DC

• Week 16. Draft final report• Week 19. Final report submission • Week 20. Dissemination event in DC

Prospective timeline

Business Models 101

InfrastructureCore capacities to execute

Partner network and alliancesValue configuration: How a

business makes itself mutually beneficial for a itself and

its customers.

CustomersBeachhead customer

Distribution channel(s)Marketing strategy

Customer service

OfferingValue proposition: The products & services a business offers.

FinancesPricingCost structureRevenue model: How company makes money through multiple streams

Key Characteristics of Base of Pyramid (BOP) Market

• Labor-Rich • Capital-Poor• Low Education/Low Literacy• Power Dynamics (gender, caste, age, race, etc)• Not One Segment, But Many!

– “Dirt-poor” (subsistence-level)– “Climbers” (price-driven, unbranded products)– “Aspirers” (desire brands, can’t purchase consistently)– “Consumers” (brand-driven, purchase consumer durables)

Key Challenges in Marketing to BOP Consumers

• Designing safe water solutions that are:– Efficacious– Reliable– Affordable– Durable– Easy to use– Do not require electricity, and,– Appeal to preferences/lifestyles/attitudes of

targeted consumer segment(s)

Key Tools for Reaching BOP Consumers

• Creative Financing

• Consumer-driven Product Innovation

• Supply Chain Strengthening

• Marketing/Behavior Change

• Community Mobilization

• Policy changes

Affordability As Barrier to Adoption

Affordability is Part Reality and Part Perception…

Affordability = Ability + Willingness

Household income and cost of technology

Understanding, trust, and perceived value placed

on product

Economic Growth

Cost Control

Creative Financing

Smart Subsidies

Systemic Shocks

Hearing/Seeing Satisfied Users

Consumer Education

Public-Private Partnerships

Promotional Activities

Leveraging Public-Private

Partnerships

Public/Donor Sector Roles

ProductDesign &

Development

QualityAssurance Production Distribution Marketing Sales &

Financing

Private Sector Roles

SupplyChain

Evaluating Business Models:Key Aspects for Strategic Firm

Management

Financial Strategy

Degrees of Strategic Freedom Time to OOC Risk/Reward

Business Strategy

Value Proposition

Marketing Model Ops/Supply Chain

Pro Forma

CapitalSourcesDebt Equity Strategic

FinancialRequirements

Driven by:

Burn RateCapital InvestmentProfit and LossRevenue Streams

Opportunity

Business Model

Financial Model