Adversity Breeds Innovation

07/30/14 – This guest blog is Part 2 of  Eric Byington’s post. He is part of the Global Social and Sustainable Enterprise MBA, is a co-founder of H2.0, and is spending his summer doing research in Kenya.

Eric Byington

Eric Byington

Behavior change is a hot topic in WASH. If you’ve always dug pit latrines with no understanding of its impacts on the local water tables, have collected water from a local river your whole life, or don’t understand how clear water can contain unseen contaminants, what would prompt you to change your learned behaviors? Changing deep seeded habits takes time, but if you start that process young and en mass, it can serve as a catalyst for widespread change. For this reason, we have come to believe the utilization of schools is paramount. There are thousands of primary and secondary schools throughout Kenya. In every school meeting we have had, the teachers and leaders of these institutions are clamoring for the proper technologies to be installed at their locations to provide both clean water and proper sanitation. These leaders spend many hours with their students, often having a deeper influence over them than their own parents, and will be the foundation for the behavior change when the proper WASH technologies are installed at their facilities.

CREATIVE FINANCING

Gatina Slum in Nairobi

Gatina Slum in Nairobi

The NGO/non-profit model has long dominated this space, and for many good reasons. Because the technology and infrastructure development are so costly, donor based models have long provided for WASH needs, often bringing thousands of products at a time to the field. Unfortunately, this modus operandi for many of these philanthropic based projects has seen thousands of products or techniques fail to be adopted by the communities they intend to impact. Ownership and education are two of the major issues that plague these freemium model projects. This is where we see creative forms of financing coming into play. Before you make a $1,000 purchase you often read a few consumer reports and do a little research, right? You understand what it is you’re buying, how it works, what to do if it fails you in any way. After the transaction the item holds some sort of value to you and more often than not (we all make those poor purchase decisions from time-to-time) you use that product because the need or want of its use was a strong enough impetus to cause you to pull the trigger on the purchase. Now this idea is neither new nor revolutionary, but a financial transaction is needed to bring ownership to the table and to, in many ways, force education and training to take place. Here’s the but that always exists; so much of this technology is way out of the price range of most users or entrepreneurs. This is where we get creative. Let’s say purchasing and installing a clean tech toilet with a biodigester at a school costs $30,000 USD. The school doesn’t have the cash to buy the product outright and a conventional loan would either be inaccessible or daunting at best. Let’s say we can cut that price in half by bringing together government and non-profit money to subsidize the labor, transportation, fees, and general overhead expenditure. The school spends approximately $6,000 USD per year on fuel for cooking and digging new pit latrines. At the new cost of $15,000, the school could use the money they’re saving on fire wood and pit latrines to pay off their $15,000 loan for the clean tech toilet and biodigester in approximately 3-4 years, including paying an industry standard interest rate. To hedge our risk, we finance only the physical product that is being installed and use those assets as collateral, and we have an assurance that the school cannot up and disappear on us the same way a sole proprietor may be able to. There are many stakeholders at play here with many details to attend to, but if we get creative, we can find ways to make a serious shift away from freemium models and towards a more sustainable market based approach.

COLLABORATION

Eric  with local children

Eric with local children

It’s amazing how much is happening in the WASH sector here in Kenya. It’s also amazing how little collaboration is going on. Shared learning, creative partnerships, and sector specific incubator spaces would serve the progression of improved water and sanitation well. People are talking about it, but we haven’t seen a lot doing it…yet. One Acre Fund is becoming an agriculture sector specific financial institution that maintains a lot of institutional knowledge specific to improved agriculture production and food security. The WASH sector could benefit greatly from a similar sort of entity, and we are working to see that happen. Bringing best practices, creative thinkers, and shared technology together and then offering creative financial products to fund collaborative work will serve to accelerate the progress this sector is screaming for.

The future of the WASH sector looks exciting. It won’t be easy and there is a great need for patient capital, flexible expectations and lots creativity, but our time in Kenya has convinced us that market based approaches must be the next step in the WASH sector, and we’re ready to work our tails off to find and build them.

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