Overcoming barriers to financial sustainability in rural water services in Africa

October 19th, 2015

Johanna Koehler, University of Oxford, United Kingdom

Universal and reliable water service delivery is an important goal in achieving sustainable development. However, financial sustainability of rural water services remains an enduring challenge in sub-Saharan Africa1 – a barrier that must be overcome if the Sustainable Development Goals (SDGs) are to be implemented.

Improving actual water service delivery beyond access would also improve the return on the USD 1.2-1.5 billion of infrastructure investments that have been made in rural Africa during the last two decades.2,3 The long repair times that contribute to high handpump failure rates in rural Africa (one third broken at any given time) are essentially associated with weak payment systems.4

We argue that there are three major barriers to achieving regular rural water user payments to promote financial sustainability:

Institutional barriers: The organizational structure of the user group affects fee collection. Geographic barriers: Handpump density can negatively impact payment behavior. Operational barriers: Delayed handpump repairs tend to discourage users from paying, as the source is considered unreliable. This constitutes a downward spiral with the risk of long-term failure in service delivery.

This research was conducted as part of Oxford University’s ‘Smart Handpumps’ project in rural Kenya, which tested a new handpump maintenance model. The trial in Kyuso Sub-County in Eastern Kenya in 2013 covered 66 handpumps (corresponding to around 15,000 water users), which have been equipped with mobile-enabled transmitters reporting hourly pump usage to a central server via SMS5. This allows diagnosing downtimes and triggering fast maintenance responses.

As pump failures are unpredictable and repair costs vary greatly, pooling payments across the sub-county is predicted to provide greater security against water risks. Therefore, a supra-communal management structure was proposed to explore a mobile payment platform that could build on high (73%) use of mobile money services in Kyuso Sub-County6.

In such a scheme all members would contribute monthly cash payments to be deposited into a designated mobile payments (M-PESA) account by the water user committee treasurer. SMS messages would subsequently inform users that their fees have been received and deposited into the account, thus creating greater transparency and accountability for the user group. If pooled, even costly repairs can be covered following an insurance-based approach.

Data on payment preferences were collected in focus group discussions during fieldwork with a total of 639 members of the water user groups at all 66 handpumps over 63 field days in 2013. A group willingness-to-pay activity was designed to identify how much each water user group would be willing to pay for a continuation of the maintenance service at the conclusion of the free maintenance trial in December 2013.

Institutional dimension: Institutional design and rural water user payments

The institutional design of handpump user groups may constitute a major obstacle to securing regular rural water user payments. The application of public goods theory and the distinction of two levels of exclusivity allow a classification of institutional structures into club goods7 and common pool resources8 (see Understanding water markets: Public vs. private goods).

The water user committee plays an important role in administering rules and regulations that define the level of exclusivity of the group. Buchanan’s theory of clubs is concerned with the highest attainable utility for the individual with respect to the optimum size of groups. High exclusivity may prevent queuing and reduce wear on the pump, over-abstraction, and potential rationing of the resource. Low exclusivity allows lower membership fees at pumps with larger numbers of members.

More exclusive handpump clubs show a 43% higher average willingness-to-pay per member per month than common pool resource groups (USD 1.03 compared to USD 0.72). Exclusivity is a response to water supply risks and constitutes a trade-off between sustainable abstraction, aquifer variability, handpump reliability and varying social demands. Too small or too large a membership limits group stability as demand can become insufficient or excessive.

The institutional design of the user group determines how and under which conditions payments are made via the water user committee. More exclusive groups tend to impose tighter financial regulations to generate the required revenue for the pump.

Geographic dimension: Handpump density and rural water user payments

Geographic factors also influence rural water user payments as users are reluctant to pay for maintenance services of a certain handpump if an alternative pump is available. Thus handpump density has implications for investment planning and management.

In Kyuso there are 17 single pumps, eight pairs, and four clusters with similar levels of population density. The willingness-to-pay level is 47% higher at single pumps than at clusters. Thus handpump clustering is at best inefficient and at worst a counter-productive planning decision.

Operational dimension: Service delivery and rural water user payments

Poor service levels seem to be the greatest barrier to sustaining water user payments. Improving reliability through mobile monitoring and quick repairs can strengthen demand. To verify this, monthly payment levels per household of the time before the service started were compared with willingness-to-pay levels after the users had experienced the service (n=46). The increase was fivefold from USD 0.2 to USD 1 per household per month.

This can be related to the fact that the new level of service produced a tenfold decrease in handpump downtime from 27 to 2.6 days on average over the one-year study period.6 Such an order of magnitude improvement had been identified as critical in the baseline survey.9 Moreover, the number of handpump user groups ready to pre-pay into a scheme covering most of the sub-county’s pumps increased threefold.

The findings suggest that payments are contingent on service delivery. Building on these findings, a maintenance service provider, FundiFix Ltd., was introduced in Kyuso that guarantees to repair all handpumps within the scheme in three days. The value this represents for rural communities is reflected in sign-up rates for the annual contract and revenue collection (89% after 6 months) as they do not have to use other, often unimproved, sources.10

Operationalizing and institutionalizing rural water services and user payments

Overcoming the barriers to rural water user payments is an essential step in the global drive toward achieving the water targets of the sustainable development agenda. An output-based payment model represents a new framework for donor and government behavior in Kenya and other African countries within the wider initiatives on result-based payment approaches.11

This study identifies three major findings to prime rural water user payments in Africa. First, a reliable and fast maintenance service can boost rural water user payments. Second, payments are subject to demand and spatial distribution of handpumps. Hence, clustering should be avoided for the sake of financial sustainability. Third, user groups choose different institutional forms within the public-private spectrum: almost half of the handpumps self-organize in clubs favor a semi-privatized model with a higher payment structure.

Understanding operational, geographic, and institutional barriers of rural water user payments allows developing an innovative, output-based payment model for rural water services in Africa. The real test will be if users acknowledge the higher value for money that the new maintenance system creates by supporting the introduction of a new payment system in the long term.

This research indicates that such reforms are supported by the communities if reliable services are delivered. The findings offer pathways toward the suggested water targets of the post-2015 sustainable development agenda promoting, inter alia, universal and sustainable access to safe drinking water and raising service standards, as well as robust and effective water governance with more effective institutions and administrative systems.12

References :

Harvey, P., & Reed, R. (2004). Rural water supply in Africa: Building blocks for handpump sustainability. Loughborough: Water, Engineering and Development Centre, Loughborough University. Hope, R., & Rouse, M. (2013). Risks and responses to universal drinking water security. Philosophical Transactions of the Royal Society, 371(2002), 1-23. Baumann, E. (2009). May-day! May-day! Our handpumps are not working! Rural Water Supply Network: Perspectives, Foster, T. (2013). Predictors of sustainability for community-managed handpumps in Sub-Saharan Africa: Evidence from Liberia, Sierra Leone, and Uganda. Environmental Science and Technology, 47, 12037-12046. Thomson, P., Hope, R., & Foster, T. (2012a). GSM-enabled remote monitoring of rural handpumps: A proof-of-concept study. Journal of Hydroinformatics, 14(4), 29-39. Oxford/RFL. (2014). From rights to results in rural water services – Evidence from Kyuso, Kenya. Water Programme, Working paper, 1. Smith School of Enterprise and the Environment, Oxford University, UK. Buchanan, J. M. (1965). An economic theory of clubs. Economica, New Series, 32(125), 1-14. Ostrom, E. (1990). Governing the commons: The evolution of institutions for collective action. Cambridge: Cambridge University Press. Hope, R. A. (2014). Is community water management the community’s choice? Implications for water and development policy in Africa. Water Policy, 1-15. Oxford/RFL. (2015). Financial Sustainability for Rural Water Services – Evidence from Kyuso, Kenya. Water Programme, Working Paper, Smith School of Enterprise and the Environment, Water Programme, Oxford University, UK. (2014). Sharpening incentives to perform: DFID’s strategy for payment by results. London: Department for International Development. UN Water. (2014). A post-2015 Global goal for water: Synthesis of key findings and recommendations from UN-Water.

Johanna Koehler is a researcher working on the Water Programme at the Smith School of Enterprise and the Environment, University of Oxford. Her work examines institutional developments in rural water services in sub-Saharan Africa. Her PhD at Oxford University examines decentralization and development – implications for water security and poverty in Kenya. The above research was conducted in collaboration with Dr Robert Hope and Patrick Thomson, University of Oxford. This article is based the following open-access publication: Koehler, J., Thomson, P. & Hope, R. (2015). Pump-Priming Payments for Sustainable Water Services in Rural Africa. World Development, 74, 397-411.

The views expressed in this article belong to the individual authors and do not represent the views of the Global Water Forum, the UNESCO Chair in Water Economics and Transboundary Water Governance, UNESCO, the Australian National University, or any of the institutions to which the authors are associated. Please see the Global Water Forum terms and conditions here.