Cost Sharing

Compiled by:
Mohnura Mamadgazanova (seecon international gmbh)

Executive Summary

Community contributions such as user fees, household investments, community-based savings and cost sharing are a major source for financing sustainable sanitation and water management products and services. These contributions are important, because sanitation and water systems will only be improved if community members are interested and willing to invest accordingly. This section will concentrate mainly on cost sharing as a method of financing. It contributes to the promotion of household “ownership” of sanitation facilities and to hygienic practices. Furthermore, it ensures that communities are involved in designing water and sanitation solutions that will work for them in the long-term (MJOLI et al. 2009).

Introduction

Cost sharing is about distributing expenses of water and sanitation projects among the main stakeholders. The purpose of cost sharing of water supply and sanitation facilities is to contribute to the building of a sense of ownership in the community. The main objective of the method is to ensure that the costs which are shared by communities will be ‘ploughed’ back into increasing coverage for scaling up and also major repair or the replacement of the installed hardware (WATERAID 2006).

Why Cost Sharing?

Partnerships between donor agencies, local NGOs, communities, local authorities, and local private sector providers have shown to improve the effectiveness of projects in many developing countries (see public private partnerships). The development of effective partnerships, as opposed to parallel and government-isolated processes, tends to be time consuming. But as a result of active communication, shared work and harmonisation of approaches, these initiatives also tend to be better prepared to face financing challenges as they arise, without threatening sustainability of services (WPP 2010).

Types of Cost Sharing

(Adapted from WPP 2010)

There are different types of expenses that can be allocated among different stakeholders according to the proposed project. These are:

 

  • Labour costs
  • Costs for training and capacity building
  • Material costs
  • Pre-operational costs
  • Costs for research
  • Costs for using equipment, etc.

 

Partnerships can help to build capacity through training and skills development (see also training courses on sustainable sanitation and water management. And with the involvement of local NGOs and community organisations they can help to transfer knowledge about a communities structures and needs. Partnerships can help in replicating successful initiatives from districts to entire regions and effectively contributing to increased coverage for the poorest (CARDONE & FONSECA 2003).

Furthermore, if community members are not capable of investing money for their water and sanitation system, they can contribute offering their labour for construction of water and sanitation facilities.

Example: Orangi Pilot Project in Pakistan

(Adapted from OPP-RTI 2010)

The low cost sanitation programme of the Orangi Pilot Project (OPP) began in 1981 in Orangi, Pakistan. Poor sanitation is undoubtedly the most distressing problem of the low-income settlements. The new immigrants succeed somehow in building houses but they fail to make proper arrangements for disposal of excreta and waste water i.e. sanitation. The cost of flush latrines and underground sewerage built officially by contractors is too high for poor people. Through research OPP discovered low cost methods and taught lane residents through technical and social guidance to construct sanitary latrines in homes, underground sewerage lines in the lanes and secondary sewers. All this was done with their own money and under their own management, while the trunk mains and treatment plants remained the responsibility of the government. The example from Orangi shows that cost sharing is an important component of any development initiative and it attracted the attention of other NGOs, CBOs, governmental departments and local municipalities.

 

Things to Consider

It is important to clearly define the financial and operational responsibilities of all stakeholders including the community, national and local governments, NGOs, donor supported projects and programmes, and possibly others such as religious organisations, individuals or the private sector. This entails determining who is financially responsible for which costs, and over what period of time (WPP 2010).

Applicability

Adopting cost sharing methods for financing water and sanitation systems requires thorough analysis of all stakeholders. It is applicable both in rural and urban areas.  

Advantages

  • Effective, because different stakeholders are involved contributing various types of contributions
  • Improves the sense of community ownership
  • Benefits local communities

Disadvantages

  • Time consuming for collecting information on all stakeholders and their contributions
  • Requires constant control of the stakeholders fulfilling their tasks
  • The issue of further operation and maintenance might arise after completion of the project

References Library

CARDONE, R. ; FONSECA, C. (2004): Financing and Cost Recovery. (= Thematic Overview Paper 7). Delft: IRC (International Water and Sanitation Centre). URL [Accessed: 20.07.2010]. PDF

MJOLI, N.; SYKES, G. ; JOOSTE, T. (Editor) (2009): Towards the Realisation of Free Basic Sanitation. Evaluation, Review and Recommendations. Report to the Water Research Commission. South Africa: URL [Accessed: 28.09.2011].

OPP-RTI (Editor) (2010): Low Cost Sanitation Programme in Orangi. Pakistan: Orangi Pilot Project Research and Training Institute (OPP-RTI). URL [Accessed: 28.09.2011].

WATERAID (Editor) (2006): Cost Sharing and Recovery Strategy. Updated in September 2006. Bangladesh: Water Aid . URL [Accessed: 28.09.2011].

WPP (Editor) (2010): Guidelines for User Fees and Cost Recovery for Rural, Non-Networked, Water and Sanitation Delivery. Water Partnership Programme (WPP) of African Development Bank (AfDB). URL [Accessed: 24.08.2011].

Further Readings Library

Reference icon

AHMAD; ALLAOUI; MAI-AFU; MARX; KANEBI ; KAMFUT (Editor) (2009): Water, Sanitation and Hygiene: Sustainable Development and Multisectoral Approaches. Water and Sanitation Sector Reform in Nigeria . Addis Ababa: 34th WEDC International Conference, Ethiopia, 2009. URL [Accessed: 27.10.2011]. PDF

This paper is about water and sanitation sector reform and improving governance in Nigeria, which is being achieved through introducing processes, guidelines and mechanism to ensure transparency, accountability and effective participation of all stakeholders. In addition, sharing of capital cost for construction of water supply systems by all three tiers of government, communities and development partners/donors is a major thrust of financing mechanism.


Reference icon

HILL, D. (2009): Supporting Community-Driven Development in Developing Member Countries. Community-Based Development in Water and Sanitation Projects. Asian Development Bank (ADB). URL [Accessed: 22.04.2012]. PDF

This paper presents comparative analysis among community-based development (CBD) and/or community-driven development (CDD) projects, and between CBD and/or CDD and non-CBD and non-CDD projects in water supply and sanitation (WSS).


Reference icon

WINPENNY, J. (2011): Financing for Water and Sanitation. A Primer for Practitioners and Students in Developing Countries. EU Initiative Finance Working Group. URL [Accessed: 26.10.2011]. PDF

This primer offers a non-technical introduction to financing for water and sanitation in developing countries.


Case Studies Library

Reference icon

BUTTERWORTH, J.; SUTTON, S.; MEKONTA, L. (2013): Self-Supply as a Complementary Water Services Delivery Model in Ethiopia. In: Water Alternatives 6, 405-423. France: Water Alternatives Association. URL [Accessed: 11.10.2013]. PDF

Self-supply, where households invest to develop their own easily-accessible water supplies, is identified as an alternative service delivery model that is potentially complementary to more highly subsidised community-level provision. The approach is widespread in Ethiopia with family wells bringing additional benefits that are in line with wider government objectives, such as supporting small-scale irrigation. However, two recent studies show the current performance of traditional or family wells to be far below potential with most sources providing unsafe water in the absence of adequate protection.


Important Weblinks

http://www.oppinstitutions.org/ [Accessed: 26.10.2011]

This is the website of the Orangi Pilot Project Research and Training Institute. Orangi Pilot Project (OPP) began to work as an NGO in Orangi town in 1980. The website provides information about five basic programmes of low cost sanitation, housing, health, education and credit for micro enterprises.