Microfinance Loans to Increase Sanitary Latrine Sales - Evidence from a Randomized Trial in Rural Cambodia

This paper assesses the use of improved sanitation among Cambodians, their willingness to pay for sanitary latrines, and whether cash constraints prevent investments in sanitation. iDE's Sanitation Marketing Scale-Up program facilitates the market for rural sanitation by training small-scale concrete producers to make and market latrines in rural Cambodia. From the Kampong province, 30 representative villages were chosen and 15 of which were randomly assigned control (Cash on Delivery) and 15 assigned treatment (MFI loan). Key findings include:

• Only 12% of households were willing to purchase a latrine at the market price when they have to pay cash on delivery, while 50% of households are willing to purchase when an MFI loan is offered. This fourfold increase in latrine uptake demonstrates that households face a significant cash constraint when purchasing latrines;
• Offering an MFI loan substantially increases uptake at all prices above USD 10;
• Financing decreases marketing and sales cost per latrine by 70%.

The paper recommends a scale up of MFI loans, for quicker adaptation of latrines and other health enhancing products such as water filter or hand washing stations in rural Cambodia. It suggests that implementing a sanitation financing program would ensure that MFI's operations are aligned with program needs.