Thursday, 15 September 2011

Why Sanitation Should be Envious of Funeral Parlours – the Challenge of the ‘Missing Middle’ ...

by David Schaub-Jones

Last week’s post suggested that a lot of the buzz around sanitation right now is linked to issue of sanitation entrepreneurs (itself partly due to the craze for all things labelled ‘social entrepreneur’).  But it also asked how many of those businesses involved in sanitation in developing countries could truly be considered entrepreneurs?  All of which set me to thinking about the ‘missing middle’ ....

The ‘missing middle’

A session on small-scale finance at Stockholm first introduced me to the concept of the ‘missing middle’. What was meant by this is that there is a dearth of meso-finance (between $5000 and $500 000) available to the water and sanitation sector – i.e. medium sized amounts of money.

So if you need more than a small microfinance loans, but less than a large government, donor or commercial loan or grants then you struggle. (Click the link for a slide on this).

I suspect that this situation is even more pronounced for sanitation, with very few making this sort of money accessible to sanitation providers.
For sanitation, this led me to also question how many sanitation businesses are of the medium-size anyway – and would be looking for this money to begin with? 
In other words – how many are medium-sized ‘entrepreneurs’ and how many are really just small, one or two person businesses that won’t ever grow beyond that?

How important is the broker?

The other ‘missing middle’ for me was not about finance per se, but about the important brokering role that must take place if sanitation entrepreneurship is to ever really take off at the scale many of us hope for.

The problem is not that the sanitation business lacks glamour (a situation that has hardly slowed the growth of funeral parlours or pest eradicators). The problem is that the sanitation business lacks predictability, simplicity and rigour (at least in the eyes of bankers, small business consultants and others we are hoping take more of an interest).

To take this metaphor further - you don’t need to explain to a bank what a funeral parlour does. The business is easily understood and financial projections simple to apply. For now, this level of comforting familiarity eludes the sanitation sector.

We’re not yet where we need to be – i.e. boring and predictable.

So while the "Sanitation, everyone's Business" tune (last week’s hit single) may be zooming up the charts, there remains a need for people and organisations to act as a broker.  In developing country contexts, they help overcome the challenge of the ‘missing middle’ by extending one arm to the legion of private businesses active in sanitation and the other to the donors, bankers, venture capitalists and others that are keen to bring their finance and expertise to bear.
Let us worry later about whether people are looking to make money out of the ‘bottom of the pyramid’, to reach the poorest of the poor, or both.  First let us make the sanitation business boring, predictable and ‘simple’!
BPD, along with other pioneers, is trying to fill this ‘missing middle’. The role of broker, facilitator and mentor is hard and sometimes thankless work. But hopefully it will be worth it in the end.

After all, wouldn’t “Sanitation, everyone’s Business” be so much more satisfying as a platinum-selling album than a one-off chart topper?!

Friday, 9 September 2011

Sanitation 'Entrepreneurs' – or Just Minding their own Business?

by David Schaub-Jones

Sanitation zooms up the charts

If the water and sanitation sector had a ‘hit parade’ (if you’re my age and ever watched the BBC, think ‘Top of the Pops’) then the song “Sanitation, everyone’s Business” would be zooming up the charts. Hell, it would easily be in the top ten by now. 

We have just come back from Stockholm Water Week, where the whirl of discussion around all things water, sanitation, hygiene (and now, climate) was intense as ever. Not so long ago, when BPD ran a
session on sanitation it was one of a measly two sessions on the topic all week. This year we, along with a few friends, ran a session on ‘sanitation entrepreneurs’ and a hundred and fifty people packed into a small room (meant for ninety) just so they could experience ‘sanitation speed dating’! See our facebook profile for some unusual photos.

A few happy trends are pushing the ‘sanitation entrepreneurs’ tune on its heady climb up the charts. One is that sanitation has itself improved its profile, thanks partly to a concerted push from activists to ‘get it on the map’ (while having the Gates Foundation weigh into the issue has certainly not hurt).


The business of sanitation vs social entrepreneurship

Another is the popularity of anything that can be labelled ‘social entrepreneurship’. Here sanitation has two advantages. As with water, there is lots of informal private activity on the ground. Yet compared to water, sanitation is politically much less contested. This means that no-one is (yet?) making a fuss about sanitation providers ‘profiteering from the poor’. A second advantage, if you can call it that, is that sanitation is so firmly in the ‘public goods’ camp that just about anyone taking a private sector approach can add the tagline ‘social’ to their activities and get away with it (HT Sophie Tremolet).

Which brings me to my point. Just how much sanitation entrepreneurship is there out there anyway? As I said, there is a lot of private business involvement in sanitation, particularly in developing countries where much of it is informal. But how much of this can be considered truly entrepreneurial, never mind qualify for the seemingly hallowed tag of 'social entrepreneurship'?

BPD (or is that just me?) may be as guilty as anyone for the boosterism associated with the topic. Yet a couple of sessions in Stockholm – BPD’s on sanitation entrepreneurs and another on
small scale finance – brought home to me just how far we may have to go. 

More on this, the 'missing middle' next week .....

PS these are not meant as rhetorical questions - please weigh in!