What determines willingness to pay for a rural water service?

Understanding key determinants of the willingness to pay for rural water services is a complex task. Comprehending this water economics puzzle is of great importance to safe water enterprises such as Project Maji, because it will determine the sustainability of market-based approaches. This research blog outlines the discourse in contemporary research. Recent findings break down affordability and/or the value consumers place on water provision, resulting in the willingness to pay for safe drinking water. This discussion is invaluable in implementing community-led sustainable rural water solutions that can create long-term value for investment.


As a key player in the rural water space, we are working to provide an excellent user experience while ensuring sustainable access to safe water. This is fundamentally why Project Maji treats the user as a consumer, not a beneficiary. Ultimately, we believe this is the only truly sustainable way we can disrupt rural water economics and challenge the status quo. Understanding demand and determinants of willingness to pay is the key to a truly financially sustainable model.


Community-based management questioned In development policy and practice, rural water management has long been delegated to users under the community-based management model. Meaning the primary responsibility for water supply systems, including operation and maintenance, falls on loosely defined clusters of households and their non-binding governance authority. For decades, community leaders, and/or water committees, take care of the regulation of revenue streams of communal waterpoints However, the sustainability of this model is being increasingly scrutinized.

Evidence from Kenya shows that these regulatory bodies are often ill-equipped to handle this burden. They are unable to meet revenue collection goals, significantly diminishing the sustainability of a water point. More importantly, the revenue shortfall is indicative of a general unwillingness or inability to pay for rural water services. Across sub-Saharan Africa, 2 in 3 rural dwellers do not pay for a water service. While affordability appears to be the obvious cause, WASH literature illustrates a variety of factors that contribute to this trend.


Affordability

Affordability measurement for inclusive policymaking in the rural water space remains an imminent discussion. Most recently, the renowned think tank Rural Water Supply Network organized a webinar presenting Preliminary Findings from the JMP and GLAAS Initiative to Strengthen Global Monitoring of Affordability. The initiative lead, Dr. Guy Hutton shared findings that revealed the proportion of total expenditure that rural households spend on water is less than their urban counterparts. In addition, the time and distance costs of water hauling for those in the lowest income decile remain extremely high, particularly when gender and child dimensions are taken into account. The preliminary findings conclude that affordability is a complex phenomenon. Looking at actual spending on water needs as a proportion of total expenditure can grossly underestimate the real affordability issues households face.


A behavioral approach

The willingness to pay for a rural water service can be understood as a response to the following question: Do people not pay because they do not value the service or simply because they cannot afford to pay for it? WASH experts claim that dismissing non-payment solely on account of affordability is a partial and unsatisfactory response. A behavioral approach to investigate what households’ value, and what deters them from regular payments, is more suitable.

The value users place on the water service is in turn shaped by a set of socio-environmental factors. These include; unsatisfactory taste, inconvenient location, lower-cost and closer seasonal alternatives, and frequent breakdown rates. All these factors could undermine both the willingness of users to contribute financially and the motivation of committee members to sustain robust revenue collection systems. In addition, productive use of a water service that boosts a household’s net income is also a positive predictor for willingness to pay, as it creates a moral obligation due to the direct economic benefits gained.


Access and proximity

Another key factor in value determination is proximity of a water point to the household. The criterion for ‘basic water services’ is that collection should be no more than 30-minutes for a round-trip. As women and girls remain the default water fetchers in rural communities across the globe, it is crucial to understand their preference for nearby water points. A water source in the heart of a community not only saves time and physical effort, but keeps water fetchers safe, recognizing that 17 million women are at risk of sexual abuse during daily water walks. As such, women’s voices must be heard in economic decision-making, promoting gender equity on a household’ water-expenditure.

While the lack of purchasing power is a key deterrent and cannot be disregarded altogether, research reveals users will be willing to pay when they feel satisfied with a water service. If user expectations are not satisfied, rural consumers may turn to unsafe water sources which are normally free of charge, such as surface water.

In other words, value creation for end-users can unlock a revenue stream, create a positive investment climate, and sustain rural water solutions over a long period of time. Hence, a shift to market-based approaches is required to ensure value creation in rural water governance by answering the following question: Within a budget constraint, which aspects of water quantity, quality, proximity, and reliability are the priority preferences of consumers?


The Project Maji Approach

Value creation, while ensuring sustainable access to safe water, remains our focus. Across Maji communities, implementation begins with community sensitization meetings and baseline research to assess affordability and willingness to pay for clean water in the long run.

The nominal fee our communities agree to pay, allows for a revenue stream that covers our operation and maintenance costs. Digital monitoring helps us measure our kiosk performance in a cost effect manner, ensuring maximum uptime. We position our installations in the heart of communities, only steps away from households. Through our interventions, the villages climb the WHO/UNICEF drinking water ladder; from unimproved to basic, well within the guidelines of 30 minutes collection time for a roundtrip and 1km.

Our solar-powered water kiosks have in-built water treatment features that ensure good taste and overall consumer satisfaction. Thus, we create a sustainable revenue flow in each community, processing micro payments through the e-payment systems. We incorporate a cashless payment system into every site to ensure financial security, guaranteeing the availability of funds for future maintenance.


A field perspective

Project Maji’s Project Manager in Kenya, John Otieno, agrees. “The willingness to pay in our communities rise by introducing digital payments options. Previously, funds disappeared when the pump was broken, but through our service agreement, users can expect reliable water access.” Mr. Otieno practitioner’s perspective is that women are tired of long, dangerous water walks. Therefore, they happily pay the agreed fee of just 5 Ksh for two jerry cans, provided that the water source is close to home, the water is available and tastes good.

These kind of field perspectives help us appreciate that long-term sustainability hinges on many factors and anticipating and managing demand are critical. After all, safe drinking water for all is unlikely to be achieved without significantly improved sustainability and profitability of rural water supplies.