Supply Chain Analysis for Rural Sanitation Products and Services in Lao pdr



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Affordability


“Affordability is a function of two main factors: (a) cost of the product relative to net income and (b) the perceived value of the product in the eyes of the consumer.” (IDE 2007). It is also a function of payment options (that is, the ability to pay in installments).

Combining together materials and labor costs, a commonly built latrine can cost US$780 (Table 31).



Table 31: Commonly-built latrine total costs (materials + labor)

Region – Province

Materials cost (LAK)

Labor cost (LAK)

Total cost (LAK)

Total cost (US$)

Northern

2,512,720

3,783,333

6,296,053

787

Bokeo

2,394,768

2,150,000

4,544,768

568

Luangnamtha

2,630,673

5,416,667

8,047,340

1,006

Central

2,819,177

3,397,000

6,216,177

777

Borikhamxay

2,649,631

4,242,000

6,891,631

861

Savannakhet

2,988,722

2,552,000

5,540,722

693

Southern

3,033,852

3,242,611

6,276,463

785

Attapeu

2,882,181

3,460,000

6,342,181

793

Salavan

3,013,458

3,090,909

6,104,367

763

Sekong

3,205,917

3,176,923

6,382,840

798

Total sample

2,813,110

3,451,144

6,264,254

783

The above latrine costs are beyond the means of poor households. For households at the official rural poverty line22 — 180,000 LAK (US$22.50) per person per month (GoL 2012), which equates to 900,000 LAK (US$112.50) for the typical five-person household — the commonly-built latrine would cost at least three months’ income. Many target households are well below the poverty line: the WSP - Sanitation Consumer Behavior Study found that around 85% of poor rural households in the South have a monthly income of less than 500,000 LAK (US$63). Almost 70% of households in the Central region and 55% of households in the North have incomes under 500,000 LAK (Figure 14). Transport costs to many target areas make the latrine even more expensive. It is apparent that the ‘commonly built’ latrine is out of reach for everyone considered “poor”. It is hard to imagine people sparing over six month’s income for a latrine – perhaps even if payments were spread over time.

Figure 14: Poor rural households’ stated monthly income, by region



Source: WSP - Sanitation Consumer Behavior Study.

Supply chain actors also view as standard a latrine model that is significantly over-designed. Superstructure and pit sizes are sometimes very large. Also some suggested latrines include bathing or other facilities (that is, a full bathroom). Expensive materials are also often used because suppliers are accustomed to serving higher-income clients. For example, two masons estimated that a door would cost 1,000,000 LAK (US$125) (one stated 700,000 for the door and 300,000 for the frame).

Although low-cost designs exist that are within many consumers’ willingness to pay (see below), these designs do not include a shelter. Shelters are important for consumers. According to the WSP - Sanitation Consumer Behavior Study, 83% of non-latrine owners would rather pay more for a solid superstructure (brick) than an inexpensive option (bamboo, palm or wood). Despite this preference, many poor households who own a latrine do build a shelter built from locally-available materials: in the Northern region, 69% of surveyed latrine-owning households had a shelter from bamboo, palm, thatch or similar (WSP – Sanitation Consumer Behavior Study).

From the WSP - Sanitation Consumer Behavior Study, more than 75% of poor rural households without a latrine who knew what one would cost and the days required to build, believed that it will cost at least 1 million LAK (US$125)23. Around 29% of households without a latrine are prepared to pay 200,001 to 700,000 LAK (US$25 to US$88) for a latrine, while 29% are willing to pay more than 700,000 LAK (Figure 15).

Figure 15: How much are you willing to pay for a latrine? (Rural poor, non-latrine owners)



Note: only rural poor households interviewed for this data.

Source: WSP - Sanitation Consumer Behavior Study.

The mismatch between actors’ costs of for a commonly-built latrine and consumers’ willingness to pay is highlighted in Figure 16.



Figure 16: Comparing costs with consumer expectations and willingness to pay (LAK)

Note: Excludes labor and transport costs.

SS = superstructure.Low-cost design with SS: assumes 635,000 LAK (US$80) superstructure.

Consumer perceived cost: more than 75% of poor rural households without a latrine, who knew the amount one would cost and the days required to build, believed that it will cost at least 1 million LAK.

Consumer willingness to pay: 40% of poor non-latrine owners are willing to pay at least 500,000 LAK.



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