The idea is to differentiate tariffs based on a specific factor common to a group of users, as the volume of water consumed or users' living area. This can also also be used for connection fees.
This approach is considered to be a good way to reach the poorest. However, the [[Asian Development Bank (ADB)]] concluded that whereas it helps to sustain existing systems, current approaches do not reach the poorest [http://www.adb.org/Waterdocuments/Policy/consultations/INDconsultation-phase-adb-accountability-mechanism-listening-communities-2005affected-Consultationadb-Report.pdf#page=31]. Tariffs based on volume are interesting, but metering is normally a problem, since it is costly. Customer involvement in the process is also very important. China’s Rural Water Supply program, for instance, has over 90% payment compliance in households with metered systems whereby the salaries of the operations staff are tied to monthly bill collection and raising tariffs if they do not cover operating costs. Cross subsidies have high potential however, particularly for poor slum dwellers, but innovative ways of dealing with the problem of metering are needed.
Regarding sanitation, the BMGF landscaping recognized differential tariffs in sewered systems charging below cost to poor users and above cost to others. These is a typical example of cross subsidies (non-poor users subsidizing poor ones).
Although this is not a finance approach on its own, increased transparency can have a great impact in allowing more efficient use of more available funding.
Corruption is a widespread phenomenon and drains part of the funding that could be used for productive activities, better salaries, etc. Rising transparency requires better procedures and access to information [http://www.irc.nl/content/download/21439/253860/file/How%20to%20hold%20a%20meeting%20tool%20(Stockholm).pdf]. A study comparing productivity among 21 water utilities in Africa found that nearly two-thirds of their operating costs were due to corruption [http://www.wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2002/10/25/000094946_02101104032679/Rendered/PDF/multi0page.pdf].
Fighting coruption corruption has high potential because the part of the sector's funds that are currently lost due to its presence can be used for service improvements or expansion of water and sanitation systems.
=== Franchising ===
====Users contribute in cash or kind or pay connection fee. ====
Good approach to enhance ownership. Also needed for replacement. Some examples of no-subsidy for hardware, but poorest sections may require subsidy. The governments of India and Bangladesh suspended subsidies because they did not reach the poor but then re-introduced them at lower levels (the equivalent of about USD 10) in order to reach the poorest of the poor. Management of subsidies remains a challenge. In Ouagadougou (Burkina Faso): a surtax on water supply is applied by ONEA, an autonomous public water and sanitation company, to subsidize on-site sanitation facilities (25% contribution and supervision of trained masons). 20,000 facilities have been constructed in schools and households. Management of funds presents difficulties, but approach was extended to other towns (http://www.wupafrica.org/toolkit/resources/pdf-files/good_practices/good_practice_Africa.pdf) Good potential to reach the poorer sections of society
=== Pay and use toilets/public bath houses ===
Good approach if systems are kept clean. Can quickly enhance coverage. A wide range of approaches are existing including public-private arrangement with users paying per visit but also some with monthly contributions
(http://www.wupafrica.org/toolkit/resources/pdffiles/good_practices/good_practice_Africa.pdf ; http://www.lboro.ac.uk/well/resources/Publications/Country%20Notes/CN4.1%20India.htm ). A good option to guarantee quality and back-up support, is to use a franchise concept. Sulab International has developed 4000 "pay and use" community toilets serving more than 11 million people daily (http://web.mit.edu/urbanupgrading/waterandsanitation/resources/caseExamples/sanitation-services.html ). Pay-and-use public toilets for crowded areas and slums, without space or funds for latrine construction. Also for transient populations such as bus stops. Managed by local government, NGOs or entrepreneurs. This includes women groups jointly developing sanitation facilities. High potential particularly in densely populated slums
=== Revenue financed expansion ===
Widely used, but often substandard performance. Could benefit enormously from proper support (advice, materials, innovation). Legalisation of property rights is key. Poorest need support. In Baroda (India) a 1999 study showed that households invested, on average, at least 70 USD in their own facilities such as rainwater tanks, underground tanks, lift pumps etc.
(https://www.wsp.org/regions/south%20asia).
The World Bank estimated that half of the investments (totalling 1.8 billion USD) made in rural China between 1990 and 1995, were made by the users themselves. (http://www.chinadevelopmentbrief.com/node/248). High potential because of growing access also of poorer groups to credits and remittances of overseas workers.
====People investing individually or jointly in sanitation====
Mixed track record in sanitation with earlier interventions even frustrating work of others. Risk remains that it operates as a parallel program. Approach is for example promoted in Latin America and Caribbean by the Inter-American Development Bank
(http://www.iadb.org and http://www.iadb.org/sds/doc/957eng.pdf ).
=== Tariff ===
====Users pay the cost for operation and maintenance====
Accepted as a rule, but not always covering all costs in sewered systems. Poor often cannot afford the fees. Also used for communal facilities that are managed by group of families, paying monthly rates, for example in Nairobi (http://www.wupafrica.org/). In South Africa differential tariffs are used to support the poor, and no tariff is charged to families using less than 6000 litters of water per month (http://www.joburg.org.za/services/water3.stm). Potential relates to the need to sustain services.
=== References ===
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