Senegal has made great strides in providing access to sanitation for its population, but more than 7 million people still lack access to adequate sanitation. To address this shortcoming, the Programme National de Développement Durable de l’Assainissement of the National Sanitation Office developed a new framework to enhance private sector engagement in sanitation. Office Managing Director Lansana Gagny Sakho recently remarked that the strong involvement of the private sector marked a sanitation revolution.
The emphasis on the private sector notwithstanding, a USAID WASH-FIN (Water, Sanitation, and Hygiene-Finance) survey of 105 private sanitation service providers (SSPs) across Senegal found that they face challenges typical of small- and medium-sized enterprises—access to finance being foremost. Moreover, the sector is stratified. Four larger private operators lead the market with prospects to access domestic commercial bank finance to expand service delivery. The remainder are smaller with less capacity to grow or upgrade the quality of their services and are at a much earlier stage in terms of accessing finance. Indeed, only one-quarter of the 105 service providers previously borrowed from a bank even though nearly three out of four had assets to serve as collateral. On the financial side, commercial banks have limited knowledge of the sanitation sector and a risk tolerance that limits their active involvement.
To overcome this, WASH-FIN Senegal is providing support to promote relationships between the SSPs and commercial banks. The overall approach consists of creditworthiness assessments, reviews of technical proposals, preparation of financial models, and identification of suitable financing institutions. When appropriate, WASH-FIN provides technical support to help prepare materials to present to banks, including comprehensive business plans and brief “teasers” to summarize opportunities.
WASH-FIN began with advisory support to a cohort of the four largest SSPs, including long-term financial planning and facilitating loan applications. Support to this group continues and is now focused on access to finance and creditworthiness assessments. During this time, WASH-FIN sought to better understand the smaller SSPs in terms of financial history and capacity and interest in accessing finance. WASH-FIN has begun to identify a second cohort for support, comprised of the top 25 SSPs.
These efforts have led to commercial banks and SSPs negotiating three transactions for investments totaling $4.3 million. Becaye Sidy of SSP Delvic remarked, “The financial model designed by WASH-FIN was very user-friendly and assisted me in convincing financial partners.”
USAID WASH-FIN provides support that not only links the SSPs with local commercial banks, but also spurs these banks to explore additional opportunities in a market previously unknown to them. The SSPs’ willingness to open themselves up to scrutiny, and then put in place measures to document their business operations and improve their creditworthiness, make these new investment opportunities possible. The overall goal is for banks to have a deeper understanding of the SSP market opportunity and establish enduring relationships with SSPs in Senegal. Achieving this goal will contribute to self-reliance where SSPs can reliably access finance from domestic sources to improve their business and expand services to more Senegalese citizens.
By Barbara Kazimbaya-Senkwe, USAID WASH-FIN Knowledge Management and Communications Lead, and Dieynaba Thiam-Ka, USAID WASH-FIN Senegal Country Team Leader