from EVIDENCE to POLICY Learning what works for better programs and policies November 2020 PHILIPPINES: Can subsidized microloans increase toilet ownership and use for poor households? To prevent the spread of harmful and deadly pathogens, house- lenging and complex. Programs that rely on toilet construction holds must be able to access and use a hygienic toilet. In many for households haven’t always been effective, especially in con- low-income countries, however, toilets that safely separate feces texts where people aren’t accustomed to using them. On the other WATER AND SANITATION from human contact have not universally reached poor rural areas, hand, programs that aim to change practices and habits alone have faced challenges because many families simply don’t have enough cash to afford a quality toilet. Even when the demand is there, the materials for toilets and the expertise to build them may not be readily available. Sanitation improvement programs need to ad- dress each of these important barriers to increase the adoption of hygienic toilets. To overcome one of these barriers, the high cost to households for sanitation improvements, some socially-oriented microfinance institutions in the Philippines have begun offering households subsidized microloans for building a toilet, with small payments and low or zero interest. However, evidence is limited on the ef- fectiveness of this approach on the adoption and use of improved sanitation among poor households. The World Bank’s Strategic Impact Evaluation Fund sup- ported a randomized controlled trial from 2015-2018 to assess the extent to which subsidized microloans can enable households to build and use improved toilets. The loans, which carried zero Source: Julian Doczi/ODI interest, included toilet installation and were offered to poor ben- forcing many people to resort to open defecation. Fecal matter eficiaries who also received sanitation behavior change promotion that is not properly contained can make its way into the house- as part of a social safety net program. The large financial subsidy hold environment, where it comes into contact with surfaces and led to modestly higher coverage of improved toilets, better toi- food and into drinking water sources, causing diseases such as ty- let quality, and greater satisfaction, while the small subsidy did phoid and diarrhea, a leading cause of child deaths worldwide, as not improve access to improved sanitation. Among those who well as stunting in young children. took out the subsidized loans, 59 percent already had improved In the Philippines and other countries where improving sani- toilets, which explains the limited effects on improved sanitation tation is a challenge, policymakers and practitioners are seeking and open defecation. Overall, these findings suggest that subsidy cost-effective approaches to increase coverage of improved toilets programs hold promise, but need to be better targeted. and eliminate open defecation. But fixing the problem is chal- This policy note is based on, “Final Evaluation Report on Integrating Sanitation Programming in the Pantawid Pamilya Program (Philippines): Impact Evaluation Report,” Odbayar Batmunkh, Claire Chase, Edkarl Galing, Minh Phuong La, World Bank (2019) Context Over the last two decades, improvements in sanitation in the hold member on average. Through the social safety net program, Philippines have accompanied strong economic growth, invest- beneficiaries are required to attend sessions that include sanitation ments in public health, and better wages and incomes. However, promotion. All study communities also received a community-led people living in rural areas continue to have much lower access to total sanitation (CLTS) program, an approach that is widely used improved sanitation compared to those living in urban areas. In throughout the region which aims to change sanitation habits rural areas, 28 percent of households lack improved toilets, with by facilitating community appraisals and open discussions of the 2 million people still defecating in the open and 4.5 million us- harm of open defecation. ing unimproved facilities such as open pit latrines without cement What is an “improved toilet”? slabs and multi-household latrines. This shortfall in hygiene contributes to water contamination, An “improved” toilet or latrine is one that hygienically separates high incidence of fecal and water-borne diseases, and poor child excreta from human contact. Examples include a flush/pour flush toilet that flows to a piped sewer system, septic tanks or pit latrines; health, including high rates of stunted physical growth. In the ventilated improved pit latrines, composting toilets, or pit latrines Philippines, approximately 33 percent of children under age five with slabs. Improved toilets are those that are not shared with other households. “Unimproved” sanitation includes pit latrines without a are stunted, or too short for their age––a marker that is associated slab or platform, hanging latrines or bucket latrines. Open defecation with lower cognitive development, productivity, and earnings, as is defined as disposal of human feces in fields, forests, bushes, open well as higher intergenerational transmission of poverty. bodies of water, beaches and other open spaces or with solid waste. The Philippines Department of Social Welfare and Develop- Source: WHO/UNICEF Joint Monitoring Programme for Water Supply, Sanitation and Hygiene ment (DSWD), with the support of the World Bank, has been working to put an end to the practice of open defecation where Rural sanitation in the study communities: improved toilet access and use remains limited. For this study, the research team partnered with DSWD and a socially-oriented The baseline survey showed 42% of households had a flush latrine, with nearly all of these (99%) considered as “improved” according to microfinance institution to offer subsidized microloans to benefi- the WHO/UNICEF Joint Monitoring Programme definition. A smaller ciaries of a conditional cash transfer program known as the Pan- share of households (15%) had non-flush latrines, and 87% of these tawid Pamilyang Pilipino Program (4P). By working through this were “improved”. The remaining 42% of baseline households did not have a latrine at home. In total at baseline, 55% of households had program, the research team was able to target some of the poorest access to improved sanitation. Among households without a facility households in the region with the microloans. Without a sub- or an informal facility at baseline, 41% reported they did not want to make any improvements, while 30% said they wanted to build a sidy, an improved toilet offered through the microloan program superstructure would cost the equivalent of three-months’ income of one house- Evaluation Researchers designed a randomized controlled trial to evaluate the construction with a 50 percent discount (subsidy) on the total effectiveness of a combination of hardware and financial subsidies cost of the toilet. In the second group, beneficiaries were offered for encouraging adoption and use of ‘improved’ toilets. a loan with a 25 percent subsidy. The third group was assigned The study took place in 190 communities (administrative to receive support to take advantage of an existing hardware sub- units called barangays) from 2015-2018. The communities were sidies at the municipal and barangay level for improvements in randomly assigned to one of four groups. All groups received the sanitation. In practice, all groups received this support so research- community led total sanitation program and were part of the 4P ers weren’t able to measure the impact of hardware subsidies on program. In the first experimental group, beneficiaries of the 4P sanitation adoption separately from the microloan options. The cash transfer program were offered a zero-interest loan for toilet fourth group was the comparison group and received just the community led total sanitation program. The study did not have When the loan agreement was signed, the micro-finance in- a pure control group. stitution provided the recipient half of the loan principal upfront, Following a baseline survey in 2015, all beneficiary house- which was directly provided to the certified mason to begin con- holds in the loan groups were invited to attend an orientation struction. When latrine construction was completed, the micro- where the microfinance institution explained the subsidized loan finance institution visited the household again to confirm the package and the process for procuring a certified mason to con- quality of the constructed latrine and then recommend releasing struct a new latrine or upgrade an existing one. During the ori- the remaining half to the mason. This verification process before entation, households learned about different latrines as well as releasing final payment was done to ensure high quality of con- repayment options, including that repayment could be done over structed latrines. The household was then responsible for paying either 23 or 46 weeks and that the interest on the loans was zero the remaining balance of the loan in weekly installments, ranging percent. There was no collateral required for the loan and there from from 80 - 300 Pesos (USD $1.50-$5.70). were no fees collected if households failed to pay their weekly in- Researchers measured impacts with a follow-up survey that stallments on time. If households expressed interest in signing up took place in 2018. A total of 2,849 study households were sam- for the loans, the micro-finance institution visited the household pled for the follow-up survey, with a 95% response rate. to confirm eligibility. Findings Offering the large subsidized loan for toilet construc- Neither subsidy intervention reduced reported open tion led to modest increases in improved sanitation. defecation. In the large subsidy group, households were 5 percentage points At baseline, 42 percent of households didn’t have any toilet in more likely to have an improved toilet after the intervention, their home and practiced open defecation, while 55 percent compared with households who received behavior change com- of households had access to improved sanitation. The major- munication alone. The small subsidy was not effective in im- ity of the households who took advantage of the subsidy offer proving access to improved sanitation. The study found that a were those in the latter category who then used the subsidy to large share of improvements were made in households who al- further upgrade their toilet. Because of this, the net increase ready had improved toilets at baseline. in access to improved sanitation was relatively low––just 5 percentage points in the large subsidy group and a statistically Toilet quality and satisfaction were higher for house- insignificant increase in small subsidy group––which explains holds offered the large and the small subsidized sani- the lack of impact on open defecation rates. tation loans compared to the households in the com- parison group. Although researchers could not measure the impact of hardware subsidies on adoption of improved Toilet quality was measured by the number of positive attri- sanitation, observational analysis shows that butes or features of the toilet, such as a fully enclosed roof, hardware subsidies largely failed to reach the walls, tiled floors, toilet seat and soap and water – features that neediest households. enhance the usability, safety and security of toilets, making them more likely to be used, and likely contribute to greater Among households who received a hardware subsidy during satisfaction. Households who were offered the large subsidized the intervention period, 49% of them already had improved loan had significantly higher toilet quality and higher sanita- sanitation before the intervention. Additionally, the quality of tion service levels than households in the comparison group. toilets constructed with the hardware subsidy was lower than Both subsidized loan groups were more likely to report satisfac- that of the toilets built with the financial subsidy. As a result, tion with their toilet than comparison households. these subsidies are likely not contributing to eliminating open defecation or to increasing coverage of improved toilets. Given Some households reduced household expenditure as a the high cost of these hardware subsidies––US$ 206 on aver- result of the loan. age per household––better targeting and quality assurance of latrine construction could help to improve the approach. A potential adverse effect of offering loans is that households may reduce spending in other areas to pay back the principal, The study found large increases in sanitation over which could lead to negative consequences if spending in the time across all groups, meaning access to sanitation is areas of food and other essentials is constrained. improving in general. In this case, the study found that 18.6 percent of households in the small subsidy group and 9.7 percent of households in These increases could be due in part to the behavior change the large subsidy group that took out a loan with the purpose communication, to the cash transfer program (which may have of making sanitation upgrades reported reducing household enabled increased investments), the hardware subsidies that were spending to meet the weekly payments. However, there was no provided in all study arms, general economic development, or evidence that households cut spending on food consumption or a combination of these. The study design does not enable re- that households missed meals to make payments. Only a small searchers to draw conclusions on the effectiveness of the behav- portion (1-2 percent) of households reported using savings that ior change communication for increasing adoption of improved were intended for another purpose to repay the sanitation loan. toilets. Conclusion The subsidized loan model tested in the Philippines, which in- resources. While researchers used a systematic listing of poor cluded latrine installation and monitoring for quality, enabled households to target interventions to those most likely to lack those who took out the loans to build high quality toilets and sanitation, the evaluation revealed that identifying households improve existing ones, but largely missed the target of reach- in need is challenging, yet this is a critical step to ensuring funds ing those who lacked any improved sanitation facility and/or are well-spent and achieve public health goals. Further, while defecated in the open. Similarly, it appeared that the hardware the large subsidy was successful in encouraging households to subsidies––which are commonly used––reached only a portion invest in sanitation, the small subsidy was less effective, show- of those who needed them and resulted in poor quality toilets, ing that households are sensitive to price even when borrow- despite their high cost. ing terms are attractive. Full subsidies, targeted to households A quarter of all households in the Philippines still lack im- without improved sanitation, will likely be necessary to reach proved sanitation. Providing subsidies to households that al- the neediest households and make meaningful progress in re- ready have improved sanitation is an inefficient use of scarce ducing open defecation. The Strategic Impact Evaluation Fund, part of the World Bank Group, supports and disseminates research evaluating the impact of development projects to help allevi- ate poverty. The goal is to collect and build empirical evidence that can help governments and development organizations design and implement the most appropriate and effective policies for better educational, health, and job opportunities for people in low and middle income countries. For more information about who we are and what we do, go to: http://www.worldbank.org/sief. The Evidence to Policy note series is produced by SIEF with generous support from the British government’s Department for International Devel- opment and the London-based Children’s Investment Fund Foundation (CIFF). THE WORLD BANK, STRATEGIC IMPACT EVALUATION FUND 1818 H STREET, NW, WASHINGTON, DC 20433