If you buy vegetables from a vendor at a market what do you thing the vendor does with this money? Most likely vendors have to make a number of payments with this money. Some have to buy vegetables from a farmer or they have to pay to produce them. Maybe they also have to pay the employees, pay rent for the stall, or tax in the transaction. We call of these payments financial transfers. In this module we introduce you to different financial transfers and flows in faecal sludge management. Following this module, you'll be able to list different financial transfers in faecal sludge management. Name stakeholders involved in financial transfers. And be able to discuss different financial flow models. Money matters. This is also true for the management of faecal sludge. In faecal sludge management money's exchange by different stakeholders to cover their capital and operational maintenance costs. Let's look at some of these cost before we look in how they are balanced by financial transfers between stakeholders. Capital costs are paid when buying equipment or infrastructure. Let's consider for example this collection service provider shown in this picture in Kampala. Before you could start operating he had to buy a gulper for faecal sludge collection. And a pickup for transport of this sludge to a treatment plant. In addition, he had to buy other personal protection equipment such as gumboots, face mask and gloves and other tools of trade. Such as these blue barrels. These are capital costs. In contrast to these capital costs which are paid one time or only every few years operation and maintenance costs incure more regularly often on day to day basis for operation and maintenance of different faecal sludge management services. Let us consider again our previous example. What would be operational maintenance cost for this service provider? Fuel for the pickup or payment of the salary of his staff are examples for operational maintenance costs. Replacing of personal production equipment or cleaning supplies or paying of a discharge fee at a treatment plant are examples. In this case the pickup is leased and the rent for the pickup an additional operation cost. Next to this example of this collection service provider in Kampala capital operation and maintenance cost incure for all stakeholders involved in faecal sludge management. This includes environmental management authorities, utilities, municipalities, private companies, non-governmental or community based organizations and household level users. These costs can be at very different magnitudes and frequencies. So, whereas the capital cost for the gulper is usually several hundred US dollars depending on in which country it is being manufactured. A vacuum truck, as shown in this picture, may cost several thousand or 10 thousand US dollars And a city scale treatment plant as shown here in Kampala several million dollars. So that faecal sludge management service can be operated over a long period of time. Financial transfers need to balance these costs of the different stakeholders. For example, our service provider would commonly cover capital, and operation and maintenance cost. Through a service fee that he receives from a household for the collection of faecal sludge and transport to a treatment plant. If this service fee is the only revenue stream and cannot cover its cost it will likely result in poor performance of the service or it would go out of business. The number of financial transfers in faecal sludge management strongly depends on the stakeholder arrangement. This slide shows different stakeholder arrangements for faecal sludge management. Each block represents one stakeholder. In the first arrangement one stakeholder manages the entire faecal sludge management service chain and there are no financial transfers between stakeholders. In contrast, other arrangements such as the last one where four main, four stakeholders managing the faecal sludge management service chain includes more stakeholders and also potentially more financial transfers between these stakeholders. This slide shows a common example of institution arrangements in faecal sludge management. That consists of a household, a private company for faecal sludge collection and transport, a public utility for faecal sludge treatment, And a farmer/industries that uses faecal sludge treatment products. In a common financial flow model for this institution arrangement the households pay a service fee to the private service provider for collection and transport for faecal sludge treatment. At a treatment plant, the company pays a discharge fee. This allows the service provider to legally discharge sludge. This fee is paid in return for transferring the responsibility managing the sludge from the collection and transport service provider to treatment service provider. The sale of treatment products by the utility provides revenue for the utility. So in this example, the service fee, the discharge fee, and the revenue from the sales of treatment products are financial transfers. The direction of the arrows indicating which direction the money flows. This is why we also call this financial flow models. Financial transfers have an effect up and down the service chain. For example, in the model we just discussed one implication could be when the utility chain has a very high discharge fee. It will likely be passed on to the household by a high service fee charged by the collection and transport service provider. This could prohibit customers being able to afford collection and transport services. Especially when they're poor households. Another implication could be, that even when sludge is collected collection and transport service providers illegally dump sludge to avoid the high discharge fee as shown here. In addition, as the public utility operates without financial effort from the government authority treatment could be less subject to regulations which could result in a poor treatment performance or poor effluent quality. How could this financial flow model be modified to reduce fees at the household level? Ensure that faecal sludge is safely collected, reduce cost for the collection and transport service providers that it can make sustainable business. and ensure quality treatment. One modification could be budget support of the utility by a government authority. The budget support could be funded through a sanitation tax. A sanitation tax is the payment from households to a government authority in return for service such as water, waste water or faecal sludge management. Sanitation's a public good. And good sanitation has significant health and economic benefits. This justifies that a budget support to the utility can also be paid from other taxes. Such as the property tax. With this budget support the public utility does not entirely rely on the discharge fee and revenues from treatment products. It has initial revenues and thereby can reduce the discharge fee which in turn reduce the total cost for this private collection transport service provider. And also maybe the service fee for collection and transport. In some parts of the Philippines households paid 10 to 20% of their water bill to cover collection, transport and treatment costs. This means that households that use less water and which also maybe have less money pay less for faecal sludge management. This is one example how the social economic realities could be considered in the sanitation tax. In parallel to the sanitation tax government authorities could also consider issuing of operational licences for the collection and transport service providers. This would be in return for the reduction of the discharge fee to operate in a certain area offer issuing of a discharge license. Such licensing could be a first step to formalize the collection transport sector. Improve standards and be enter point for further interventions For example, for schedule faecal sludge collection. As you have seen now the model has become more and more complex and includes more stakeholders. Reliable implementation of a financial flow model with more stakeholders and more financial transfers requires good coordination and management. Such a model could be prone to corruption and relies on reliable tax collection that can be challenging especially in urban poor areas with difficult accessibility and tenure. However, a sanitation tax could have the benefit of providing a reliable income for the public utility that's required for reliable operation and maintenance of the treatment plant. One tool to manage this increased complexity could be to make financial transfers electronic. For example, with phone based money transfer. At the treatment plant in Kampala collection and transport service providers pay a discharge fee by transferring money with their mobile phones to the account of the utility. So there's actually no cash being handled. These were some examples of financial flow models developed for training purposes and based on available literature and our work in Uganda, Senegal and Tanzania. There's no single financial flow model that has been shown to be effective for faecal sludge management all situations. With a number of different stakeholders that can be both public and also private. And the number of financial transfers A large number of different financial flow models could be developed. In reality, as the urban areas in which they exist these financial flow models can be much more complex and dynamic will develop over time and maybe also exist in parallel to each other in one area. In this module we learned about different financial transfers in faecal sludge management depending on different stakeholder arrangements. Financial transfers include a sanitation tax, service or discharge fee, budget support, a discharge and operational licenses, and sales revenue from treatment products. We also learned to read and discuss financial flow models. What is the financial flow model in your city? We hope that examples provided in this module inspired you to explore what could work best in your city.
