The authors introduce two alternative measures for assessing household demand for basic services in developing countries, where access to cash is limited: Willingness to borrow, and willingness to work.
by Adam Abramson, Nir Becker, Yaakov Garb and Naftali LazarovitchIn many least developed countries, inadequate user willingness to pay (WTP) to achieve cost recovery for improvements to substandard rural water services is a major barrier to reaching targets such as the Millennium Development Goals. A meta-analysis of 21 contingent valuation studies conducted in least developed countries reveals that cost recovery from user demand is infeasible in most cases, and that rural areas are especially unwilling to pay enough to finance water service improvements. We argue that this is largely due to inability to pay cash rather than an absence of demand and propose two alternative financing approaches that may enable capital deficient communities to afford improvements. A discrete choice experiment, conducted in a rural catchment of Zambia, compares conventional cash-based WTP for different water service attributes with two alternative measures. (1) Willingness to borrow: Monthly payments in cash, with a no-interest loan given to the user. (2) Willingness to work: Instead of cash, payment in the form of contributing time devoted to unskilled labor. To different degrees, these alternatives elicit higher demand and enable cost recovery, providing evidence that demand-driven, economically sustainable water development efforts, as described here for Simango, Zambia, may be implemented for rural, resource-poor communities