About a third of all rural households in the country defecate in the open. It has long been assumed that low-income families in rural India do not want or cannot afford a household toilet. New research suggests that this is not true. Field work (in UP and Karnataka) and analysis conducted by Dalberg, in partnership with the Asian Development Bank and water.org, shows that most rural households that engage in open defecation want a toilet and would be willing to seek and repay a loan to help finance it.In fact, toilet loans were found to have a 99% repayment rate. Among households surveyed, the majority were interested in a loan amount of ₹20,000 to 30,000 to help purchase a toilet, with preferred monthly repayment installments of ₹500-1500.
Most rural households that engage in open defecation want a toilet and would be willing to seek and repay a loan to help finance it.
At the core of the Government of India's Swachh Bharat Mission (Gramin) (SBM (G)), lies a ₹12,000 financial incentive for eligible households to build individual household latrines. This incentive has helped drive the increase in toilet coverage for the poor, yet it is not sufficient for all households. Often families feel that (i) the incentive amount is insufficient to build the quality of toilet they desire, or (ii) the incentive does not work for them as it is often delayed i.e. they are required to pay upfront the cost of the toilet, and the incentive amount is transferred only upon completion of building the toilet. This is often something most households cannot afford. Moreover, the scheme does not cover households that built toilets under previous government programs, even if the toilets have gone defunct.
This opens a tremendous opportunity for financial institutions (FIs) to offer toilet loans that could supplement the government incentive. Three types of loans are particularly relevant:
- Bridge loans: Loans for incentive eligible households that are struggling to meet the upfront cost of purchasing a toilet.
- Top-up loans: Loans for incentive eligible households that wish to buy a better, costlier toilet but affordability is an issue.
- Improvement loans: Toilet loans for households that are not eligible for the incentive but wish to upgrade/ repair their toilets.