Hardware subsidies have held a controversial place in the sanitation sector’s policy toolkit. Initially, subsidies were among the common policy tools for expanding access of rural populations to sanitation, often coming in the form of one-time distribution of latrine hardware to households with little or no attention to targeting the poor. Over time, however, hardware subsidies were found to produce distortionary effects on sanitation markets, introduce perverse incentives on the part of beneficiaries, and strain the budget of implementers, while often failing to achieve the behaviour change needed for sustained maintenance and use of latrines. As such, the popularity of hardware subsidies faded in the mid-2000s, giving way to more demand- and behaviour change-focused sanitation interventions such as community-led total sanitation (CLTS) and market-based sanitation (MBS).
Recognising that “no subsidy” approaches alone also were not sufficient to achieve sustained access and use of latrines, recent hardware subsidy efforts have sought to improve upon their predecessors in several ways. First, these “smart” subsidies seek to reduce market distortion by restricting eligibility criteria to a portion of in-need households. Second, they seek to target poor and vulnerable households more accurately, using identification strategies that rely on local knowledge (e.g. community consultation), existing social protection systems, proxy means testing (PMT), and innovative technologies (e.g. geospatial techniques). Lastly, they avoid supplying hardware directly to households, instead relying on a diverse set of mechanisms, such as vouchers and rebates, to ensure recipients express demand for sanitation and change behaviour, while stimulating the local sanitation market. Smart hardware subsidies are increasingly recognised as an effective tool for reaching the goals of equity and universal coverage in the area-wide sanitation (AWS) framework.
This review draws from a broad array of evidence on the use of household toilet hardware subsidies within the sanitation sector and borrows from that of other sectors where needed to present a practical overview of the elements of design and implementation that can impact the effectiveness of smart hardware subsidies in reaching poor and vulnerable households.
