Field Actions Science Reports (Jun 2012)
Enabling the maximum number of people to access essential services will not be possible without private sector involvement and appropriate pricing of the services concerned
Abstract
Private sector provision of basic services (water, energy, financial services and housing) for people in developing countries is a necessity if we really want to try to curb poverty. However, ‘traditional’ private funding is not spontaneously directed towards these sectors, largely as a result of rejecting the idea that poor population groups should ‘pay’ for essential services; an issue that has often been the subject of opposition campaigns mounted by social stakeholders. Nevertheless, there are many, many examples to show that given the impact of these services on their quality of life, consumers in these countries - and especially those at the ‘bottom of the pyramid’ - are prepared to pay for them as long as they have access to a high-quality service. In these sectors, the nominal cost of the service concerned matters much less than its opportunity cost and the impact it will have on the lives of those who benefit from it. Very often, this service may even be paid for in advance as a way of enabling families to gain greater control over the expenditure they can devote to obtaining it. It is, however, important to distinguish between the supply of essential services and those of consumer goods, and - of course - to avoid abuses. In any event, the possibility of building financially-balanced models is what governs the process of securing sufficient funding from local and international financial institutions. In this area, as in others, the way forward is probably the happy medium: avoiding the excesses of overpricing, but accepting the need to maintain profitable economic models. These should enable investors to receive a level of profit that encourages them to continue and increase their investment, thereby increasing the number of recipients as quickly as possible. Aspiring to build social models that reject the ambition to achieve a reasonable profit and rule out any distribution of dividends to shareholders is to condemn the poorest populations to long-term dependency on charity or hypothetical budget surpluses, and seriously restrict their access to essential services.
