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Infrequent billing or billing at intervals which do not meet community income cycles has a serious effect on the ability of the poor to pay. The result is that there is a low perecent of recovery of billed amounts by the utility. Large bills which may arise from infrequent billing, especially for vendors, creates difficulty in saving the money and its availability at the required time. Combined with poorly sited payment points this also contributes to the poor rate of settlement of bills.
Where there are intermediaries such as vendors, or tap attendants collecting money they rarely are unpaid as they collect money in direct exchange for water. This suggests that the problem lies more with the payment system than the ability to pay. The lack of meters and use of flat rates, the recovery of water charges by landlords even when there is no water supplied, all contribute to consumers dissatisfaction with systems and preference for options which include direct payment.
Payment systems thus tend to be inflexible and insensitive to customer needs and the best option may not always be the most obvious or the highest service level.
Utilities themselves suffer from the consequent loss of income and poor viability of services to low income areas. The lack of insurance against defaulters, who may not hold title to the property, discourages a house connection policy and further increases risk to the utility.
In most cases these problems are caused by an inappropriate payment system. Improved collection rates and willingness to pay can be achieved by more flexible and innovative approaches to payment systems.
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Case Example:
Payment Realities Blantyre, Malawi
Blantyre Water Board, a statutory corporation in Malawi, operates Commercially in-line with government policy for all statutory corporations. Its performance is measured by the amount of profit it declares at the end of the year. However, in order to assist the low-income customers, connections were given in one peri-urban area on interest-free loan basis payable in installments for five years. But unfortunately most of them stopped payments only after one year. The utility therefore has had to disconnect water supply to the defaulters. Some of these defaulters reconnecting themselves illegally and the utility ended up uprooting their supply pipes. As an alternative the utility in collaboration with an NGO opened water-selling points (kiosks) at a subsidised rate. These kiosks were managed by committees chosen by the community themselves. The problem arose when the committees squandered the money from the water sales and failed to clear bills at the utility. Some of these kiosks were thus closed and some ware leased to interested private individuals who unfortunately are now selling the water at an exorbitant rate.
Contributor: Milward Selemani
e-mail: mselemani@bwb.mw
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| How to improve collection rates?
All utilities would be interested in increasing the revenue collection and thus the viability of their organisations. There are problems with other consumer groups under the utility but it is the low-income groups who suffer the greatest lack of services as a consequence.
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| Objective:
Establish payment systems which maximise the collection of water and sanitation charges and thus the viability and sustainability of services in low income urban communities.
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Actions:
- Provide accurate information on consumption (e.g. through improved metering) and a breakdown of charges,
- Introduce volumetric charges/ tariffs and ensure that progressive tariff or other regimes that have social objectives reach intended targets, and take into account possible negative impacts on community services, multifamily units, domestic vending etc.
- Introduce frequent and timely billing or cash systems to accommodate both low income consumers and informal service providers who may have irregular incomes.
- Prepayment systems should be introduced to improve revenue collection and address issues of security for house connections where there is no title. Installment plans will help with large bills.
- Payment sites more convenient to customers reduce inconvenience and increase security for consumers and informal service providers.
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| Tools:
See also Case Examples: Kiosk and domestic vending
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Case Example:
Willingness to Pay
Prepayment Management System
Windhoek, Namibia
Service providers often use the lack of adequate funds as an excuse for not providing a service, without looking at internal operations. Tariffs are set to cover inefficient practices and making the provision of water unaffordable for the poor. The poor in the end pay more for their water than the rich, because of other middlemen that get involved in providing "a service." The fact that the poor are prepared to pay higher prices for water provided by vendors tells a lot about their willingness to pay for essential needs. Participation of the end-user is critical in planning services to the poor in order to quantify their basic needs and for utilities to make sure they can provide in this need effectively and efficiently. In a pilot project in Windhoek, Namibia, it was found that there was always a willingness to pay for water, but where other services were involved this willingness decreased. With the introduction of a water prepayment management system the response was even better, because of the possibility to budget for consumption and being aware of what quantities are consumed and what credit is available. The only problem with the prepayment products on the market is that it is still very much in its infancy.
Contributor: Ferdi Brinkman fbr@windhoekcc.org.na
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