From Stanford Business magazine
STANFORD GRADUATE SCHOOL OF BUSINESS – Five years ago, public toilets in Naitobi, Kenya, were neither sanitary nor safe. “These toilets were places where gangs congregated,” said Amon Anderson, a portfolio associate in the Acumen Fund’s Nairobi office. “Beyond that, they were not the sort of place anybody would want to be from a sanitation perspective.”
Today, some Kenyans have another option: toilets managed by uniformed staff, decorated with bright colors, and surrounded by attractive landscaping. About 600,000 times per month, people pay 5 Kenyan shillings (about 6 cents) to use the 27 multiple-stall toilets at locations where they also can buy a snack or shoeshine. The company that built them, Ecotact, had $15,000 in revenue in 2008 when the Acumen Fund decided to lend it $757,000.
“Nobody in their right mind would have made them this loan without our source of capital or our business model,” said Brian Trelstad, MBA ’99, chief investment officer of Acumen Fund. Founded by Jacqueline Novogratz, MBA ’91, Acumen invests for potential social impact as well as financial return, Trelstad said.
The toilet project promises to be a sustainable way to provide better public health, especially in slum areas where people have no home toilets. That fits with Acumen’s goals to improve the lives of the world’s poorest people. In this case, it hopes to serve as “a model for the world to better understand how to deliver sanitation services,” Trelstad said. “We don’t like to do a lot of ‘me-too’ businesses. We like to do businesses that have the capacity to show the world that this is possible.”
The toilets in Nairobi’s business district are doing well financially, he said. For those in poor residential areas, however, pricing is tricky. The toilets are serving as “almost household-level infrastructure,” he said, and poor families can’t necessarily afford to pay for each use.
The broader impact of Ecotact’s toilets is that they raise the population’s expectations. “It’s changing the way people think about sanitation,” Anderson said. “It has forced many other facilities to raise their game and create a more positive sanitation experience as well.”
Novogratz added, “Ecotact is exactly the kind of investment that Acumen Fund’s patient capital approach is meant for.”
Also on Stanford Knowledgebase: