Programme designers need to shift from thinking of sanitation problems as one-off toilet construction projects to thinking about how to solve the long term on-going process of keeping large quantities of pathogenic excreta separate from human contact and rendering it safe. The starting point for thinking about subsidy is to consider ways to use public finance more effectively to encourage home owners to build and use latrines on their own by helping them overcome the constraints they may face. Programme designers need to stop focusing on subsidising the construction of private home sanitation facilities. Instead they should consider other ways to help and address the problem of safely and efficiently managing excreta once it leaves the household, especially in dense urban slums. They need to work at the large community and municipality level to achieve this (Methra and Knapp 2005; Evans et al. 2004).

Many developing countries have recognised that some form of subsidy is necessary. However, they are caught in the moral and political dilemma of believing that on the one hand the poor cannot afford good sanitation and should not be made to suffer any additional financial burden, and on the other that subsiding latrine construction leads to dependency and unsustainable excreta disposal systems. The solution suggested is often a ‘smart’ or ‘intelligent’ subsidy and is taken to mean that it:

• is capable of being withdrawn without the final user noticing the impact.
• acts as a catalyst for commercial activities with them becoming a primary engine for change.
• allows for transitions from an unprofitable to a profitable business.
• is used as a temporary promotion tool to kick start demand, and should be time bound and well publicized, e.g. “Two for the price of one; offer ends Easter”, “Half price special introductory offer for first twenty customers”, “Chance to win a new bicycle for first 100 customer” etc.
• always has an exit strategy
• should not undermine the profitability and viability of the non-supported private sector and should not produce a disincentive for, or prevent organisations outside the system from, becoming involved and competing
• if possible, is output as opposed to lump sum based, where an output-based subsidy (see for example http://www.gpoba.org/) allows contractors to be rewarded for achieving good results and good impacts (not just building things), maintaining good customer relations, improving the quality or efficiency of services and being innovative in adapting service delivery. With subsidies paying for the provision of some form of infrastructure the incentive for the contractor to improve the quality of service is diminished.