village characteristics derived from reports by SBM officials during endline survey. As expected, toilet prices are highly correlated with various village characteristics. Villages with high toilet costs are less likely to report farming to be the most important economic activity, less likely to be OD free, and less likely to report sanitation activities to have taken place in their communities. Interestingly, villages with low toilet costs are much more likely to be headed by a female Sarpanch and one that has not been in politics prior to be elected to office. Given these imbalances, average toilet costs are most likely not exogenously determined relative to sanitation loan and toilet uptake. We therefore have to be careful not to interpret our results as necessarily being causal. It is nevertheless interesting to use these results to consider whether or not our findings are consistent with micro-credit being used as supplementary funding.

Table 14 displays the results. We find, indeed, that impacts on sanitation loan uptake are highest in areas where mean toilet costs are generally higher. Moreover, impacts on toilet uptake are only significant in areas with relatively low toilet costs. In those areas, micro-credit led to an increase in toilet uptake of 17 percentage points, significant at the 5% level. We do no observe any impacts on toilet uptake for subsidy eligible households residing in villages with high toilet costs. Just as we observed for delays in subsidy disbursement in the previous section, this is consistent with the hypothesis that increased investment costs - here caused by relatively high toilet construction costs - lead to deferrals of sanitation loans to non-sanitation investments.

Overall, the results discussed in this section are consistent with micro-credit being taken up by subsidy eligible households to bridge funding in light of expected delays in subsidy disbursement and to cover relatively more expensive toilet costs. However, we also highlight that households residing in areas with substantial delays in subsidy disbursement and/or in areas with substantially high toilet costs are not likely to convert these loans into new toilets.

# **6 Concluding remarks**

The use of public funds for preventive private health investment has been subject to heated debates - individual household toilet construction subsidies being no exception. Especially because those who lack access are in many cases the extremely poor, coupled with the public health benefits of universal access to sanitation, few disagree that allocating public funds is an appropriate policy response (Hall and Lobina, 2009). However, critics argue that subsidies merely serve as a drop in the bucket in addressing the sanitation crisis (Mehta, 2003) and that many subsidy programs have failed to create demand (Foster et al., 2000; Brook and Smith, 2001; Cairncross, 2004; Lenton et al., 2005). The former argument has led to calls for alternative, innovative financing mechanisms. The issue has received increased attention in the context of many Financing Ministries developing strategies that enable their countries to meet the ambitious targets set out in Sustainable Development Goal 6.

Leveraging private investment in sanitation and blending these with other approaches has been postulated as a particular promising solution. A position paper for a finance minister’s meeting in 2017, prepared by several international organisations working in the sector, jointly with the Ministry of Foreign Affairs in the Netherlands, states for example “Governments should encourage their financial sectors to prioritise socially-oriented micro-loan products via regulations to enable larger proportions of low-income 24