UN fund champions 'sanitation economy' to tackle crisis in Kenya
Environment & Climate
By
Brian Ngugi
| Oct 07, 2025
A United Nations fund is advocating for a radical market-based approach to the global sanitation crisis, aiming to unlock private investment in ‘next-generation’ technologies and create a thriving ‘sanitation economy’ that could mirror the off-grid solar revolution.
In an exclusive interview, Dominic O'Neill, Executive Director of the UN's Sanitation and Hygiene Fund (SHF), told The Standard that traditional models of financing large, centralised sewer systems have failed to keep pace with need, leaving billions behind.
"Business as usual clearly was not working," O'Neill said, noting that 3.5 billion people globally lack safely managed sanitation. "Sanitation is not just a public good. It's an economy. It's a service. It's an asset."
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The SHF, launched in 2021, is now pushing for a pivot towards decentralised, non-sewered technologies – such as small-scale treatment plants – which it dubs "next-generation sanitation." O'Neill compared the potential transformation to the leap from landlines to mobile phones.
This shift is critical in countries like Kenya, where O'Neill revealed government estimates show 60 per cent of the population, or about 30 million people, will never be connected to a sewer line.
For these millions, the lack of safe sanitation perpetuates a cycle of disease and poverty. Contaminated water from poor sanitation spreads illnesses like cholera and typhoid, burdens families with healthcare costs, and stunts children's development. In urban informal settlements, flooding often washes raw sewage into homes, creating public health emergencies.
"Nobody's investing in non-sewer technology, and it can't happen on its own," he said. "If Kenya wants to increase access, it needs to embrace different technologies, different financing models, and different regulations."
The fund's strategy involves catalysing local capital by de-risking the sector for Kenyan banks and pension funds. A key challenge is the "natural resistance to change" from institutions that find large, familiar sewer projects easier to fund, despite their limited reach.
O'Neill explained that while a Kenyan banker might not currently understand how to assess a loan for a sanitation SME, the goal is to build that capacity.
"We want Kenyan banking institutions to... know what questions to ask," he said, drawing a parallel to the established agriculture sector.
This would allow local financiers to provide sustainable, shilling-denominated loans, avoiding the currency risk that makes dollar debt untenable for small businesses.
O'Neill cited a recent visit to a manufacturer in Nairobi producing decentralised sanitation systems. "He has intellectual property rights on his technology... he's creating jobs," he said, illustrating the potential for local job creation and entrepreneurship.
The case for investment is bolstered by climate co-benefits. Poor sanitation is a major source of methane, a potent greenhouse gas, and flooding in urban slums often leads to outbreaks of waterborne diseases like cholera.
Beyond sanitation, the SHF is applying a similar market-building approach to menstrual health, working with the Kenya Bureau of Standards and global bodies to establish safety and quality standards for products, which currently do not exist.
"Until you have all of that information, it's hard to make an investment case," O'Neill said.
The fund is currently working with the Kenyan government to strengthen the regulatory framework for non-sewered sanitation, helping to formalise the sector so that small businesses can secure contracts and, in turn, access loans from local banks.
"We're the catalyst," O'Neill stated. "We're trying to bring in investors to say, 'Here's your pipeline, go and invest.'"