HOUSEHOLD’S WILLINGNESS TO PAY FOR IMPROVED WATER

SUPPLY SERVICE (IN CASE OF SAWLA TOWN, SOUTHERN

ETHIOPIA)

ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF FINSANCE AND DEVELOPMENT ECONOMICS

A SENIORESSEY SUMITTED TO THE DEPARTMENT OF ECONOMICS

OF ARBA MINCH UNIVERSITY IN PRTIALFULFILLMENT OF THE
REQUIREMENTS OF BACHELOR ARTES DEGRE IN FINANCE AND
DEVELOPMENECONOMICS

PREPARED BY: ABEBE AYICHILUH

ID: RBE/042/10 ADVISOR: KABEDE (MSC )

JANUARY-2020

SAWLA- ETHIOPIA
ACKNOWLEDGMENT

For all praises and honor to almighty God. I would like to thanks, my God for being with me in
all aspects during my stay in Arba Minch university and I would like to thanks my Mom
w/ro.Zewdetamire who support and the first (when I was born) up to these and I would like to
say to her welcome to your vision is comes to truth my mom my mom!! And I would like to
thanks all my family especially my lovely father Ayichiluh Seffu who support in financial and in
his ideas up to the completion of my study.

Also I would like to extend my heartfelt thanks to my advisor kebede(MSc) for his valuable
advice, insight courage and guidance starting from the proposal development to the completion
the research work was useful in improving the quality of the paper. Finally, I want to thanks my
Brother kefale Ayichiluh who supported me in financial. Also I am very grateful thanks the staff
members of Sawla town water supply a service and residents of the town in the informant and
providing data.

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Contents
CHAPTER ONE..........................................................................................................................................1
1. INTRODUCTION...................................................................................................................................1
1.1 Background of the study....................................................................................................................1
1.2 Statement of the problem...................................................................................................................2
CHAPTER TWO.........................................................................................................................................7
2. LITRETURE REVIEW...........................................................................................................................7
2. 1 Theoretical literature review.............................................................................................................7
2.1.1 Concepts of Willingness to pay..................................................................................................7
CHAPTER FOUR.....................................................................................................................................21
4.RESULTS AND DISCUSION...............................................................................................................21
4.1 Socio Economic Characteristics of Respondents.............................................................................21
4.1.1 Educational level of the respondents.............................................................................................21
4.1.2 The family size and occupational level.....................................................................................22
4.1.3 Total income of the respondent per month................................................................................23
4.2 Existing Water Supply Situation......................................................................................................23
4.2.1 Current Source of Water Supply...............................................................................................23
4.2.2 Current Price of Water..............................................................................................................24
4.2.3 Reliability of current water supply source................................................................................25
4.2.4 Level of satisfaction with the existing source...........................................................................25
4.2.6 Disease Episodes......................................................................................................................26
4.3 Demand and Willingness to pay for improved water supply............................................................26
4.3.1 Demand for improved water supply..........................................................................................27
4.3.2. Willingness to Pay (WTP) for Improved Water Service..........................................................27
4.4.4 Determinants of household’s willingness to pay responses.......................................................28
4.4.1 Results of the Logit Model........................................................................................................28
.CHAPTER FIVE......................................................................................................................................32
5.CONCLUSIONS AND RECOMNDATION..........................................................................................32
5.1 .5Conclusions..................................................................................................................................32
5.2 Recommendation.............................................................................................................................32

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 ACRONYMS
SNWSSS Southern Nation water Supply and Sewage Services

CSA Choice Statistics Agency

CV Contingent Valuation

CVM contingent valuation method

GDP Growth Domestic Product

ES Environmental Service

FAO Food and Agriculture Organization

HH’s Households

HPM Hedonic Pricing Method

IWM Integrated Watershed Management

MoWRs Ministry of Water Resources

NGO Non-Government

TCM Travel Cost Method

TEV Total Economic Value

UNDP United Nation Development Program

UNEP United Nation Environmental Program

WHO World Health Organization

WTA Willingness to Accept

WTO World trade Organization

WTP Willingness to Pay

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ABSTRACT
This paper tried to examine and analyzed assessing household’s willingness to pay for improved
water supply services in urban areas of Ethiopia, Sawla town as a case study. 99 samples
households were interviewed during the survey. The surveyed resulted showed that if the towns
water supply office provide improved water supply, more than 77% of household were willing
and able to pay for the service at a price more than a cost recovery tariff rate. This result
showed that income of households, satisfaction level and bid price were highly affecting
household willingness to pay The study populations would be all the domestic water uses
household in Sawla town .In order to represent the population with sufficient accuracy and inter
the sample results to the population the target sample households would be selected used a two-
stage simple random sampling technique. The main purpose of this study was to estimate
households willingness to pay for the improved water service. In this study the demand side of
the improved water supply services was analyzed. The survey responses of 99 selected
households from all the 4 kebele of Sawla town were analyzed in the study. The sampled
households were asked questions related to their socio-economic and demographic
characteristics, water use practices, and problems with existing water services system and some
general questions. From the survey for improvement in the existing water supply, the following
policy recommendations are forwarded. Sawla town suffers from increasing problems of water
shortage. The inhabitants of the town have high eager to have reliable and improved water
services. All the surveyed households expressed their willingness to pay for the improved water
service above the existing tariff structure.

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 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

Water is a back bone of animals. Specially, water is a human basic needs and for
others. In case of this, all animals need water in their life on the land. In their life
animal, need water to achieve their life. Water is the more important need for
animals rather than food. This means we can live without food for around nine
days but we cannot live without water for nine days.

Water covers about 70% of earth surface, makes up about 70% of your mass, and is essential for
life. Water is the most determinant for all animals. Water is only substances that exist naturally
on earths in all three physical states of matter: gas, liquid, and solid and it is always on the move
among them.

There would be so many advantage of water in our life. Specially, we need water to drink, to
wash our cloth, to make food. In addition, water used us a source of income by tourism method.
For example, we can take lake, ocean, and large river live on the world.

Access to water services is the major component in the UNDP human poverty index for
developing countries the problem is more heart in developing countries than others. Ethiopia has
many constraints to make potable water easily accessible and it is only 38% of total population
has access to reliable, safe and clean potable water supply in the urban areas of Ethiopia. The
service is better when compared with rural areas however there is the problem with the quantity,
and quality, sustainability as coverage associated with rapid population growth and rapid
urbanization in some cities like sawla town (UNDP,WHO,UNICEF, 1999,2010)

The main reason for the urban water supply problem is absence of adequate finance. Most of
water supply projects are by their nature requiring huge capitals. The study is an appraisal of the
impact of urban expansion on water supply system in sawla town of SNNP regional state of
Ethiopia. In addition, most people’s see water a sanson 2003 public good that is supplied fairly.

1
It has an impact on the sustainability of the project. In most towns the revenues obtains from
consumers not cover the cost of providing the servicSNWSSS. (United, 2006)

Then it should be implemented cost recovery tariff rate. It is tariff rate at which the revenue
gained from the service is fully covered all expense incurred on water supply. Whether the
citizens are able and willing to pay for the service provided is important. This help to understand
the value of the consumer places on the improved water service and for identifying those
groups who are not willing to pay and to establish a cost recovery tariff.

Access to water supply and sanitation in Ethiopia is among the lowest in sub Saharan Africa and
the entire world .The SNNP regional state sawla town water broad STWB through the
government of Ethiopia received grant from the International development Association towered
the cost of planning and Implementation of town water supply and sanitation Improvement
program and it tends to apply part of the proceeds of this grant to payments under the contact for
civil work ,supply ,supply and Installation of pips and fitting for sawla town water supply. Sawla
town water board reserves the right to reject all part of the bid.

1.2 Statement of the problem

Water is crucial for human survival and economic development. The provision of adequate
supply of potable water in urban areas of both developed and developing counters is essentials
for life.

In developing countries the privation of safe and adequate potable water improved health by
reducing incidence of water related illness such as diaries, cholera etc. this also helps to decrease
mortality and morbidity rate and increase GDP by reducing time lost in sick and by making
available more healthy time for individual to participate in labor market. Sick reducing demand
for imported medicine and consumption of heath care goods, expenditure and there by easing
balance of payment problem facing least developed countries like that of Ethiopia.

The demand for such resource in urban areas of developing countries has been increasing over
time under such circumstance pining for efficient and equitable water delivery system in both
short and long runs crucial to ensure adequate water supply. However the problem here is the

2
wide spread failure of water supply in the urban areas of Ethiopia which attributed to the cost
inquired on water projects is too high.

In most urban areas the revenue gained from water supply is unable to cover the cost incurred on
it. sawla town is one of the list urban towns in Ethiopia that the revenue gained from water is
unable to cover the expense incurred on water service activities. This problem is further
Aggravated by rapid population growth of town. The town ‘populations were unable to get the
required quantity of water at desired time Assessing household’s willingness to pay for improved
water supply services.In order to satisfy the rapid growing population water demand as well as
the required quantity for exiting population new water project must be designed as well as the
sustainability of exiting water project must be maintained. The capital needed to supply water to
the town is too high. This makes the investment on water difficult. Better use of scarce water
resources and management of waste water disposal to conserve the natural environment by
signaling to consumers the cost to the economy of the resources used by the services. Country
Policy and Institutional Assessment: what is the political and economic environment, the existing
situation of the country regarding average income levels (GDP per capita and Gini index), trends
in growth rates, urban and rural, and therefore the likely future required and desired services and
the potential for cost recovery. Policy and institutional environment, the laws and formal
statements of policy by relevant authorities and other government ministries which govern the
specification of user fees and cost recovery. (G

In order to implement cost recovery tariff in urban area research whether the households are able
and willingness to pay is very important this helps to understand the fundamental value the
consumer place on the improved water service. So that the price that reflect the ability and
willing to pay of the household for improved water service, as strategy for cost recovery, can be
established.

Donors, government, and community itself can be fill the finance required to fill this financial
problem. However, the most sustainable way is cost recovery by consumer or community itself.
It is the system that the revenue gained from sale of water can cover all expenses on water
supply. Water tariff should be at cost recovery rate (fikadu, 2011)

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There is some gap between the Griffin and Fikadu idea on the household’s willingness to pay for
improved water supply. This gap is according to griffins idea the finance requires to full fill this
finance problem can be filled by NGOs and the society. But according to Fikadu’s idea, the
finance required to full fill this financial problem can be filled by donors and government. Most
of the previous studies show household willingness to pay for improved water supply services by
trying to work on few selected urban areas like (p. 4; Bayrou,griffin,and zeleke, 2002,2010,).As
far as the best of the researcher’s knowledge, there has been no study undertaken in sawla town
to determine factors affecting the willingness to pay for improved water supply. So that, the price
that reflect the ability and willing to pay of the household for improved water service as strategy
for cost recovery assess in sawla and an energetic idea for this thesis. Having said this, were
intend to answer the following research questions: Those researchers was simply recommended
that, its costumer should cover the cost of investment for improved water supply. This study
therefore, aims to estimate the amount that household would be willing to pay for improved
water supply services and identify the potential factors affecting their willingness to pay in sawla
town.

1. How much households were willing to pay for improve water services?

2. What the factors determine households willingness to pay for improve water services?

3. Why individuals were not willing to pay for improved water service

4 Objective of the study

1.4.1 The General objective

The general objective of this study would be households willingness to pay for improve water
service in sawla town.

1.4.2 The specific objective

The specific objective of the study includes:

• To assessing and identify the willingness to pay for water supply.

• To examine the determinant of willingness to pay for improved water supply.

4
 • To analyze consumers ability to pay improved water supply.

1.4. Research Question

The study was attempted to answer the following questions

 Why households willingness to pay for water supply?

 How to examine willingness to pay for improved water supply?
 How consumers ability to pay improved water supply?

1.5 Significance of the study

The rural and urban poor were the first to suffer of water supply services. A better and Mach
more equitable would be to collects water price from consumers and then improved and expand
the water supply system. That is cost recovery is the main requirement for sustainable
development in water supply. However, the price of water should be depend on the consumers
capacity and willingness to pay for such service. Therefore this study important for design to find
it the expenses incurred in supplying improved water service in urban areas. This implies the
study provides required information on the ability and willingness of the people not only to pay
for the service but also to sustain their supplies that include paying for maintenance and
investment costs. It would help as a reference material for others who are going to conduct their
study on the willingness to pay for improved water service in urban area. In relation to this there
need to prove the relevance of contingent valuation method in sawla town.

1.6 Scope of the study

The scope of the study was restricted to sawla town due to limited time and financial constraints.
Sawla were selected because the town seriously affected by shortage of water. The study would
be restricted to analyze the determinant of willingness to pay and analyze the ability to pay of
households only for domestic purpose in the town. The study also limited to demand side
information to water supply problem and on supply side it was including the cost of providing
improved water supply only

1.7 limitation of the study

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When researcher conducts this study, some hindrance factors affects the effectiveness of the
study. These factors were lack of deeply aware of experience about how to work the research,
involuntariness of respondents in giving adequate information that is necessary for study, lack of
enough organized secondary data in the town, and lack of reference book in a library.

1.8. Organization of the study

This study would be organized in to five chapters. Accordingly, the first chapter deals with the
introductory part of the study which contained, background, statement of the problem, objective
of the study, significance of the study and organization of the study, scope and limitation of the
study. The second chapter includes Literature part, theoretical and empirical literature. Third
chapter about the methodology part and it contains the type of data collected and the method of
data analysis technique used in the analysis. The forth chapter the discussion part. In this part,
the collected data would be analyzed through appropriate data analysis techniques and the last
chapter contains conclusion and recommendations.

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 CHAPTER TWO

2. LITRETURE REVIEW

2. 1 Theoretical literature review

2.1.1 Concepts of Willingness to pay

The issue that is most important for water project designers and planners is how to ensure the
financial sustainability of a project. This can involve predicting and estimating what users will be
willing and able to pay for proposed water schemes in the future. That is because most water
projects in developing countries are financially unsustainable leading to water supply shortages
in many places.

Policy makers most of the time sees water supply provision using both demand and supply side.
As can be seen from the following chart supply side of water provision usually sees technical
alternatives used in water investment. While the demand side of water supply provision sees the
households’ WTP as a policy recommendation.

WTP is the maximum amount individual states they are willing to pay for particular goods or
services based its characteristics (e.g. water supply: the difficulty of obtaining it, available
sources, water quality and service level (Douangchanhlopaying, 2004)

It is the amount a person would be "willing to pay" to obtain a good or service. It is what the
person is willing to sacrifice to get the good. It is the amount of money a person can give up,
receive the good, and have their utility remain the same. People are willing to pay very high
prices for basic minimum water requirements to ensure the survival of household.

Consumers are often willing to pay a higher price for water than the tariffs charged. How much
higher depends on how much water is being used. WTP diminishes rapidly with non-essential
levels of water use, therefore the relationship between WTP and water use can be shown by a
downward sloping demand curve (Sansoon, 2003; sanson, 2003)

7
Another definition is one by Cardone and fonseca states that “Willingness to pay (WTP) is an
expression of the demand for a service, and it is strong prerequisite for sustainable cost recovery
because it is the materialization of the users’ satisfaction and of their desire to contribute its
functioningAt this time most of water projects revenue is unable to cover the cost incurred on it.
So this willingness to pay survey is an important tool whether to state consumers’ preference to
pay at cost recovery rate.

2.1.2 Value of environmental resource

The term value has many meanings, which may be used in different sense. The theory of value in
economics attempts to explain the worth of goods and services. Classical economists believed
labor as true measure of value. For them value equals the amount of labor embodied in the
commodity

The neoclassical economists did not agree with classical concepts of value. They defined value
as marginal concept. Jevons, one of the founders of neo classical economics school defined value
as marginal utility. Since then the theory of value developed along this line.

The neoclassical economists used marginal utility gained by individuals from the last unit
consumed to explain the market prices of the given commodity.

The neoclassical economists mainly focused on explaining the behavior of prices and the
allocation of goods and services in the market. They also replaced the classical notions of
absolute scarcity with relative values as determined by the forces of supply and demand

Ideally all values would be expressed in monetary terms. Tradable goods since they have only
use values their value can easily expressed in monetary terms. Environmental resource provides
a complex set of values, such as life support service, amenity services, material resources for the
production of goods and services, and used as sink of wastes generated by households and firms.

The value of environmental resource such as improved water resource consists both use and non-
use values. Use values, which can be broken down into direct and indirect use values arise from
the actual use of environmental resources. The non-use value (or passive use value) arises from
independent use of resources. The non-use value (or passive use value) comprises three separable
components- option values, bequest value, and existence value. Thus total economic value

8
(TEV) of environmental resource can be cited as the sum of use and non-use values (hessen,
2000)

.2.1.3 Non-market valuation techniques

In a market economy goods and services are allocated by the price mechanisms. Market price
reflects people's willingness to pay for marketable goods and services. However, this approach is
difficult for environmental resources, for market failures often occur in providing environmental
resource due to externalities. Many environmental resources are not traded in markets. The
market rarely exists for environmental goods and services.

Therefore, require non-market valuation methods to value improvements and /or reduction in
environmental goods and services including water resource. “Although water is increasingly
allocated by market mechanism its unit attributes makes it a classic example of the markets
potential failure to achieve an economically efficient allocation. Externalities, public goods,
decrease costs in supply, and high transaction costs among reasons why markets will not always
best serve society in allocating water resources. Thus we use the non-market valuation
techniques to provide measures of value and scarcity for economic policy making related to
water

Economists have developed the broad categories of non-market valuation techniques for valuing
the value of public environmental resources. These valuation techniques are called revealed
preference and stated preference methods. Cross cutting methods, which combines market based
and non-market valuation techniques such as benefit transfer and unit day methods also use for
valuing public environmental goods, such as Water resources. The most widely recognized
revealed preference and the stated preference valuation techniques are discussed below.

9
2.1.3.1 Revealed preference method
The revealed preference methods infer the value of environmental goods by studying their actual
or revealed behavior in closely related markets through the application of some model of
relationships between marketable goods and environmental services. The great advantage of the
revealed preference methods is that it dependence on the actual behavior. However, the
application of the revealed preference methods requires weak complementarities between
environmental goods and private goods.

The revealed preference methods have also some drawbacks. It is used to value only use values.
The method is not appropriate for valuing non-use values of environmental goods. The other
problems in applying these methods are that it is often difficult to find suitable and reliable links
between market goods and environmental amenities. The sensitivity of the estimated results with
respect to the assumptions of the models is also another drawback of the revealed preference
methods. The revealed preference methods that are in use in relation with water resource
valuation are hedonic pricing method, the travel cost method and defensive (averting) behavior
(Young, 2005)

2.1.3.1.1 Hedonic pricing methods

The hedonic pricing method is one of the revealed preference non-market valuation techniques.
It is derived from the characteristics theory of value and seeks to explain the value of
commodities as a bundle of valuable characteristics. The method indirectly measure people’s
willingness to pay for change in water attribute when housing prices can be affected by the
availability of improved water supply. The hedonic pricing method for it is based on actual
market prices its application is straight forward and uncontroversial.

The main shortcoming of the method is that it requires real property markets and does not
capture non-use values of environmental

2.1.3.1.2 Travel cost method:

Travel cost method is originated with a letter sent to the U.S.A national park by Harold
Hosteling. It is the oldest environmental valuation technique and is used to assess the value
people place on recreational activities such as parks, lakes and other areas which host a good

10
deal of recreational activities. The travel cost method estimates the demand function of
recreational site and the site's consumer surplus. The site's consumer surplus found by this way,
however, is only use value. It does not include non-use values. The method failed to estimate
non-use values. The other drawback of the method is that its application is limited only for
valuation of recreational sites. (Seller,christine eta al, 1985)

2.1.3.1.3 Defensive (Averting) behavior

This method is the less frequently used valuation techniques. The method is used to infer value
from household expenditure to avert environmental problems, such as water pollution. The
method is used to measure peoples' willingness to pay for welfare gain from the improved
environmental resource such as from clean water. The general premise of the method is that a
rational person will adopt defensive or averting behavior as long as the value of the damage
avoided is greater than aversive expenditure. The method is used for valuation of water quality
improvements to protect against polluted drinking water.

2.1.3.2.1 Contingent valuation method (CVM)

The contingent valuation method is the earliest technique of the stated preference method of non-
market valuation approaches. The CVM involves asking people directly what they would be
willing to pay or willing to accept compensation for change in preferences. This method is called
contingent valuation for it is contingent on the hypothetical market. The contingent valuation
method is preferred to the revealed preference methods for it deals with both use and non-use
values and survey responses to willingness to pay or willingness to accept hypothetical questions
go directly to the monetary measures of utility change. S.V Ciriacy-Wanstap first proposed the
contingent valuation survey method as a method of valuation for non-marketed environmental
public good in 1947. However Robert K Davis, who did the first empirical research in 1961 in
valuing outdoor recreations, Since then the method become one of the widely used valuation
approach in water and sanitation services, urban air pollution, soil erosion, deforestation,
biodiversity, water shed management and ecosystem valuation (whittigton, 2002)

In designing good CVM study we must follow certain methodological procedures . They include:
(1) Creating survey instruments. This can be seen as having three components: a) Designing

11
hypothetical scenario; b) deciding whether WTP or WTA questions have to be asked; and c)
Creating hypothetical scenario about the means of payment or compensation (Permian et al.,
2003, p. 421), (2) The service of environmental good to be valued must be limited
geographically and should be defined in terms of characteristics that can enter respondents’
utility function, (3) Methods of asking questions: The elicitation methods can be open ended,
iterative bidding approach, the payment card approach and dichotomous choice format. To
improve the precision of the estimates in recent years researchers have introduced dichotomous
choice format followed by the dichotomous choice format. Some researchers to get the
advantage of both dichotomous choice format and the open ended format they use the
dichotomous choice format followed by open ended format (FAO Corporate Document
Repository, 2007; Shyue-CherngLiaw and Wan Jiun Chen2006), (4) Data collection technique.
Survey responses can be gathered by face-to-face interview, telephone interview or mailed
questionnaire. Face to face interview method is superior to telephone interview and mailed
questionnaire, but the use of the face to face interview method is very expensive as compared to
telephone and mail survey, and (5) Analyzing survey responses. This includes estimating average
WTP/WTA of the population, computing total WTP/WTA of the population, and assessing the
survey result so as to judge the accuracy of the estimates.

2.2 Empirical Literature Review

Most empirical studies on the WTP for improved water resources and supply indicate that
income, household size, education, age, distance from existing water source, employment status
and gender influence willingness to pay for improved water resources. For instance, (Otsetswe,
2001; ostsetstwe, 2001) found that the above parameters were the main determinant for WTP for
private water connection in Kenya village in Botswana.

In 2004, Pham Kahn Nam and Tran VO Hung Son did a study on Household Demand for
Improved Water Services in Ho Chi Minh City, Vietnam. The study assessed the willingness of
people in Ho Chi Minh City to pay for improvements in their water supply system. It also
investigated what aspects of water supply, such as quality and water pressure are most important.
Many households surveyed already had to do a lot and spend lot of money to cope with
unreliable poor quality public water supply they currently use. Also, households without piped
water are more willing to pay for improved services than those that already enjoy fixed supply.

12
Non-piped households place more importance on water quality than water pressure. The studies
reviewed above have all employed CVM to solicit WTP for improved water service.

In recent years CVM has been extensively applied to variety of water related issues in different
frameworks. Some of the CVM studies done on improved water supply service are cited below.
Employed CVM to assess households’ willingness to pay for the improved water supply in three
rural areas of Brazil: one relatively prosperous well-watered southern state of panama and two
dry areas of north areas. In this study the bidding game was administered, and the Probit, Tobit
and Multinomial Logit models were used to analyses the survey responses. The findings of the
study indicate that the majority of surveyed households are prepared to pay much higher tariffs
than existing tariffs. The willingness to pay for yard tap is positively affected by income, assets,
education and formal sector occupation. The findings of the study also indicated that it is
possible to provide free water to the poor at public taps without harming the financial viability of
the scheme.

Ued CVM to estimate the WTP for public taps and private connections to the improved drinking
water system in three Ibgo villages: Edem, Ekwegbe and Umunko- in the Nsukka district of
Anambra state of Nigeria. All these three villages were predominantly agricultural communities
and at the time of the study none of them had operational water supply system. In this study two
different starting values (high and low) starting values were used and each household in the
sample was assigned to one of these two groups. In this study the households’ response was
analyzed in three ways: interval estimate, ordering of the alternatives, and as choice to a single
decision about the availability of water system. To analyze survey responses the ordinary least
square (OLS) and Multivariate models were employed.

The findings of the study indicates that the coefficients of attitudes, assets, education, housing
type, storage capacity and the qualitative variable for the starting point had expected sign and
statistically significant and determines households’ willingness to pay for the improved services
used CVM to assess the WTP for the improved water supply and sanitation service in Iquitos
city, the Republic of Peru. In this study double bound CVM format was used and to analyze
survey responses the survival analysis and will be models were employed. The data were
analyzed by statistical package called CVM 2002. The research finding indicated that age of the
respondent, household income and current water usage practices determine households’

13
willingness to pay for the improved water supply service. The findings of the study in particular
indicate that the younger the age of the respondent, the higher the monthly income, and the
shorter the availability of time to fetch water from the existing source the higher the
households’WTP for the improved water services.

In Ethiopia we found some studies done on improved water supply through CVM method.
mployed CVM to analyses the households WTP for improved water service supply in sawla
town. In this study multinomial ordered probit model was used to analyze the households’
response. Similar to other studies in this study socio-economic and demographic factors and
water problems and households water consumption practices used as explanatory variables

Assefa Chaka (1998) used the CVM to assess the WTP for improved water supply of Addis
Ababa by taking four kebeles as a case study. In this study probit binomial models were
estimated with LIMDEP 7.0. Chaka specified two models to analyze the households’ responses.
In the first model, the probability of the household who wish to connect to the improved water
supply was taken as dependent variable while in the second model the respondents WTP for
improved service falls within specified interval was taken as dependent variable.

The findings of the study indicate that all coefficients of the explanatory variables had expected
signs, though all are not significant. The coefficients of income, household size, sex of the
respondent, level of education, and time required for fetching water, and households’ attitude
towards the responsibility for supplying improved water were found statistically significant. The
coefficients of age of the respondent, house (taken as proxy for wealth) and employment in the
formal sector though they had expected sign they were not significant and rejected. According to
the finding of this research female respondents had more willingness to pay for the improved
water service as compared to male respondents. For wealth, women, children, domestic animals,
and sex of the respondent statistically insignificant and rejected..

Genanew Bekele in his study used the midpoint of WTP interval in the bidding game with in
which respondents’ WTP bid falls as dependent variable. Like others the explanatory variables
used in the study were socio economic and demographic factors and the status of water exist at
the time of the study. The findings of the study indicates that the coefficients of income,
education, gender of the household head, location of the study area, staring point bid game and

14
 quality of the water exist during the survey time statistically significant and determines
households' willingness to pay for the improved water services. The coefficients of family size
and employment in the formal sector were not significant. The findings of the study show that
the entire surveyed households preferred the provision of the improved water service. The
surveyed households show their WTP about 15 times more than the existing tariff if they get
improved water service.

2.3 conceptual framework of the study

The issue were most important for water project designers and planners is how to ensure the financial
sustainability of a project. This can involve predicting and estimating what users will be willing and
able to pay for proposed water schemes in the future. That is because most water projects in developing
countries are financially unsustainable leading to water supply shortages in many places. Policy makers
most of the time sees water supply provision using both demand and supply side. As can be seen from
the following chart supply side of water provision usually sees technical alternatives used in water
investment. While the demand side of water supply provision sees the households' WTP as a policy
recommendation

Policy makers most of the time sees water supply provision using both demand and supply side.
As can be seen from the following chart supply side of water provision usually sees technical
alternatives used in water investment. While the demand side of water supply provision sees the
households' WTP as a policy recommendation.

Generally, WTP refers to the value of a good people are willing to pay, sacrifice or exchange
for it. Used in contingent valuation to estimate the value of a nonmarket good, WTP would
generally be determined through questionnaires distributed to a representative population
asking something like, 'How much would you be willing to pay for a certain improved water
supply service'?

Education
Income

Level of satisfaction
HH
15 Household size

WTP
 Age

Bid

Gander

Figure 1 Conceptual framework of the study

CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1 Description of the Study Area

3.1.1 Location of the Study Area

The study was conducted in sawla town, which is located in the southern part of Ethiopia, in
SNNP national regional state. Sawla town is located at a distance of 514km to South West from
the capital city of Ethiopia, Addis Ababa on the road to goffaa. The town is roughly located
between at a latitude and longitude of6°18'N36°53′E/600°N 37.967°E with the average altitude
of 1,395m above sea level. Its surrounded by goffa zone

16
The town is serving as exclusive transport for seven woredameloko-
kozo,basket,gezegofa,oyda,dembagoffa,zala and ubadebtetsahay. Goffa zone is part of a region
known forhillyandundulating midland and upper lowland retrained due to terrain and weather
patterns lees than one in five household is food secure

3.2 Data type and source

To undertake this research, the study uses both primary and secondary data. Primary data would
be collected from local peoples and the town. The secondary data would be collected form
recorder and previous works of water service provider and other related studies in the subjects,
through questionnaire’s and oral interview. When researcher says through oral interview,
research would be use a mobile interview or face-to-face interview.

3.3 Sample techniques and sample size

3.3.1 Sampling Techniques

The study populations would be all the domestic water uses household in sawla town .In order to
represent the population with sufficient accuracy and inter the sample results to the population
the target sample households would be selected used a two-stage simple random sampling
technique.

In first stage four Kebeles would be randomly selected out of ten Kebeles founds in the town
The population of four kebele is 11189 in the town these numbers of kebele were considered to
be sufficiently large for drawing valid statistical inference and would be also manageable to be
surveyed with the available resources of finance and time.

In the second stage, total of 99 households would be selected randomly from selected Kebeles
using proportional to size sampling technique.

3.3.2 Sample Size Determination

17
According to 2007 census conducted by CSA, Sawla town has a total population of 46957 of
whom 23243 ware mean and 23714 ware women. The town is serving as exclusive transport
optionforsevenworeda,Melokoza,Basketo,GezeGoffa,Oyda,DembaGoffa,Zala,andUbaDebretsha
y. The majority of the inhabitants were protestant, with 49.12% of the population reporting that
belief, 45.22% practiced Ethiopian Orthodox Christianity, and 4.63% were Muslim.
Table1: Kebele,s and number of households randomly selected for questionnaire survey:

Name of Kebeles Total households Sampled households Percentage

costumer
Gorade 1871 17 17.17%
Yela 2054 18 18.18%
Seseka 3274 29 29.29%
Suka 3990 35 35.35%
Total 11189 99 100%

3.2 Method of data collection

For collecting the data suitable technique would be uses depending upon the nature of the data.
Primary data would be collected from household through questionnaires and key informant
interview. The questionnaires that were used to elicit households’ willingness to pay for
improved water supply service divided to three basic parts namely:- Households socio-economic
characteristics, Existing water supply situations of the town, Households willingness to pay for
improved water supply questions. For secondary data related literature would be consulted and
reviewed.

3.4 Method of Data Analysis

After the relevant data was gathered both descriptive and inferential analysis methods would be
uses. The main reason to descriptive analysis most of the data collected through open-ended
questionnaires and interviews which difficult to quantify .Hence, it appropriate and convincible
to the technique based on the fact and information collected. This descriptive data analyze by
tables, graphs, and figures.

18
3.4.1Model Specification
To determine the socio-economic variables that influence WTP the study adopts alogit or
probity econometric model as commonly and previously used in environmental studies
by( Ahtiainen 2007) and Mehrara et al, (2009).

This study was dependent variable which elicits “yes” or “no” responses to WTP question, so
logit regression are suitable to estimate the model. The logit model is employed to analyze
Factors that determine households’ willingness to pay for the improved water services for single
bound dichotomous choice questions survey responses.

In the model, WTP is endogenously determined and is a function of the following independent
variable: - income level, gender, age, education, household size , marital status, daily used
volume of water , and satisfaction .Thus,

WTP= β0 + β1bid + β2age + β3educ + β4gender+ β5marstat + β6hhsize + β7income+

β8satsfaction + β9 vol + ε Where; β1<0, β2< 0, β3>0, β4< 0, β5> 0, β6< 0, β7> 0, β8< 0, , β9>0

Where,

WTP: Willingness of sawla town residents to pay for improved water quality reliable supply

β0: Constant; βi : Coefficients where i= 1 to 9.

Bid; Income: Household income level; Household size: Household size.

Marstat: marital status ; Age: Age of the respondent.

Gender: Gender of the respondent where GEN= 1 for male respondent and GEN= 0 if
respondent is female; Educ: Education of the respondent (in terms of number of years at

school); Satisfaction: The existing water supply satisfaction level; and Ε: Error Term.

3.4.2 Definition of variables and Hypothesis or Priori Expectations

Dependent variables

19
WTP: is a ultimately insure sustainable water supply source, logit regression model is estimate.
In the model the dependent variable equals to 1, if the respondent accept the propose initial bid
and 0, otherwise.

Independent variables: the explanatory variables expect to influence the dependent variable
would be as follows,
Bid; a variable expect to a negative contribution to the WTP. This means that the size of bid
increases or decreases leads WTP to decreases or increases, other thing being unchanged. Which
is logical as economic theory predicts, demand for good/service decrease as the price of the
good/service increases given other factor constant.

Marital status: it a dummy variable when 1,equal a married status and 0, otherwise. Married
status positive related to dependent variable, WTP.
Level of satisfaction: It A Dummy Variable, Satisfaction ( 1= Satisfied And 0 otherwise).with the
existing service negatively affecting house hold willingness to pay.
INC; Income expected to be positively related to WTP. Environmental economic theory assumes
that the demand for an improved environmental quality increases with income. Consequently,
those with a higher income expected to be more willing to pay for an improved water quality and
reliability of supply than those who have little or no source of income.

HOUSEHOLD SIZE; Household size expected to be inversely related to WTP. It assumed

that big households would be willing to pay relatively less due to the associated high running
costs (i.e. budgetary constraints). Thus, the study was expected to sign of its coefficient to be
negative.

AGE; Respondents were asked their age. A prior, it not possible to know how a respondents age
may impact WTP. However, in general, it hypothesized that as people grow older, they become
more politically conservative, and their WTP will decrease. Consequently, the estimation
coefficient of this variable expected to be negative.

GEN; Gender (1 = male and 0 otherwise) supposed to affect WTP. A positive relationship
between WTP and GEN might exist when the respondent is female because they are the ones

20
who take care of domestic household chores such as travelling to other places to fetch water in
times of need, hence they will be willing to pay.

EDU; WTP for improved water quality and reliability of supply is expected to be positively
related to education. The longer time in formal schooling (years), the more people understand
better the consequences of using unsafe water and the need to have reliable water supply.
Therefore, the educated would be more willing to pay than the illiterate.

CHAPTER FOUR

4. RESULTS AND DISCUSION

4.1 Socio Economic Characteristics of Respondents

Using a contingent valuation survey, a total of 99 sample households were interviewed though
oral interview and questioner during a survey. From the total sample households, 50.50% were
male households, while the remaining49.49% are female households.

Table.4.1.1 sex of the respondents

Sex of respondent Male’s of Percentage Cumulative

respondent
Male 50 50.50% 50.50%
Female 49 49.49% 100%
Total 99 100
Source: Own survey (2020)

21
Generally, it can be recognized from above the table more than half of the respondents are male.
this indicates that relatively more number of male WTP than females during the time of study.
4.1.1 Educational level of the respondents

The education level of the respondents showed that, majority of the respondents were within
secondary education level. The minimum education level achieved by the respondents was not
able to read and write (illiterate), while the maximum level is Master’s Degree. From total
respondents who gave answer to this question, 14.14% can neither read nor write (illiterate),
25.25% have within primary education (1-8 grades), 33.33% have within Secondary Education
(9-12), diploma 17% %)degree and above 10%

Table 4.1.2 educational level of the respondent

Educational of level Number of respondent Percentage Cumulative

of respondent
Illiterate 14 14.14%
1-8 primary education 25 25.25% 39.39%
9-12 secondary 33 33.33% 72.72%
education
Diploma level 17 17.17% 89.89%
Degree level 10 10.10% 100%
Total 99 100
Source: Own survey 2020

4.1.2 The family size and occupational level

The data about the occupation of the respondents shows that 32.32%% of them were self-
employed, 24.24%% of them were government worker. While the remaining 43.43% were
unemployed.

Table 4.1,3;Occupational level of the respondents

Occupation level of Number of respondent Percentage Cumulative

respondent
Employed 32 32.32%

22
Government worker 24 24.24% 56.56%
Unemployed 43 43.43% 100%
Total 99 100%
sources: Own survey 2020

Table 4.1,3; Size number of the respondents

Size number of the Number of the Percentage Cumulative

respondent respondent
1 12 12.12%
2-3 31 31.31% 43.43%
4-6 42 42.42% 85.85%
7-10 14 14.14% 100%
Total 99 100%

Sources: Own survey 2020

The average family size of the total sample households were 4-6 the maximum family size of the
sampled household is 10, while the minimum of 1

4.1.3 Total income of the respondent per month

The average monthly income of the sample households was Birr 1200, which is ranging from the
maximum of Birr 10,000 to the minimum of Birr 0. Data about the income of households reveals
that, there income disparity between the households of the town.

Attempts were also made to know the wealth status of the sampled households. Based on this,
from total sample households of 37.37% of them reveals that they live in their own house,
52.52% lives in privately rented house.

Households were given different social services to rank them in accordance with their priority of
need. Survey results showed that 45.45%rank water service as their first need, 34.34% rank
health service as their first need, 20.20% rank electric service as their first need. With regard to
their second and third choice, most of the respondent chooses health and electric service
respectively. From this are clearly understood water supply is the priority need of sample
households and the most important thing for them.

23
4.2 Existing Water Supply Situation
Household’s attitude towards current water supply situation of the town presented in the
following section by discussing main source of water, existing price of water, quantity, quality
and reliability of current water supply source.

4.2.1 Current Source of Water Supply

With respect to the sources of water supply households were using, most of sampled households
were using piped water from the main source supplied to the town, followed by public hand
pump, water vendors, protected spring or well, river, and ground water respectively as can be
seen in the following table.

Table4. 2.1: Current Sources of water supply for the town

Source of water supply Number of respondent Percentage

Private piped 52 52.52%
Public tap 47 47.47%
Total 99 100%
Source: Household survey; 2020

With regard to sources of water supply 52.5.2% of households who were using piped water from
the main source supplied to the town, while the remaining 47.47% of households used Public tap
water supply. The Households who were not using private piped water supply. Based on this
most of them said that the house not their own and they do not need piped water source.

4.2.2 Current Price of Water

Survey about the current Government water tariff of the town’s water supply based on a
progressive water tariff calculation aiming to support the majority low income customer and high
consumers to pay progressively higher as their consumption. Total payment is calculated after
each consumption category identified from the total consumption and multiplied by their
respective prices.

Table 4.2.2.1 - consumption category of sawla town water supply syste

Water in litter The current payment for this water

5litter 0.25 cents

24
10litter 0.50 cents

15litter 0.75 cents

20litter 1.00 cents

25litter 1.25 cents

Source; own survey 2020/2013

From sample collected data households who have piped water supply source can consume on
average 81.08 litter of water per month. However households are not using the required quantity
of water at desired time.

4.2.3 Reliability of current water supply source

Contingent valuation survey about quantity, quality and reliability of current piped water supply
source indicated that, most of respondents said the quality of water is not good so, there is a
problem in all time availability of water supply service.

With regard to the quantity of water supplied to town’s all of the population said that quantity of
water delivered at a time is poor. A question related to the quality of water was, whether the
households uses any purification method before they drink or not. 97.3 % of households who
were responded for this question were not using any purification method before drinking and
using for domestic use. 2.7% of respondents were using cleaning materials such as boiling, and
wuha Agar before using the water. Those who were not using any purification method were
asked why they are not, based on this, 22.22% of households said water is clean for drinking and
domestic use,11.1% purification is costly and time consuming, and the rest 66.66% responded
water is not clean and also it have side effect on health. With Regard to all time availability of
water, only a small proportion of respondents were said the water availability at all time is good.
While most of the respondents responded availability of water at all time is poor. On average
water is available only for 3 days per week.

25
4.2.4 Level of satisfaction with the existing source
Data about the level of satisfaction with the existing source of piped and public tap water supply
indicate that, most of the respondents are not satisfied with the existing source. As researcher
tries to explain about the private piped water and public tab water, about 55%are not satisfied
with existing water supply source. Whereas, 44.% are satisfied with existing water supply
source. The reason for their dissatisfaction with the existing source is the quantity of water
supply per day is not sufficient and it is not found at desired time.

Table 4.2.4.1: Level of satisfaction with existing source

Respondent situation Number of Percentage comulative

respondent
Satisfied 55 55.55%
Unsatisfied 44 44.44?% 100%
Total 99 100%
Source: Owen survey 2020/2013

4.2.6 Disease Episodes

Water quality and disease episodes are directly related. As the water quality becomes good, the
chance of getting water borne diseases such as typhoid, Diarrhea and Vomiting is getting lower.
This question was forwarded to sampled households of Sawla town.

From sample households who were responded to this question, 17.3% were said that one member
of their family over 12 years in the last one year were affected with one the above disease. If this
water supplied is insufficiency or have no quality, these all residents can be damaged by all kinds
of disease. So that, pure water quality have very important for Sawla residents.

4.3 Demand and Willingness to pay for improved water supply

In the previous two parts, data about household’s attitude towards current water supply situation
is presented together with their socio economic and demographic characteristics. In this section,
household’s willingness to pay for the improved water supply service is presented. Before doing
that, it is important to see the question presented to the sample households.

The provision of improved water service among other things means, good quality of water which
is safe for health and an increased amount of water available for use .It also means a highly

26
reliable source at any time (7 days a week, 24 hours a day). Now, let us assume that you have an
option for a private connection to such an improved piped water supply scheme. The improved
system will provide you with as much water as you wish at any time of the day, throughout the
year.

Let us also assume that, you will be charged a monthly water fee based on the volume of water
your household consume in a month (the tariff is Progressive), the more you consume the higher
will be your monthly bill. The tariff per volume will be the same for all consumers. You may not
be required to pay initially the costs of connection to the new scheme. Instead, it will be
distributed over several years in your monthly bill (The payment will be built-in the monthly
water bill). You are required to pay a minimum of at cost recovery after the improved water
supply has been come to benefit.

4.3.1 Demand for improved water supply

Provision of Improved water supply has much importance. Among them it is reducing the
incidence of water borne diseases such as diarrhea; it also improves sanitation activities, and
generally contributes to the economic growth of every nation. With regard to the choice for the
above improved water supply, since most of households are not satisfied with the existing
source, they told they need improved water supply.
(Source: Household survey).

The most of sample households responded that they need improved water supply. Their main
reason for demanding improved water supply is, there is no sufficient amount of water at the
required quantity in the desired time.

4.3.2. Willingness to Pay (WTP) for Improved Water Service

The first question related to willingness to pay for improved water supply is, whether they are
willing to participate in improving water supply service. The answers from respondents  reveal
that, if the town’s water supply office provides them the above improved water supply Option,
most of the sample households 58.58% responded they are willing to pay at a cost recovery tariff
rate. While the remaining 41.41% is not willing to pay for the improved water supply option
provided to them at a cost recovery tariff rate.

Table 4: Households response of WTP for improved water supply

27
WTP Frequency Percentage Cumulative
Yes 58 58.58?% 58.58%
No 41 41.41% 100%
Total 99 100%
Source own survey, 2020/2013

Responses from the Economic valuation question of Mean WTP reveal that, the mean
willingness to pay for the improved water supply services of the sample households were
16.32cents per bucket of water. This implies that the residents of the town are willing to pay
more than the existing tariff rate.

The frequency distribution for Willingness to pay responses indicated in the following table
reveals that from the total of 99 sample households, 24 .24% are willing to pay between 0.1- 0.2
cents per bucket of improved water. 30.30% percent of sample household’s fare willing to pay
between 0.3 – 0.4 cents, 20.20% of them are willing to pay between 0.5- 0.6 cents, and 25% are
willing to pay between 0.7-0.8 cents per bucket of water. From the table it is also clearly
indicated that more than 75% percent of sample households will be willing to pay between 0.1 -
0.6 cents.

Table 4.3.2.2: frequency of WTP ranges

Hbdid(amount of their Frepuency Percentage Cumulative

payment
0.1-0.2cents 24 24.24%
0.3-0.4cents 30 30.30%
0.5-0.6cents 20 20.20%
0.7-0.8cents 25 25.25% 100%
Total 99 100%
Source: Household survey 2021

28
4.4.4 Determinants of household’s willingness to pay responses

4.4.1 Results of the Logit Model

To identify the key factors that determine probability of respondents WTP for improved water
service which ultimately ensure sustainable water supply source, logit regression model was
estimated. In the model, the dependent variable equals to 1, if the respondent accepted the
proposed initial bid and 0, otherwise. Multivariate econometric analysis was also applied in
addition to the descriptive analysis conducted so far in order to have a broader framework
in identifying factors accountable for the willingness to pay for improved water service. The
logit result shows that the model fits the data well (see Table 6). The pseudo 2R for the logit
estimation is 29.71 This value of 2R indicates that 29.71% of the variation in the WTP is
explained by the explanatory variables included in the model. Mitchell and Carson (2020)
suggested, “The reliability of a CV study which fails to show 2Rof at least 0.15, using only a
few key variables, is open to question.” According to this standard, the result of this
regression output is reliable. Moreover, Likelihood Ratio Chi-Square test of whether all
predictors' regression coefficients in the model are simultaneously zero and count 2R( percent
correctly specified) show that the model fits the data well and reliable multivariate.

Of the total 8 explanatory variables hypothesized to influence the probability of WTP choice
decision, 2 variables were found to have significant effect on probability of a respondent
accepting the level income;hhs;education and the remaining 5 variables were found to be
insignificant. In logit regression model if Pseudo R2 is greater than 15% the model is adequate.
In my model pseudo R2 is29.71 % therefore my model is adequate.

Table 6: The logit regression model estimation results for determinants of households

WTP choice for improved water.

. logit WTP BID MAS LVS INC HHS AGE GEN EDU

29
Iteration 0: log likelihood = -67.765566

Iteration 1: log likelihood = -47.891255

Iteration 2: log likelihood = -47.629453

Iteration 3: log likelihood = -47.629037

Iteration 4: log likelihood = -47.629037

Logistic regression Number of obs = 99

LR chi2(8) = 40.27

Prob > chi2 = 0.0000

Log likelihood = -47.629037 Pseudo R2 = 0.2971

WTP Coef. Std. Err. z P>z [95% Conf. Interval]

BID .751801 .5500332 1.37 0.172 -.3262442 1.829846

MAS -.3913255 .5378026 -0.73 0.467 -1.445399 .6627482

LVS .7924481 .5586927 1.42 0.156 -.3025694 1.887466

INC .9396057 .2924198 3.21 0.001 .3664735 1.512738

HHS .5511251 .2756669 2.00 0.046 .010828 1.091422

AGE -.0997227 .040168 -2.48 0.013 -.1784505 -.0209949

30
GEN .1270976 .6675688 0.19 0.849 -1.181313 1.435508

EDU .2391622 .0831153 2.88 0.004 .0762593 .4020651

_cons -1.966572 2.022112 -0.97 0.331 -5.92984 1.99669

Significant variables affecting WTP decision at 0.01 (**) , and 0.1（*） levels of significance.

As a clearly saw from table stata marital status of the household head has a negative and
statistically insignificant relation with the probability of the WTP, which shows the absence of
significant difference between maried and unmeried in willingness to pay for the improved water
supply. Those households whose were maried are highly affected by WTP than unmaried
households.The estimated coefficient of the bid value (MAS) was found to be statistically
insignificant at level of significance, with the expected negative sign. The estimated coefficient
of the logit model for the marital status value

31
 .CHAPTER FIVE

5. CONCLUSIONS AND RECOMNDATION

5.1 Recommendation
From the survey for improvement in the existing water supply, the following policy
recommendations are forwarded. Sawla town suffers from increasing problems of water
shortage. The inhabitants of the town have high eager to have reliable and improved water
services. All the surveyed households expressed their willingness to pay for the improved water
services above the existing tariff structures. Thus, the expected revenue from the provision of the
improved water services will be high. The findings of this study also clearly show socio-
economic and demographic characteristics and water related variables that affect households’
willingness to pay for the improved water services. As the researcher studied the role of the
government to improve water supply service is insufficient.

Based on our research findings draw the following policy implications:

The strong positive relationships between the income of the respondents’ and their
willingness to improve water supply service in Sawla town.

In addition researcher should have to solve this problem with the part of the government.
This means, in future researcher should work with the government to tackle the existing
problems in this regard.

pay for the improved water services in logit models indicate that the water tariff charged
should reflect the income characteristics of the households.

The surveyed sampled households expressed their interest to pay above existing tariff
structure. Thus, if the improved water supply is provided to the town by increasing water
tariff structures the financial viability of the authorities will be improved and at the same
time the water need of the households will be satisfied.

There is no faire distribution of water supply in Sawla town therefore; recommend that the
concerned office should be fairly distributing the existing water service.

32
 According to my idea, there is no government role to improve water supply service in Sawla
town. So researcher recommended that, the government should have to participate to
improve water supply service in Sawla town.

In addition researcher should have to solve this problem with the part of the government.
This means, in future researcher should work with the government to tackle the existing
problems in this regard.

5.25Conclusions
The main purpose of this study was to estimate households willingness to pay for the improved
water service. In this study the demand side of the improved water supply services was
analyzed. The survey responses of 99 selected households from all the 4 kebele of Sawla town
were analyzed in the study. The sampled households were asked questions related to their socio-
economic and demographic characteristics, water use practices, and problems with existing water
services system and some general questions.

To analyze the survey responses contingent valuation method was employed. The survey
responses were analyzed by using STATA 11 econometrics software. The survey response
analyzed by using both descriptive analysis and econometric models.

The survey results showed that pipe water is the main source of water for the town. Of the total
survey respondents 62.7 % use pipe water. 37.3% of the respondents use public tap water.
However, only 22.7 of the respondents satisfied with the status quo level. 77.3% of the
respondents revealed that the existing source has poor reliability. The whole surveyed
households expressed their willingness to pay for the improved services ranging from 5 cents to
30 cents for a bucket or 20 liters of water they will get from the improved sources. 75% of the
respondents show their willingness to pay between0.5-0.20 cent, and the remaining 25% percent
of the respondents show their willingness to pay for the improved services abouve0.2 cent.

To identify the determinants of households’ willingness to pay for the improved water service
logit econometrics models were estimated.

33
The results of the logit model show that, level of satisfaction, bid value and the income variable
determine households’ willingness to pay for the improved services in Sawla town. The mean
willingness to pay for a bucket or for 20 liters of water from logit model is 16.32 cent.

Bibliography

Bayrou,griffin,and zeleke. (2002,2010,). Most of the previous studies show householdwilligness to pay for
iproved water supply by services trying to workon few selected urban areas like.

34
Douangchanhlopaying. (2004). WTP is the maximum amount individual states they are willing to pay for
particuler goods orservics based its characteristics (e.g water supply,thedifficulty of obtaining it,
avilable sources,quality and service level.

fekadumegersa. (2011). Assessing hoseholds willingness to pay for improved water service.

Hessen. (20010). The total economic value(TEV) of environmental resourse can be citedas the sum of use
and non-use value.

ostsetstwe. (2001). Most emperical studies on the wtp for improved water resoursesupply indicate
thatincome household size education age distance from existing water source employment status
and gender infulence willingness to pay for improved water resources.

Seller,christine eta al. (1985). The drawback of the method is that its application is limited only for
valuation of recreational sites.

UNDP,WHO,UNICEF. (1999,2010). The service is batter when comperd with rural areas havever there t
probleme with the quality, and quantity substainability as coverage associated with rapid
population grouwth and rapid urbanization in some cities like sawla town.

United, N. (2006). Southern nation ethiopia water supply and sawage service.

whittigton. (2002). Since than the method become one of the widely used valuation approach in water and
sanitation service,urben and air polution ,soil erosion, deforestation,biodiversity,water shed
managment and ecosystem valuation.

Young. (2005). The releveant preference method that are in use i nreiation with water resourse valuation
are hedonic pricing method ,the travel cost method and defensive (averting) behavior .

ARBA MINCH UNIVERSITY

SAWLA CAMPUS
COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
DEPARTMENT OF FINANCE AND DEVELOPMENT ECONOMICS

QUESTIONNAIRES

35
CONTINGENT VALUATION SURVEY - HOUSEHOLD QUESTIONNAIRE
Contingent valuation method survey of offices questionnaire of sawla town water
supply
I would like to inform you that this questionnaire is prepared for academic purpose only; that is, I
am conducting a research, which is entitled on “households willingness to pay for improved
water supply service( in case of Sawla town), Southern Ethiopia” for award of BA Degree in
Finance and Development Economics. This questionnaire is designed to obtain information on
the current situation of water supply in Sawla town and residents’ willingness to pay for an
improved water supply services. The information collected is for purely academic purpose and
will be kept confidential. And your name personal information will never be linked with your
responses. Hence you are requested to participate in this discussion as truthfully as you can.
Thank you in advance your participation

Name of the Interviewer_________________________________

Interview Started/ended_________________________________

Kebeles No______________________ household number ___________

Part I: Socio Economic characteristics of the Respondents

1. Sex: a. Male b. Female

2. Marital Status: a. Single b. Married

3. Age of head of the household _________ years

4. Education level of the household ______________

a. Elementary level (1_8) b. High school level (9_10)

c. Preparatory level (11_12) d. University or Collage Level

5. Total income of head of household per month____________ Birr

6. Occupation status of head of the household:

a. Business man b. Employ in private and NGOs

c. Government worker d. Unemployed

7. Total number of people living in the house______ peoples

8. List of the following services in order to importance (Rank them)

a. School b. Health c. Water d. Sanitation

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e. Road f. Electricity g. Telephone

9. Do you rent or own house?

a. Own b. Rented c. If other specify_________________

Part II: Existing water supply Situation

1. Which is your households’ main source of water supply?

a. Private piped water b. Public tap

2. If the maximum amount of money you would like to pay for improved water service you will
get from the improved service is “zero” what is your reason for you do not want to pay?

a) Water should be provided free of charge b) I satisfy with the existing source

c) I do not have enough money d) If other specify________________________________________________.

3. How do you judge the existing tariff of towns’ water supply office?

a. Too expensive b. too cheap c. fair d. it is difficult to judge

4. Do you get piped water at a desired time and quantity?

a. Yes b. No

5. If your response to above question is “no” how many days when waters absent

___days

6. How do you rate the state of service of piped water your household uses?

i. Quantity: a. satisfied b. average c. unsatisfied

ii. Quality: a. satisfied b. average c. not good

7. Does your household use any purification method to clean piped water before drinking?

a. Yes b. No

8. If your answer for question number 7 is not what your main reason is

a. Water is clean for drinking

b. Purification is time consuming and costly

c. It is not clean but a side effect on health

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9. How much water is on average do you use daily bucket (20 liters of jerrycan?)

a. 1-5 b. 5-10 c. 10-20 d. 20-60 e.50-100 f. more than 100

10. If you use public tap, how much do you pay per bucket? (20 liters of jerry can)

Up to a.10 cents b.11-20 cents c. 21-30 cents

d. 31- 50 cents e. >50cents

11. What type of diseases has affected any members of your family of over 12 years in the last
one year (If your insert the number of patents)

a. Diarrhea b. Malaria c. Vomiting d. Typhoid e. If other

specify______________________________________

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