How informal water markets serve the urban population: Dynamics of invisible hand in Nairobi’s water sector

Globally, attaining universal access to affordable potable water presents a significant impediment. Nairobi, Kenya, exhibits a marked reliance on informal water markets due to a limited (approximately 20%) piped water infrastructure in low-income areas. These markets function under an “invisible hand” dynamic, where vendors pursuing self-interest concurrently serve public water needs. Scholarly literature examining the “invisible hand” mechanism within water markets remains limited. This qualitative study explored informal water markets within two informal settlements in Nairobi. Study findings delineated three distinct informal water market modalities: wholesale, distribution and direct vending. Wholesale vendors supplied water to distributing vendors, who, in turn, delivered water directly to households. Direct vendors operated sales at various points, including neighborhood reselling locations and roadside stands. Community residents’ procured water from diverse sources based on availability, affordability, and perceived quality. Deficiencies in government control on water quality, procedural inequities and conflicts at public water points impeded water provision and catalyzed the growth of informal markets. These markets operate via an “invisible hand” mechanism, fostering competition among vendors to potentially lower prices and enhance water quality. In the context of inadequate governmental intervention, these markets fulfilled societal needs regarding water provision and access. In conclusion, in informal settlements with inadequate government support, water service providers might be inefficient and exploit consumers by charging high prices for poor-quality services. Local authorities should acknowledge that their inability to deliver adequate public water services can stimulate the expansion of alternative water markets. Consistent engagement with water providers is imperative to maintain affordable, high-quality, and flexible water service delivery. Both governmental bodies and vendors should adapt. Governments by integrating water vendors into policy and practice, and vendors by establishing networks and advocating for their rights while abstaining from anti-competitive behaviors.