Abstract We carried out a stated preference survey in Malawi to examine whether access to microfinance for sanitation would significantly increase the proportion of households upgrading to improved pit latrines or alternative improved sanitation technologies (urine diverting dry toilet, fossa alterna, pour flush). We presented a range of sanitation options at local market prices, initially without and then with a real microfinance option, to 1,300 households sampled across 27 low-income urban settlements in the two largest cities, Lilongwe and Blantyre. When we gave respondents a microfinance option, the proportion of households stating an intention to install improved and unimproved pit latrines decreased significantly, while the proportion stating an intention to upgrade to alternative improved sanitation technologies increased significantly. However, households in the lowest wealth quintile were more likely to state a preference for unimproved pit latrines, suggesting that the benefits of microfinance for sanitation may not accrue equally across wealth strata. Organisations seeking to improve access to safely managed sanitation by promoting alternative sanitation technologies would succeed if households have access to affordable alternative sanitation technologies and microfinance for sanitation. However, poorer households would need more affordable improved sanitation technologies, flexible microfinance options and possibly targeted subsidies to gain access to safely managed sanitation.