Might be lack of a suitable site, in some cases. I.e., the people are so cheek-by-jowl that there's no place to dig except your neighbor's 20x20 space. (Ever seen a picture of Mexico City's high-density neighborhoods?)
Yes.
That sort of squalor is hard for me to understand so I'll admit ignorance when it comes to third world sanitation.
One would think that living with cholera, dysentery and hepatitis ridden sewage would motivate these poor wretches to reach a consensus for a remedial solution to the problem.
Tear down selected areas of shacks for communal latrines. Burn the waste with diesel or kerosene. Bury it, pour lime on it, compost it, generate methane with it, anything but live with it flowing down the street or stream.
It doesn't sound like an insurmountable problem that requires first-world monies to solve.