Output-Based Aid:
Introduction, Lessons and Challenges


                     Yogita Mumssen
             Senior Infrastru...
Outline

 What is OBA?
 How does OBA work?
 What are the lessons and best
  practices emerging from application of
  OB...
Defining OBA
 OBA = Performance-based grants to help cover gap
  between what user can afford and the actual cost of
  pr...
OBA in the Context of
             Development Assistance

                                                OBA “Outputs”
 ...
Output-based vs. Input-based
     Traditional            Government purchases specific                 Output-Based
     A...
Typical OBA Structure
State/Municipality                                     Donor or Government
   (contracting
    autho...
OBA Core Concepts
 Targeting of subsidies
 Accountability
 Innovation and efficiency
 Using incentives to serve the po...
OBA Portfolio
        WBG OBA Portfolio by Region
                                                   WBG OBA Portfolio by ...
OBA Project Examples - 1
  Kampala Water
  Connections for the
  Poor, NWSC Uganda
• Objective: Access to piped water serv...
OBA Project Examples - 2

 Manila Water
 Supply Project,
 The Philippines

• Objective: increase access to water services ...
Output-Based Aid:
Lessons Learned
and Best Practices

World Bank
Publication
Coming soon!
Lessons Learned
            Benefits of an OBA Approach
 Explicit identification of outputs promotes targeting (e.g. indo...
Lessons Learned
       Challenges of an OBA Approach
 Access to finance determines how “output-based”.

 Capacity to imp...
About GPOBA
 GPOBA is a partnership of donors and international organizations
  working together to support OBA approache...
For more information on OBA or
GPOBA, visit the GPOBA website:
        www.gpoba.org
Upcoming SlideShare
Loading in …5
×

Output-Based Aid: Introduction, Lessons and Challenges

1,715 views
1,558 views

Published on

Published in: Education
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,715
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
49
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Output-Based Aid: Introduction, Lessons and Challenges

  1. 1. Output-Based Aid: Introduction, Lessons and Challenges Yogita Mumssen Senior Infrastructure Economist Global Partnership on Output-Based Aid, The World Bank African International Water Congress, Kampala, March 15 -18, 2010
  2. 2. Outline  What is OBA?  How does OBA work?  What are the lessons and best practices emerging from application of OBA in the water sector?
  3. 3. Defining OBA  OBA = Performance-based grants to help cover gap between what user can afford and the actual cost of providing service.  OBA “subsidies” (or “payments” to service providers) channeled most often as supply-side subsidies after agreed outputs have been delivered.  OBA mostly “one-off” capital subsidies to help defray costs of initial access for the poor.  OBA part of a broader results framework: other results- based mechanisms (e.g. CCT, COD etc)
  4. 4. OBA in the Context of Development Assistance OBA “Outputs” Independently verified Inputs (Intermediate) Development Outputs Design Outcomes Impacts Build, Operate •Output specification OBA “Outputs” include •Service provider selection •Water connection made & service provided •Solar Home System installed & maintained •Medical treatment provided
  5. 5. Output-based vs. Input-based Traditional Government purchases specific Output-Based Approach “inputs”, builds assets and contracts Approach out or provides services itself Inputs Inputs (such as materials) (such as materials) Commercially Structured Finance Service Service Provider Provider Public Finance Outputs Outputs (Services for End Users) OBA reimburses the service provider after (Services for End Users) the delivery of outputs.
  6. 6. Typical OBA Structure State/Municipality Donor or Government (contracting authority) Financial Subsidy Fund Intermediary Subsidy Independent Service (4) Verification Provider Agent (3) Pre-finance (1) Output Delivered = Connections installed, service delivered (2) Targeted poor communities not yet connected
  7. 7. OBA Core Concepts  Targeting of subsidies  Accountability  Innovation and efficiency  Using incentives to serve the poor  Output verification and monitoring  Sustainability
  8. 8. OBA Portfolio WBG OBA Portfolio by Region WBG OBA Portfolio by Sector (Total = US$ 3.5 billion) SAR (Total = US$ 3.5 billion) 9% MENA Education 1% Water & 5% AFR Sanitation 33% Energy 5% 6% Health 24% EAP 3% LCR ECA Transport 52% 2% 58% Telecom 2% Includes 51 GPOBA projects, mainly in water, health and energy, of US$153 m value (committed).
  9. 9. OBA Project Examples - 1 Kampala Water Connections for the Poor, NWSC Uganda • Objective: Access to piped water services to poor HHs. Initial target of ~400,000 people • Project implementation: Urban Pro-poor Branch, NWSC Kampala • Total cost : US$ 4million, of which US$ 2.5 million provided by GPOBA to help defray cost for user and incentivize NWSC to serve poorest, many who consume at social tariff • HHs in OBA project areas contribute equivalent of $25 towards connection cost (compared to $50 in non-OBA areas); GPOBA provides a subsidy of $104; NWSC covers remainder • Pro-poor solutions: focus on poor slum and peri-urban areas; subsidize yard taps and PWPs; pilot pre-paid meters in some cases. But targeting still a challenge. Demand creation through social mobilization is a critical component and takes time. More effort required • Output-based: 90% disbursed after connection verified; 10% after 12 months of service • 1,679 Yard taps benefiting ~30,000 people have been verified as of Oct 09; therefore roll- out underway, but slower than expected
  10. 10. OBA Project Examples - 2 Manila Water Supply Project, The Philippines • Objective: increase access to water services through individual HH connections for low-income communities in the Manila Metro region; 100,000 beneficiaries. • Total cost: US$15.5 million, of which US$1 million provided by GPOBA. • Project administered by Manila Water Company. • Subsidy paid in installments after independent verification of outputs and three months of operational water service. • At the time of the GPOBA pilot, households contributed $36 towards the $167 user connection fee and GPOBA provided a $131 subsidy for the remainder • 10,642 connections benefiting 50,024 people have been verified as of Oct 09 10
  11. 11. Output-Based Aid: Lessons Learned and Best Practices World Bank Publication Coming soon!
  12. 12. Lessons Learned Benefits of an OBA Approach  Explicit identification of outputs promotes targeting (e.g. indoor connections vs. stand-posts). Targeting criteria part of verification  OBA shifts performance risk (construction, operational & demand) to providers and helps ensure “you get what you pay for”. But, how much risk is shifted to the provider depends on context…  Efficiency gains through competitive processes, e.g. lowest-subsidy required auctions => 20-30% reduction of subsidy needed. Focus on output delivery => innovative behavior, such as pro-poor products, sensitization campaigns (but, also a challenge…)  So far $2 of private finance leveraged for $1 of subsidy; varies by sector and region  “Internalizing monitoring” by paying on outputs.  Too early to judge performance on sustainability, but, encourages careful subsidy design
  13. 13. Lessons Learned Challenges of an OBA Approach  Access to finance determines how “output-based”.  Capacity to implement and monitor can be an issue; may be difficult to find qualified and independent verification agents.  Demand risk requires more “soft” up-front investment by service provider to ensure uptake, especially in relation to poor consumers (e.g. less “familiar” services, payment schemes, etc).  OBA one component of a wider set of policy instruments, and requires a supportive enabling environment for sustainability.  Development partner/donor co-ordination: incentives for line ministry to undertake a new accountability instrument.
  14. 14. About GPOBA  GPOBA is a partnership of donors and international organizations working together to support OBA approaches to improving service delivery for the poor.  GPOBA was established in 2003 by the UK (DFID) and World Bank. Its donors are the World Bank, the UK (DFID), the Netherlands (DGIS), Australia (AusAID), Sweden (Sida) and the IFC  GPOBA provides three types of support: technical assistance of OBA schemes, dissemination of experiences and best practices in OBA, and less so, grants for OBA subsidy funding  The program’s focus sectors are water and sanitation, energy, telecommunication, transport, health and education
  15. 15. For more information on OBA or GPOBA, visit the GPOBA website: www.gpoba.org

×