Safe access, disposal, and sustainable management of human waste is a necessary asset for healthy and prosperous communities, and yet remains an often unspeakable and taboo subject in many lesser developed countries.  Poor sanitation lies at the root of many development challenges, including important public benefits in terms of health, education and the environment – as well as nutrition, economic growth, gender equality and personal dignity. To focus awareness on the urgency of providing access to improved sanitation services, the United Nations (UN) in 2013 declared November 19 as “World Toilet Day,” an official UN international day.

The World Bank reports that 2.4 billion people globally live without access to improved sanitation, with about 1 billion resorting to open defecation. While 68 percent of the world’s population has access to improved sanitation, only 30 percent of the Sub-Saharan Africa population and 47 percent of South Asia’s population have access to a toilet and proper waste management services. It is estimated that access to modern sanitation services can add 20 years of life to the average human life in those regions, and improved sanitation has been recognized by the readers of the British Medical Journal as the most important medical milestone of the past 200 years. On the economic development front, the World Health Organization has estimated that every $1 invested in sanitation will trigger a return of $5.50. 

The UN Sustainable Development Goals (SDGs) which came into effect on January 1, 2016, has as among its targets for 100 percent of the world’s population to have access to improved water and sanitation services by 2030.  There are multiple challenges facing this ambitious milestone in terms of financing, education, behavior change, and processing, but is necessary to make up for lost ground and time – as the UN Millennium Development Goal (MDG) for the sanitation sector fell short of its target in 2015 – falling short of the proposed number of people with access by almost 700 million.

This is an ambitious target and brings-up a number of challenges to overcome to achieve this:

1. There is a large gap between available public funding, and the investments required to achieve a 100 percent target in less than 15 years.
2. Sanitation utilities and households looking to invest in sanitation lack access to finance to bridge this gap.
3. Service providers are not always held accountable for providing quality service, and it is often difficult to measure results from up-front investments in sanitation.
4. The poorest and most marginalized communities are often excluded from sewerage network expansions, or unable to provide funds to purchase improved sanitation facilities.

GPOBA has been piloting an innovative financial instrument, Output-Based Aid (OBA) for the last 13 years as an innovative financing tool to reach poor and unserved communities.  OBA ties the disbursement of public funding to the achievement of clearly specified and pre-agreed upon results that directly support access to improved basic services. These subsidies can also be packaged to support services along the “sanitation value chain,” from demand promotion to collection/access, transport, treatment, and disposal/re-use. 

There are currently three active projects in the portfolio with one pending signing. More information on each project can be found in the activity pages below:
   
Active projects (as of Nov. 2016)
Sri-Lanka: Colombo Wastewater
Ghana: Greater Accra Metropolitan Area Sanitation Project
Kenya: Extension of Water and Sanitation Services to 80,000 residents in Nairobi’s Informal Settlements
Scaling up Blended Financing of Water and Sanitation Investments in Kenya (see video also)
 
Closed projects
Senegal Output-Based Aid Sanitation Project
Morocco Improved Access to Water and Sanitation Services OBA Project (see video also)
Output-Based Aid in Honduras: An OBA Facility for the Water and Sanitation Sector (see video also)
 
General
Output-Based Aid and Sustainable Sanitation

 (Click on map below to enlarge)

 

“During the past two centuries, innovation has more than doubled our life span and given us cheap energy and more food. If we project what the world will be like 10 years from now without continuing innovation in health, energy or food, the picture is dark,” Bill Gates

Did you know that currently more than half of the world’s population lives in urban areas and this will rise to 70 percent by 2050? How can developing country governments respond to the demands of this rapid urbanization to deliver essential infrastructure and related services, especially for the urban poor? The estimated annual global infrastructure investment needed is US$3.7 trillion – of which only about US$2.7 trillion is currently met on an annual basis. New and innovative solutions are needed to finance the delivery of basic services to these residents.  

Innovation is all about finding and applying new ways to address existing problems and accelerate development impact. GPOBA uses Output-Based Aid (OBA) and Results-Based Financing (RBF) as one form of innovative financing to bridge the gap between poor households, government aims and service providers. OBA projects carefully target poor and marginalized households, working with a range of service providers and governments to enable these consumers to access basic services. OBA funds are disbursed only when services have been delivered and verified, ensuring that service providers are held accountable and that money is spent where it’s needed on things that actually happen.

Since the establishment of GPOBA in 2003, 48 subsidy projects totaling US$239 million have supported access to basic services for over 9 million beneficiaries. GPOBA has worked in seven sectors including energy, water, health, sanitation, solid waste management, education, and telecoms in 28 countries spread across Sub-Sharan Africa, South Asia, Middle East and North Africa, Latin America and the Caribbean as well as Europe and Central Asia regions.  Through these projects, OBA has demonstrated efficiency gains through competition in most sectors when competitive pressures have been applied in the selection of the OBA service provider.

GPOBA’s depth of experience, reach and results focus in project design, targeting poor consumers and applying these innovative financing mechanisms is the foundation of its expanding work as a Center of Expertise on output and results-based approaches. Knowledge exchanges, learning activities and publications provide lessons from projects in many regions and sectors. While OBA has been used primarily for increasing access to basic services, recent experience highlighted in this knowledge note on Kenya describes how sector reforms and innovative financing initiatives can also improve access to commercial finance in the water and sanitation sector.  

GPOBA is also examining the potential for OBA and other forms of RBF in untested and pioneering sectors. Most recent studies include urban transport, climate and affordable housing. GPOBA is also looking to expand its portfolio to other forms of innovative RBF schemes such as Social Impact Bonds (SIBs), which are a results-based financing mechanism that harness private capital to deliver social services for long term results. SIBs allow for financial returns to be tied to the social impact of services provided and by this interest the private sector in programs that are not wholly profit-centered but produce social externalities.

GPOBA also recognizes innovation through its annual Inn-OBA-tions Awards. The Award, launched in 2013 as part of GPOBA’s 10^th year Anniversary, recognized ten award-winning pilot projects which exemplified the RBF/OBA scheme by showcasing projects with potential for replication and scaling up. Since then a total of 18 projects have been recognized, including the 2016 Inn-OBA-tion award winner, the Nepal Micro-Hydro project. This project is helping Nepal to mitigate climate change and generating results-based financial revenues that are being reinvested to scale up micro-hydro plants and to maintain and rehabilitate existing ones to ensure sustainable operations. Previous awards from 2014 recognized RBF projects from the health, Energy and Water sectors in Bolivia, Kenya and Zimbabwe.  In 2015 projects from West Bank Solid Waste Management (SWM);  Uganda Grid Based OBA Facility: Energy for Rural Transformation II; and  Moldova Biomass Heating and Energy Conservation Project ; and  Indonesia Local Government and Decentralization were recognized.
 
Related Resources
Results-Based Financing (RBF)
GPOBA Publications
Lessons Learned
Knowledge Note: Kenya
Social Impact Bonds
Inn-OBA-tion Award winners 2013
Inn-OBA-tion Award Winners 2014
Inn-OBA-tion Award Winners 2015
 

Photo: GPRBA

 “There is no great force for change, for peace, for justice and democracy, for inclusive economic growth than a world of empowered women.” - Phumzile Mlambo-Ngcuka, Executive Director of UN Women

The United Nations’ Sustainable Development Goals (SDGs) address key development challenges and women’s empowerment is central to achieving these goals. While SDG Goal 5 is specifically dedicated to achieving gender equality and empowering all women and girls, and it is widely agreed in the international development community that gender equality is an essential part of economic development, gender equality is achieved when women and men, girls and boys, have equal rights, conditions, opportunities and power to shape their own lives and affect society. The Strategies of our donors and partners identify gender equality as smart development policy and business practice, and many of them have made it a cornerstone of their agendas.

Gender and women’s empowerment are a feature in several GPOBA projects, with specific targeting and consideration around access for women and girls. Below are some examples of GPOBA subsidy projects and support demonstrating efforts toward the aim of achieving gender equality:

Water: In many developing countries, retrieving water is a task performed by women. As a result, having access to drinking water and improved sanitation close to home allows women to participate in more productive activities. Our projects in Kenya, Indonesia, Morocco, Uganda and Vietnam have made positive impacts in rural communities and the lives of these women.

Sanitation: Lack of sanitation facilities and poor hygiene is a cause for the spread of disease, with women and children often suffering the most from the consequences. In response to the issue of safety, GPOBA’s most recently supported project in sanitation in Bangladesh takes into consideration the needs of female users in the design of the facilities, such as ensuring that the facilities are conveniently located, well lit, and have lockable doors (elements not commonly found in public toilets). GPOBA has also helped bring improved sanitation services to Kenya, Ghana, Senegal, Sri Lanka and other countries.

Energy: Improved lighting, especially electricity as a substitute for kerosene lamps helps to extend the hours in which women can engage in productive activity and have more time to dedicate to education and improve health conditions. Rural electrification projects we supported by in Ethiopia have enabled women to spend less time gathering wood fuels, freeing time for other productive activities. Other projects in Bangladesh, Kenya, Vanuatu, the Philippines, Mali, and Zambia contribute to improving the lives of women.

Health: Health projects specifically address gender-related risks, particularly maternal health and safe childbirth, which when targeted correctly significantly reduce maternal mortality, as well as the burden of disability related to pregnancy and delivery. Our maternal health project in Uganda, has resulted in 26,000 assisted deliveries with the full scale rollout of over 250 health facilities and will soon be expanding services to provide Post-Partum Family Planning (PPFP) services.

Many lessons have been learned in incorporating and designing sensitivities to gender in the projects supported by GPOBA. These lessons will continue to be integrated in our strategy and projects going forward so that we maximize the impact our projects and improving lives in poor communities. 
 

Expanding in­frastructure and improving basic services is universally recognized as an essential element of economic growth and poverty reduction. It is also recognized that private sector financing is needed to address the infrastructure financing gap as reflected in the Sustainable Development Goals (SDGs). The development community and Multilateral Developments Banks are now focused on the Billions to Trillions agenda to mobilize ‘billions’ in ODA financing and resources to attract, leverage, and mobilize ‘trillions’ in investments from other sources. By partnering with the private sector through Public-Private Partnerships (PPPs), in addition to private and commercial financing, governments can tap into the innovation, technology, and technical and com­mercial expertise of companies to deliver essential public goods and services. 

PPPs typically focus on building large infrastructure projects and Results-Based and Output-Based Financing (RBF/OBA) approaches can add value to PPP projects by focusing on access to basic services for the poor, who are often excluded because they cannot afford to pay the full cost of the connection. Several specific examples of PPP projects enhanced by GPOBA components are provided below and more examples can be found on the GPOBA website.

In the Philippines, an OBA component was embedded within an existing PPP concession in which the Manila Water Company (MWC), a private entity, assumed responsibility for the operation of the East Zone of Manila in an arrangement with the state-owned Metropolitan Waterworks and Sewerage System. The OBA subsidy helped to expand MWC’s service to low-income communities by funding water connection charges. Ultimately, the project helped to connect 28,563 poor households, benefitting 142,810 residents.

In West Bank and Gaza, GPOBA supported the first PPP project in the country through a subsidy to improve the sustainability of a privately managed Solid Waste Management (SWM) project. The subsidy provides partial support to offset the costs associated with proper disposal in the new sanitary landfill and improve municipal service performance. This project is designed to benefit about one-third of the population of the West Bank (approximately 800,000 people) and includes the sanitary landfill, as well as some small-scale recycling and composting.
 
In Kenya a micro-finance loan project is helping increasing access to clean and reliable water for rural communities, using a blend of commercial finance and an output-based subsidy. The project is helping small community-based private water providers access the finance they need to improve existing water systems and connect poor households to piped water supply.  This project shows that investing in community water projects can be viable for commercial banks. Following a successful initial pilot, the program is being expanded nationally and will target over 165,000 beneficiaries in 55 communities.

In Bangladesh, GPOBA supported the Rural Electrification and Renewable Energy Development (RERED) project to increase access to electricity for poor households in remote, rural areas.  The project, implemented by the Infrastructure Development Company Ltd. (IDCOL), provides loans to private sector companies to support infrastructure projects in Bangladesh. Through the use of subsidies, OBA encourages private sector interest and helps to build markets for products and services that private providers were not interested in due to potential risk of financial losses. To date, this project has helped install 3,214 Solar Home Systems and reached 16,070 beneficiaries.
 
In Liberia, as part of a World Bank-financed project, GPOBA provided a subsidy to partially offset capital investment costs needed to build transmission and distribution networks to reach 21 low-income neighborhoods in Monrovia.  The project was undertaken with Liberia Electricity Corporation (LEC), which is operated by an international private operator, Manitoba Hydro International. The project has helped to connect 16,739 poor households and 83,695 beneficiaries to the grid in those neighborhoods.
 
RBF and OBA, with a focus on social inclusiveness, can play an important role in PPPs. Through pro-poor targeting and emphasizing accountability in service delivery, these approaches can help to ensure that services and economic growth benefits provided by large scale PPP infrastructure reach poor and vulnerable populations.

Useful Resources
Output-Based Aid at Work in Public-Private Partnerships
Output-Based Aid for Solid Waste Management Nepal and the West Bank
Output-Based Aid in Bangladesh: Solar Home Systems for Rural Households
Scaling Up Blended Financing of Water and Sanitation Investments in Kenya
PPP Knowledge Lab
Public-Private-Partnership in Infrastructure Resource Center (PPPIRC)
From Billions to Trillions: MDB Contributions to Financing for Development
 
 

Some of the features of results-based approaches can help Output-Based-Aid (OBA) and Results-Based Financing (RBF) practitioners become more aware of behavior determinants to support behavior change and deliver results more effectively.  The World Bank’s World Development Report 2015: Mind, Society, and Behavior identifies behavior determinants and barriers important to the successful implementation of infrastructure projects – whether OBA/RBF or otherwise. Even though it is assumed that affordability, awareness of program, and access to service are enough incentives to change the behavior of customers to access services, all based on rational behavior, studies have shown that people often do not make decisions on the basis of rational analysis, but within a psychological, social, and cultural nexus.
 
The studies have identified that much of our thinking is automatic – that is, largely outside voluntary control, using only a small portion of the relevant and available information to form conclusions. Our decisions are shaped by the norms, ideas, and identities that characterize the social networks to which we belong. Finally, we operate on the basis of mental models – broad ideas about how the world works, which we often hold onto even when their consequences are constraining, destructive, or demonstrably false.  Poverty itself is a behavior determinant. Time pressure and financial stress put people under cognitive strain, which means that deliberate decision-making processes are not functioning optimally and people are relying, more than ever, on automatic thinking.
 
A number of features of OBA/RBF, such as the use of pro-poor targeting, the emphasis on accountability through the verification mechanism, and the focus on results, which themselves typically are behavioral in nature, can support behavior change. When designing projects, bringing an iterative process to bear on the challenges of behavior change can help guide project planners and implementing agencies. GPOBA conducted an online discussion on behavior change and whether RBF pushes the implementing partners and beneficiaries to discard irrational and automatic thinking, social norms and mental models. We would like to hear your perspectives on this topic and if you have any examples of biases that the RBF/OBA approach is better positioned to address. Please visit our discussion page here.

Photo:  Dominic Chavez/World Bank

Efficient urban transport systems are vital for economic development, connecting poor and underserved communities to jobs, education, and health services. With rapid urbanization and increasing numbers of urban poor living in informal settlements, a well-connected and affordable transport system can have a transformative effect, reducing poverty, boosting prosperity, and contributing to the achievement of the Sustainable Development Goals.  

Over the last decade there has been increased interest in public investment in urban mass transit, with implementation of urban rail and bus rapid-transit projects in cities around the world. However, there is little indication of the extent to which the poor are benefiting from these interventions due to the affordability of the service.

The complexity of urban transport systems makes it challenging to design and deliver one that is affordable to a range of users. As a result, the urban transport sector is usually subsidized to cover either infrastructure investment needs, operator costs, or user’s fees. Whatever subsidy option is used, careful consideration should be given to balancing the affordability of the service to the poor, the quality and quantity of service availability, and the financial sustainability for the government.

The Global Partnership on Output-Based Aid (GPOBA) has championed Output-Based Aid (OBA), a form of Results-Based Financing (RBF), as an innovative financing tool that can bridge the gap between what low-income households can afford and the cost of the service. Many of the short comings of the subsidy systems in urban transport can be addressed by designing or reforming them per OBA principles.  OBA uses pro-poor targeting, which aims to reduce the main access-related barriers that affect low-income populations disproportionally, such as affordability, supply, and physical access to service. Pro-poor targeting can be particularly beneficial in the transport sector where subsidies do not always translate into pro-poor impacts—particularly when they are paid directly to operators, resulting in more low- income customers being left out of the system.

When used in transport projects, OBA aims to improve access of low-income populations to economic opportunities and services. OBA financing could be used to upgrade regulated transport services; regulate and improve unregulated services; make transport more affordable for low-income populations; or improve transport infrastructure, which in turn improves the enabling environment for better performance and service delivery making the sector more effective. 

In 2017, GPOBA conducted an Urban Transport Study which analyzed how OBA approaches can help address the urban transport access challenge for low-income populations in sub-Saharan Africa and South Asia. Pilot OBA concepts were developed with recommendations on how to identify and prepare projects, as well as to evaluate options for an integrated public transport fare and subsidy policy to make transport more affordable.  OBA can be sustained beyond the life of a project through project replication, leveraging of additional financing, or the conversion of a ‘traditional’ subsidy scheme into one based on OBA principles.

Related Resources
Analyzing the Use of Output-Based Aid (OBA) in Urban Transport
Output-based Aid for Urban Transport
Webinar on The Application of Results-Based Financing for Urban Transport