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Some 768 million people worldwide don’t have access to safe, healthy water sources, and 2.4 billion people live without access to safe sanitation, such as an on-site toilet or connection to a sewerage network -- around 900 million must defecate in the open.[1]
The situation is particularly difficult in Sub-Saharan Africa and parts of Asia. Approximately 70% of people in Sub-Saharan Africa and 53% of people in South Asia still lack access to basic sanitation.
Installing safe toilets is especially critical for the health and well-being of children. Ending open defecation can save children’s lives by reducing disease transmission, stunting, and malnutrition. Girls are especially affected. Without adequate sanitation facilities, they are more likely to drop out of school or are vulnerable to assaults while seeking privacy.
Lack of sanitation is also detrimental to economic growth. Poor sanitation costs some countries billions of dollars, amounting to the equivalent of 6.7% of GDP in Bangladesh (2007), 6.4% of GDP in India (2006) and 7.2% of GDP in Cambodia (2005) annually. The costs stem from premature deaths, healthcare and pollution, as well as lost time and productivity seeking treatment and finding access to sanitation facilities.[2]
For more than 15 years, the Global Partnership on Output-based Aid (GPOBA) has used an approach called output-based aid (OBA) to tackle this development challenge. This form of results-based financing (RBF) provides subsidies to public and private service providers based on verification of pre-agreed project targets defined during project design, holding them accountable to deliver results.
In Senegal, GPOBA provided a US$5.8 million results-based grant to deliver safe and affordable sanitation services to 103,000 people through the installation of 11,495 facilities. The Office National de l’Assainissement du Sénégal (ONAS) contracted out the service delivery to the Agence d’Exécution des Travaux d’Intérêt Public contre le sous-emploi (AGETIP, or the National Agency for Public Works and Underemployment), which pre-financed the facilities.
Local firms installed the facilities, consulting firms provided technical studies and supervision, and neighborhood community-based organizations (CBOs) carried out social intermediation, hygiene promotion, monitoring, and collected user contributions. Additionally, municipalities then engaged in information and communication activities. Once the facilities were properly installed, GPOBA disbursed the final round of funds.
In Bangladesh and Ghana, two recently completed sanitation projects have also demonstrated successful results.
Bangladesh has almost ended the practice of open defecation—now down to one percent. This has helped reduce health risks-- especially for children under five -- and has provided safety, dignity and security to women and adolescent girls.
In rural Bangladesh, GPOBA worked with local microfinance institutions to help transition households to the next generation of toilets—hygienic latrines which fully confine feces and harmful pathogens from both the environment and the user. The project helped 170,000 low-income, rural households, representing a total of 850,000 people, access microloans to purchase affordable hygienic latrines from local construction firms. GPOBA jumpstarted the effort with a US$3 million grant, which mobilized an additional US$22 million from microfinance partners.
GPOBA’s contribution was designed to stimulate the market for sanitation in rural Bangladesh by enhancing the attractiveness of borrowing by increasing access to and affordability of higher-quality latrine options for poor households, as well as reducing the risk of lending for the microfinance partners involved.
In contrast, sanitation has not been prioritized in Ghana, where economic growth has led to rapid urbanization. Only 23% of households nationwide have a toilet or improved latrine; in the greater Accra area, only one-third have access to a flush toilet. This lack of sanitation has led to outbreaks of cholera and the second-highest open defecation rate among African countries.
GPOBA teamed up with the government of Ghana to supply low-income communities with low-cost toilets. A US$4.85 million grant from GPOBA supported product development to meet the needs of households, engaged with private service providers to improve their business model, mobilized financial institutions to commercialize lending for toilets on a larger scale, and subsidized the installation of 7,685 sanitation facilities in the low-income communities of Accra.
In conjunction with Sri Lanka’s National Water Supply and Drainage Board, GPOBA is currently providing subsidies for both improved sewerage connections and on-site latrine facilities to connect low-income households in the Greater Colombo area. Thanks to RBF, a household near an existing sewer network can be connected at a cost 20-50% less compared to before OBA, and has already benefited 9,000 households in Colombo and surrounding area. For those living further away where network extension costs would be prohibitive, the project has implemented on-site sanitation systems (septic tanks and decentralized wastewater treatment systems) along with improved management that includes fecal desludging and disposal/reuse/treatment. Therefore, lower-income residents not living near an existing sewer network can still access improved sanitation facilities, These on-site options, have benefited 565 households and cost 25% less than conventional sewer connections. Whether connecting households or providing safe and improved latrines, these solutions have been designed to provide all recipients with equal levels of quality.
As the cases of Senegal, Bangladesh, Ghana and Sri Lanka demonstrate, OBA can be an effective approach for helping to fill the sanitation financing gap.
[1] “Sanitation.” World Bank, www.worldbank.org/en/topic/sanitation.
[2] Ibid.
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“Evidence shows that results-based financing has a significant impact – saving lives and expanding access to quality, essential health services for the poorest women and children in developing countries”. Jim Yong Kim, World Bank Group President
Using our guide for effective results-based financing approaches
Results Based Financing (RBF) can be broadly defined as a financing arrangement in which payments are contingent upon the achievement of pre-defined and verified results. A variety of RBF instruments exist to address a range of challenges, from improving access to basic services like water and energy for low-income communities, to decreasing unemployment and improving education outcomes.
The use of RBF approaches within the international development finance community is growing rapidly. In the last decade alone, at least $25 billion of development spending has been tied to results, an increase from just a few billion the decade before.
Despite the increase in the use of RBF approaches, the practice in certain thematic areas remains emergent and insufficiently documented. With an assortment of RBF instruments available, it is important to understand how the principles and requirements of the different approaches vary in their application.
Commissioned by GPOBA and written by Instiglio, the report serves as a guide and diagnostic tool for practitioners interested in using RBF to meet their development objectives, helping funders to understand where and how they can best use different RBF instruments to deliver impact. It draws on lessons and examples of RBF projects in varied contexts and sectors implemented around the world.
The report specifically looks at questions that are critical to building a mature practice of RBF, including:
- In what contexts does RBF work best and which instruments are most appropriate?
- What does it take to enable the use of RBF?
- How should RBF be designed to maximize impact?
- How can RBF approaches be strengthened and scaled over time?
Read more here: Guidebook for Effective Results-Based Financing Approaches
Access the RBF Database noted in the Guidebook.
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GPOBA was initially founded to implement output-based aid, targeting low-income households and communities. While OBA has proven to be a successful type of development financing over its 15 years of operation, GPOBA has discovered that more complex and changing environments require more flexible financing solutions to meet impact objectives.
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The report covers highlights of this fiscal year of 2018 (July 1, 2017 to June 30, 2018), in which GPOBA commemorates its 15th anniversary, along with a review of the progress towards achieving the partnership's goals of designing and implementing OBA pilot projects, building a Center of Expertise, piloting other results-based approaches, and communicating with the development community.
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The objective of this TA was to assess the potential of social and development impact bonds (IBs) in delivering social and environmental outcomes in order to inform the GROBA future involvement in this space. This would be achieved through research of existing IB schemes in developing countries, gathering and disseminating knowledge, and partnership building activities targeting WBG staff, governments, donors, and development partners. The TA will support the implementation of the GROBA strategic direction approved by the donors.
Two analytical papers been prepared under this activity, and the budget was increased from the original 175,0000. Approaching Investment Returns and Pricing of Outcomes paper discusses pricing and risk sharing. For pricing, it describes methods that rely on prior information about cost such as “market determined,” “historical cost of outcome” and “cost plus” as well as methods that assess future benefits of the achieved results such as “net savings” and “quantified public value.” For risks, it acknowledges the role of philanthropic investors who, by accepting higher risk/lower return, allow the capital structuring that crowds in the conventional investors. Impact Bonds and Maximizing Finance for Development paper discusses the impact bond potential as an RBF instrument to particularly foster innovation and entrepreneurship, resolving challenges with public service provision. In turn, market discipline and competition can encourage a larger scale. The paper illustrates this using the impact bond cases in West Bank and Gaza targeting youth employment and in Cameroon targeting mother-baby healthcare. These papers will be disseminated in the next reporting period as a background for the inaugural RBF Forum.
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Project activities are designed to update, expand, and disseminate knowledge on results-based financing (RBF) approaches and applications, which is relevant in fulfilling GPOBA's mandate as a Center of Expertise of RBF. These activities will be supported by GPOBA staff together with a specialist consultant(s), and will include: i) updating and expanding the existing RBF knowledge database of key RBF instruments and stakeholders for a more complete mapping of the RBF universe; and ii) developing an RBF typology/diagnostic tool, which will involve a comprehensive definition of key RBF instruments and identify in which sectors/circumstances a particular RBF instrument and/or combination of instruments works best. The activity includes funding for the development of dissemination materials and events as necessary to promote broader awareness of RBF methods, as well as to support clients, donors, and other development partners to identify and adopt appropriate RBF approaches for their programs.
The activity prepared "A Guide for Effective Results-Based Financing Strategies" and a database of RBF projects (accessible at the GPRBA website).
The guide introduced a diagnostic tool that helps RBF practitioners answer questions such as what conditions need to be in place to use RBF, what RBF instrument to choose in a given context, what core RBF design features would maximize impact, and how the RBF strategy should be refined over time to improve impact.
The deliverables were to be used in the course of preparation of the RBF Forum that was planned for the next reporting period.
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The tasks under this activity will include the following:
Component 1: Knowledge sharing and learning - This component will foster collaboration with PforR team on generating and disseminating knowledge, particularly on pro-poor targeting methodologies, DLIs, monitoring and verification protocols, as well as lessons learned in these areas of expertise from specific countries and tested sectors.
Component 2: Advisory and operational support - This component will seek to identify advisory and analytical activities in support of PforR.
Finally, this component will foster partnership with OPCS aimed at mainstreaming RBF in CPSs with the aim of increasing aid effectiveness.
The activity has been completed and its results have been disseminated. GPRBA engaged with the Bank's PforR team within the Operational Support Vice-Presidency (OPCS) through knowledge exchange, learning activities and project support. This exchange was mutually beneficial, allowing the GPRBA team to deepen operational understanding of PforR while sharing own RBF/OBA expertise to strengthen the instrument. In this context the TA activities included knowledge sharing - GPRBA partnered with OPCS in support to analytics on disbursement-linked indicators (DLI) required for the portfolio review – specifically: (i) deep dives into selected country-level PforR portfolios; (ii) deep dives into selected sectoral-level PforR portfolios; (iii) an assessment of DLI verification arrangements across the PforR portfolio; (iv) insights from restructuring and additional financing (AF)and (v) a mid-term roundtable to take stock of interim findings of the PforR portfolio review at large. development of GPRBA fundraising action plan with a focus on a broad range of RBF instruments. knowledge sharing activities by RBF community of practice. an upstream operational support to PforR.
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The activity was to deliver the following:.
1. Portfolio review: conduct a desk review of GPOBA portfolio and interviews of project teams to determine how GPOBA projects and its current practices contribute to reducing gender gaps. The analysis also included examples of RBF projects outside GPOBA identified through reviewing project documents sections mandated by the WBG Gender Strategy.
2. Gender analysis: assess the impact of GPOBA projects as well as other RBF projects on reducing gender gaps and promoting gender equality.
3. Gender-related recommendations: the report suggested designs to ensure an effective narrowing of the gender gap and tracking of gender indicators in line with the World Bank Group Gender Strategy.
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Objective of this activity (a) to develop an IVA knowledge product that enables cross-learning of verification practices across different RBF instruments including OBA, PforR and other RBF methods; and, (b) to disseminate the knowledge product to RBF practitioners.
The activity has been completed.
The budget was increased from the original 250,000. It delivered analysis of verification protocols and disbursement-linked indicators, providing input to the updated GPRBA Operations Principles
Also, it systematized the database of Independent Verification Agents (IVAs) and ToR, as GPRBA is most often contacted by RBF practitioners with request to share technical knowledge on physical verification of deliverables. The results of the analysis was to be shared at the RBF Forum in the following reporting period.
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This activity aims to document and disseminate relevant examples of results-based financing (RBF), including output-based aid (OBA), that can be used in to leverage financing and scale up projects that provide access to basic services for poor and marginalized populations. GPOBA is working to expand the understanding and use of RBF/OBA as one component in the overarching use of development finance. As recognized by the Addis agenda and resulting agreements and positions widely acknowledged in development finance, leveraging finance especially from the private sector and in local and regional markets remains an underutilized yet critical component of large scale efforts to increase access to basic services and promoting economic development. The activity will provide specific examples to be disseminated, discussed and used by clients, donors, development practitioners and others in the use of RBF approaches.
GPRBA produced four case studies analyzing results-based blended finance initiatives in energy and sanitation in Bangladesh and Ghana, as well as a two-page brief, serving as a resource for clients and development partners. GPRBA undertook an evaluation of the ongoing OBA Sanitation Microfinance Program in Bangladesh, assessing the impact of the OBA subsidy on sanitation market development in rural Bangladesh, and supported consultant fees for the ICR. This activity also funded the ICR for the Nairobi sanitation project. The activity supported four country-focused knowledge exchanges to further the blended finance agenda in Accra, Dhaka, Paris, and Zimbabwe. Finally, the activity supported project pipeline development and supervision/knowledge dissemination of ongoing blended finance projects.