In 1997, when Dr. Fouzel Kabir Khan became the CEO of Bangladesh’s newly inaugurated Infrastructure Development Company Limited (IDCOL), he wasn’t at all sure the new venture would work out—particularly after he heard that his counterpart in Pakistan was now in jail. 
 
“That was comforting,” Dr. Khan joked while recounting his experiences with members of the Global Partnership on Output-Based Aid (GPOBA).  Dr. Khan, who after working at IDCOL became the Secretary of Power Division for the Ministry of Power and Energy, Government of Bangladesh, now works as a private consultant.
 

During his presentation, Dr. Khan described how in the face of low expectations and daunting odds, he and his colleagues at IDCOL developed their organization and with grants from development partners, including GPOBA, created a solar home system project that brought new access to clean energy in Bangladesh.  Today an estimated 3 million solar home systems have been installed throughout the country, and the project has been acclaimed as a successful model for other developing countries.
 
“We had to create an island,” said Dr. Khan in describing the beginnings of IDCOL.  “Bangladesh in those days had serious issues of transparency and corruption.” 
 
To avoid these problems, Dr. Khan and his colleagues used a three-prong strategy in staffing their organization:
 
1.     They sought out new talent for their employees.  “We did not recruit anyone with experience,” said Dr. Khan.  “With experience comes baggage.  You’re experienced not only in work but also in corruption.”
2.     They outsourced the vetting process and used codes so that the process remained anonymous.
3.     When new hires were brought on, they signed contracts with an explicit zero tolerance for corruption, and their salaries were structured in such a way as to create disincentives for corruption.
 
Dr. Khan went on to describe how IDCOL became involved in solar home systems, which at first seemed a counter-intuitive move for an organization set up for large infrastructure projects. 
 
Another challenge was that Dr. Khan, an economist, and his colleagues, who had been hired because they had no experience, lacked concrete knowledge of microfinance or how to run small-scale projects targeted to individual households. 
 
Finally, in 2001, solar energy seemed to be for, as Dr. Khan memorably put it, “yuppie generation alternative lifestyle” clients, rather than economically disadvantaged people in rural areas.  And the fact that in those days solar energy was relatively expensive only seemed to confirm that general impression.
 
“When the Bank approached us, I didn’t know much about it and was not very impressed,” he said.  All that changed, however, when Dr. Khan donated a solar home system to the mosque in his ancestral home village, a remote island in the south of Bangladesh.  A few weeks later, he received a postcard from the mosque saying that the system was a great help.  “Then I thought maybe it could have some benefit,” he said.  “So let’s talk.”
 
Initially, IDCOL’s skeptical board approved a pilot project of 500 solar home systems.  After the success of that pilot, the program expanded.  “Our target was to achieve 50,000 solar home systems by 2008,” said Dr. Khan, “but it was done in two years time from 2003 to 2005, 3 years ahead and 2 million dollars below budget.”
 
To protect the program from the influence of vested interests and the possibility of corruption, IDCOL set up several independent committees with members of the public and private sector to oversee training and operations.  And to make the solar home systems affordable, they were subsidized with grants and credits.
 
Dr. Khan vividly described many of the initial difficulties his team faced.  Few people in rural villages knew what solar lighting was.  “They thought it was magic or voodoo,” he quipped.  So IDCOL mounted a massive advertising campaign, using handbills, billboards, TV spots, and even dramas featuring popular actors.  They also trained individual household members in how to use and maintain their solar home systems.  Interestingly, Dr. Khan said that about 80% of their clientele were women.  
 
“The men are out in the field working,” he explained.  “They are not interested in filling water in a recycled battery or cleaning the solar panel.  So women have a really, really big role.”
 
Another issue was the chance of misappropriation, that a client might claim an installation subsidy without actually putting in the solar home system.  To head off that possibility, Dr. Khan’s team would travel to rural areas to inspect the systems as well as solicit feedback on how they were working.  Initially that work was very difficult since there were only a few systems and they were spread out over a large area. 
 
Today, however, solar home systems are widespread in Bangladesh, and thanks to developments in the green energy sector, they have become an affordable option for consumers. 
 
Dr. Khan noted that one of the keys to the project’s success was an attitude of “healthy suspicion,” in other words, constant questioning to make sure that operations were running smoothly and effectively.  As Dr. Khan said:  “Suspicion with a common goal is actually a good thing.”

Still Image from World Bank video "Bangladesh: Women Empowered by Solar Energy"

The Sustainable Development Goal on Climate Action identifies urgent measures to combat the effects and impact of climate change. The United Nations Framework Convention on Climate Change (UNFCCC) has set specific goals and targets that stimulate action in areas of critical importance to combat human-induced climate change and its impacts. The Conference of the Parties CoP22 which took place in Marrakech, Morocco focused on making the voices of the most vulnerable countries to climate change heard, in particular African countries and island states where Climate Change poses the greatest danger to the world's poorest.

Results-based financing (RBF) allows funds to be dispersed upon achievement of predefined results. Climate change mitigation under the Paris Agreement requires countries to set quantified targets defined within their Nationally Determined Contributions (NDCs) as part of their input to address climate change. Therefore, results-based climate finance approaches provide one tool as a means to successfully mobilizing private investment, and helping to create new markets relevant for low-carbon and climate resilient economies. As part of the RBF framework, GPOBA uses the Output-Based Aid (OBA) results mechanism to improve the delivery of basic services to the poor in developing countries. 

GPOBA work has contributed to achieving the climate change agenda through subsidy funding using OBA approaches primarily through renewable and energy efficiency projects in low-income areas of developing countries. As part of its strategy to become a center of expertise in RBF approaches, GPOBA has launched a new initiative to showcase opportunities in applying results-based and climate-smart financing approaches, focusing on cities and disaster risk management. In collaboration with the World Bank Climate Change group, GPOBA is mapping the whole range of Results Climate Based Financing (RBCF) approaches.  The outcome of this analytical work will present a new platform for engagement in the RBF community of practice.

Over the last 13 years GPOBA has supported clean energy projects using technologies such as natural gas, solar home systems, pico-photo volatic and compact fluorescent lamps, and off-grid electricity systems to provide access to energy for low-income households. These projects in Armenia, Bangladesh, Bolivia, Colombia, Ethiopia, Ghana, Nepal, and Philippines have achieved demonstrable results (see infographic below).. 

Several other organizations such as the Carbon Initiative for Development Ci-Dev are using results-based payments as a vehicle for financing energy access projects. The Pilot Auction Facility for Methane and Climate Change Mitigation uses results-based payment mechanism to set a floor price for future carbon credits in the form of a tradeable output option, which is to be competitively allocated via auctions.

A noteworthy project funded and implemented by the World Bank Group is the Moldova Biomass Heating and Energy Conservation Project. This project helped install 317 new and more efficient boilers in public buildings across Moldova, including schools, hospitals and community centers, contributing to energy savings, lowering greenhouse gas emissions, and creating better living conditions for about 40,000 people. The project is the first in the country to earn certified carbon credits, which are sold to the World Bank’s Community Development Carbon Fund (CDCF) to earn revenue which helps municipalities pay for investment in energy-efficient measures. So far, the project has reduced green-house gas emissions by 89,500 tons of carbon dioxide, equivalent to taking about 19,000 modern vehicles off the roads for a year.

The World Bank’s Climate Change Action Plan highlights the need for leveraging partnerships between the donor community, development banks, NGOs, private sector and other stakeholders to help developing countries accelerate efforts to tackle climate change and deliver on their national climate plans. Results-Based Financing mechanisms, which put funding behind partnerships and innovative market-based Instruments such as GPOBA, the Carbon Initiative for Development and the Pilot Auction Facility are making tremendous contributions to the climate action agenda.

(map below has been updated since this article was published; click map for full-resolution version)

DHAKA, January 10, 2017
 – Over 170,000 low-income households in rural Bangladesh will have access to hygienic sanitation under the Output-Based Aid (OBA) Sanitation Microfinance Program. The World Bank, in partnership with the Palli Karma-Sahayak Foundation (PKSF), is supporting this program with a $3 million grant from the Global Partnership on Output-Based Aid (GPOBA), in line with the government’s initiative to enable households to shift from basic to hygienic quality sanitation services.

“Bangladesh has made remarkable progress in almost ending the practice of open defecation in rural areas, which is now down to 1 percent. This has helped reduce health risk, especially for children under five and provided safety, dignity and security to women and adolescent girls. Improvements in quality of drinking water supply and environment are noticeable with improvements in sanitation", said Rajashree Paralkar, Acting Country Director, World Bank Bangladesh. “The OBA Sanitation Microfinance Program for rural communities will complement our ongoing work towards meeting the SDG goals in improved sanitation, and help poor rural families gain access to affordable hygienic sanitation facilities.” 

The OBA grant supports access to hygienic sanitation by leveraging approximately $22 million in household loan finance from participating microfinance institutions (MFIs), for a total project cost of $25 million. Participating MFIs include the Association for Social Advancement (ASA), as well as 20 additional partner organizations of PKSF. This combination of microfinance and output-based subsidies will make affordable loans available to low-income households for the purchase of quality hygienic latrines from local construction firms -- thus reducing the total purchase price for families unable to pay the entire cost up front.

 “GPOBA is proud to partner with these Bangladesh microfinance institutions in supporting a results-based approach for healthier, safer, and affordable sanitation services to low-income rural households,” said Catherine Commander O’Farrell, Head of GPOBA. “This approach has had a major impact in the renewable energy sector in Bangladesh, and we look forward to seeing results-based approaches and lessons applied across other sectors as we work with development partners and communities to increase access to basic services for the poor.”

The project builds upon and will be closely coordinated with an ongoing World Bank sanitation marketing initiative to encourage private sector involvement in rural sanitation. The sanitation marketing initiative, which began in 2009, has since been scaled up and supports demand creation and market promotion for hygienic sanitation, including handwashing promotion and behavior change activities. Furthermore, it supports latrine product development, taking into account female preferences and gender-related issues which may affect access, builds the capacity of local sanitation construction firms, and engages community leaders and local government for project advocacy.

Building on previous experience and in collaboration with its partners, the OBA Sanitation Microfinance Program aims to make clean, safe sanitation affordable and accessible to poor households, and ultimately scale up the adoption of sanitation microfinance in Bangladesh.

(see related blogpost by the project team leader: "In Bangladesh, changing behavoirs for better health")