The aim of the project is to increase the accountability of local governments in their use of Specific Purpose Grants, known as DAK, from the national budget.  These grants will give participating local governments in regions with limited fiscal capacity an incentive to invest in infrastructure for basic services such as roads, water, sanitation, and irrigation.

The DAK grants will work in a similar way to output-based subsidies, which reimburse service providers for independently verified, pre-agreed outputs.  In an OBA project the outputs typically include household connections to a service, such as potable water supply or electricity, and a period of verified use of the service.  The service provider is usually a private enterprise, but could also be a public utility or a nongovernmental organization.

An output-based aid approach is helping to provide access to safe drinking water for low-income households in Jakarta and Surabaya.

In the DAK project, 81 local governments will be eligible for grants, meaning they will be able to claim reimbursement for reported and verified physical outputs for infrastructure.  The State Finance and Development Supervisory Board (Badan Pengawasan Keuangan dan Pembangunan, BPKP) will be responsible for verifying project outputs before the local governments are reimbursed. In 2010 DAK allocation amounts will total about two percent of Indonesia’s national budget.

Both DAK grants and OBA subsidies help to bridge a financing gap that would otherwise be an obstacle to basic service delivery, either because the infrastructure could not be built or because low-income segments of the population could not afford the connection fees to gain access to the services.

A look at how output-based aid (OBA) is being used to help the urban poor access water services

• Until recent projects funded by the municipal council and the World Bank made clean water available and affordable (Ksh3 per 20 liters), Kibera’s population relied on water collected from the Nairobi dam.  The water from the dam is not clean and made the dwellers vulnerable to contracting cholera or typhoid; and   
•  Most dwellings in Kibera do not have toilet facilities, relying instead on latrines which are just holes in the ground and each one shared by up to 50 shacks.

• In Cameroon, only about a third of the national population has access to piped water. A GPOBA pilot with a grant of over US$5 million aims to deliver new piped water connections for about 40,000 poor households. The project is the first GPOBA project to use an affermage contract, a model which transfers the operation of a national utility to a private operator while investment remains the government’s responsibility.  

• In Indonesia, two projects with grants totaling about US$ 5 million aim to help low-income communities in Jakarta and Surabaya gain access to clean water. In Jakarta, unconnected households can pay as much as 15 percent of their household income on water. Often, the water that they do have access to is overpriced by informal providers or is collected from shallow wells and contaminated. In Surabaya, the pilot project aims to extend piped water access to over 77,000 people.

• Although Morocco is a middle-income country with good access to clean and affordable water for most of the population, there are some poor communities in peri-urban settlements that faced the “last mile” paradox. So, although the water infrastructure was there, the cost of connecting to the network presented a barrier to access for poor households. In partnership with the government and the operators of water utilities in Casablanca, Meknès, and Tangiers, a GPOBA grant of US$7 million is helping over 11,000 households connect to local water networks.

• In the Philippines, the Manila Water Supply pilot will help almost 100,000 people gain access to clean, potable water. So far, 45 projects have been completed and benefited 11,000 households. As well as enjoying the benefit of 24-hour access to clean water supply, the target households have also reported financial savings and a reduction in the incidence of water-borne diseases. Encouraged by the initial success of the Manila project, the Government of the Philippines is exploring the idea of a national OBA facility to help ensure access to water for people across the country.

•  In Uganda’s capital city, Kampala, water connections for the poor will help bring access for communities in targeted urban settlements up to almost 100 percent by the project’s end.

•  In Yemen, a GPOBA grant of US$5 million will help the poor in urban and peri-urban areas gain access to safe drinking water and sanitation services. The pilot project is also being used as a model to show that tapping into private sector expertise and encouraging competition in the water sector can both serve the poor and help to reduce infrastructure costs.

Imagine cooking in a kitchen producing so much smoke, it causes chronic indoor air pollution. Too often this happens in developing countries like Indonesia, where 40 percent of the country’s 60 million households still rely on traditional biomass fuels for cooking.  The simple act of preparing a meal can harm the health of cooks, often mothers, as well as their families, especially small children who routinely inhale toxic smoke from burning wood. In fact, household air pollution has been linked to nearly 165,000 premature deaths each year in Indonesia. 

There is, however, a cleaner and more affordable solution for these families.

On June 15, 2015, GPOBA co-sponsored a learning event broadcast online on “Understanding User Needs in Developing Clean Stove Technologies.” Its goal was to help devise a clean, innovative solution to the problem of household air pollution by promoting the use of affordable clean stoves through results-based financing (RBF). Several renewable energy and social development experts, as well as World Bank staff, discussed topics such as analyzing household behaviors, exploring socio-cultural trends related to RBF, creating a monitoring system to verify results, and raising awareness of RBF projects.

One such project is the Indonesia Clean Stoves Initiative, the first to use a systematic RBF approach for promoting clean cooking in Indonesia.  In December 2014 it was recognized at the GPOBA “Inn-OBA-tions” awards. The project’s RBF framework was supported by two recipient-executed trust funds with the Government of Indonesia and PT Bank Rakyat Indonesia Persero Tbk, one of the largest state-owned commercial banks to manage the RBF fund.

Co-sponsoring the learning event with GPOBA were the Global Practice for Social, Urban, Rural & Resilience (GPSURR), Behavior Change Community of Practice, and the Energy Access Community of Practice.

This event highlights the importance of market-based clean cooking solutions through RBF, as well as incorporating social dimensions and local cooking practices to RBF projects.  Ultimately, these strategies give hope for raising cook stove standards as well as improving the health of Indonesia’s population.