Development practitioners are acutely aware of the need to find more effective ways to improve basic living conditions for the poor, as traditional approaches of delivering public support have not always led to the results intended. Results-based financing instruments are now recognized as one important piece of the aid delivery puzzle. Output-Based Aid: Lessons Learned and Best Practices reviews the experience with output-based aid, a results-based instrument that is being used to deliver basic infrastructure and social services to the poor, often through public-private partnerships.

1. Output-Based Aid:
Lessons Learned and Best Practices
Yogita Mumssen, Senior Infrastructure Economist
Finance, Economics and Urban Department
The World Bank 1

2. Outline
Output-Based Aid (OBA)
• What is OBA
• How Does OBA Fit With Other RBF Approaches
Application Of OBA
• Snapshot of OBA Projects
• Lessons Learned: Benefits and Challenges
• Way Forward
2

3. What is Output-Based Aid?
• Performance based - shifts
risk to service provider
• Bridges gap between cost of
service and beneficiary’s
ability to pay
• Pro poor - aims to provide
basic services to low-
income households
Mongolia: Access to Telephony
and Internet Services
3

4. Output-based vs. Input-based
Traditional Government purchases specific “inputs”, Output-Based Approach
Approach builds assets and contracts 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 the (Services for End Users)
delivery of outputs.
4

5. OBA in the Context of Development Assistance
OBA “Outputs”
Independently verified
Inputs
(Intermediate) Development
Outputs
Design Build, Outcomes Impacts
Operate
OBA “Outputs” include
•Water connection made & service provided
•Solar Home System installed & maintained
•Medical treatment provided
5

6. OBA Core Concepts
• Targeting
• Accountability
• Innovation and efficiency
• Using incentives to serve
the poor
• Output verification &
monitoring
• Sustainability
Bangladesh: Electrification for
Poor Rural Households
6

7. How Does OBA Fit with Other RBF Approaches?
Performance
bonuses OBA
COD
Results-based
financing PBC
CCT
7

8. Snapshot of OBA Projects
• 2002: 32 projects identified for $1.5 billion WBG funding
• 2009: 131 projects identified for $3.5 billion WBG funding
(excluding $2.8billion government financing)
– 66 projects identified outside the WBG
– 51 Global Partnership on Output-Based Aid (GPOBA) projects, mainly in water, health
and energy, of US$153 m value (committed)
• Evidence base is increasing (34 projects closed, 78 under
implementation)
• OBA is used in both IDA and IBRD countries
IDA IBRD BLEND
By number of projects 58% 29% 13%
By funding amount 42% 53% 5%
8

9. OBA Portfolio
WBG OBA Portfolio by Region WBG OBA Portfolio by Sector
(Total = US$ 3.5 billion) (Total = US$ 3.5 billion)
SAR Education
MENA 9% Water & 5%
1% AFR Sanitation Energy
5% 6%
33%
Health
24%
EAP
3%
Transport
LCR Telecom
ECA 58%
52% 2%
2%
9

10. Lessons Learned: Benefits of OBA Approach
• Explicit identification of outputs
promotes targeting
• OBA shifts performance risk to
providers
• Achieve efficiency gains through
competitive processes
• So far $2 of private finance
leveraged for $1 of subsidy; varies
by sector and region
• “Internalizing monitoring” by
paying on outputs
Uganda: Access to Health Services
• Encourages careful subsidy design for Poor Households
which should contribute to a
more sustainable intervention
10

11. Lessons Learned: Challenges of OBA Approach
• Access to finance determines how
“output-based”
• Capacity to implement and
monitor can be an issue
• Demand risk requires more “soft”
up-front investment by service
provider
• OBA one component of a wider
set of policy instruments
• Requires a supportive enabling
environment for sustainability
• Supporting internal environment
(e.g. systems allow for output- Morocco: Connection to Water and
based disbursement) Sanitation Services for Low Income
• Development partner/donor co- Households in Urban Centers
ordination
11

12. Comparison of Performance:
OBA vs. Traditional Projects
80%
70%
60%
50%
40%
30%
20%
OBA
10%
Non-OBA
0%
Overrun
Over-achieved
Achieved
Under run
Unclear
Not (fully) achieved
In Budget
Results Budget
12

13. Moving Forward
• Where it makes sense, scale-up OBA
• To do this effectively, need to:
a) address challenges, such as access to finance, capacity for
implementation and verification
b) integrate results-based financing within Bank operations, e.g.
proposed Results-Based Investment Lending Instrument
• Share lessons across RBF initiatives and work together (e.g. CCT
and OBA), and also help inform new RBF initiatives (e.g. Advanced
Market Commitment for Energy)
• GPOBA to fund technical assistance for new initiatives and further
analysis and evaluation; will provide limited subsidy support for
new sub-sectors (e.g. solid waste, irrigation, sanitation)
• Continue monitoring existing portfolio and sharing lessons learned,
gathering results from impact evaluations currently underway
13

14. Thank You
• To order the book:
http://www.worldbank.org/ecommerce/
• For more information about OBA:
http://www.gpoba.org/gpoba/what-is-oba
Uganda: Access to Sustainable Water Services
for the Poor in Selected Small Towns 14

15. Targeting
80%
70%
60%
50%
40%
30%
20%
10%
0%
Geographic Targeting Means Testing Self Selection Targeting No Targeting Identified

16. OBA One-off Subsidy Portfolio by Disbursement
Trigger
Advance
10%
Service Delivery
23%
Output Delivery
67%

17. Efficiency Gains
Selection of Service Providers Use of Competitive Bidding by
Sector
Other Water & Energy
17% Sanitation 11%
14% Health
7%
Multiple
service
providers
13%
Bidding
47%
Transport
34%
Incumbent Telecom
provider 34%
23%