This document discusses results-based financing (RBF) approaches for scaling up sanitation and hygiene. It describes RBF instruments that can incentivize 1) policy makers, 2) service providers, and 3) households. Examples of each type are provided, such as India's Nirmal Gram Puraskar program for local governments and Senegal's output-based aid program for sanitation operators. The document stresses that RBF designs must carefully avoid perverse incentives and be evaluated against traditional financing. It outlines key steps to consider in the RBF design process.

1. EHSD/UNICEF/CONIWAS
Meeting
16 – 18 January, 2012
Scaling Up Sanitation and
Hygiene through Results
Based Financing

2. Results Based Financing -Background
 With RBF, funding is provided if pre-specified results
have been achieved.
 Premise-
 Traditional Financing has not been sufficient in
advancing sanitation goals – hardware subsidies have
resulted in “wasted investments”. Efficiency of software
spending yet to be adequately tracked.
 Funding based on an input basis means that there are
limited incentives to reduce the cost of providing
services
 Assumption- payments for performance can foster
improved and more cost-efficient delivery and pro-
poor targeting

3. Results Based Financing –Macro Level
Instruments
 RBF refers to a broad family of financial
instruments
 Macro-Level – RBF influences policy makers to
prioritize sanitation sector investments through
an incentive scheme
 e.g. CASH on Delivery for mutually agreed
outcomes (MDBS , FOAT ),
 local level rewards to communities or local
governments through performance based inter-
fiscal transfers

4. COD for Sanitation – Nirmal
Gram Puraskar in India
 Central Government provides one off
payment to local government based on a
set of criteria
 100% Sanitation coverage
 LGA completely ODF
 Award of US 1,250- 12, 500 depending on
population for improving environmental
sanitation
 Key Challenge: Weakness in performance
verification system

5. COD for Sanitation
 Define a critical indicator that provides an
incentive for government (local/ central )
to invest in a sustainable and measurable
manner in sanitation
 Develop simple performance measures
that do not generate perverse incentives

6. Results Based Financing –Supply Side
Instruments
 Supply Side – RBF Instruments target suppliers to
provide them with an incentive to provide services
to the poor
 Output based Aid to small scale providers. OBA
ties the disbursement of funds to clearly specified
results that directly support improved access to
basic services
 Full amount of the funds is paid to the service
provider only when results have been achieved
and verified by a third party.
 Subsidies are provided to encourage provision of
basic services to the poor in areas that are not
commercially attractive
 Can we consider OBA for latrine enterprises?

7. OBA in Senegal for Onsite
Sanitation at Household Level
 Objective was to create incentives for
“sanitation operators” to emerge,
contractors in charge of building latrines
as well as ensuring continuous operation
and maintenance e.g. attend to pit
emptying , user education etc

8. Results Based Financing –Supply Side
Instruments
 Supply Side – RBF Instruments target suppliers to provide
them with an incentive to provide services to the poor
 Advanced Market Commitments for research and innovations
also targets service providers just as OBAS but used where new
products and innovation are required
 Can be applied to software in sanitation e.g . achieving
sustainable ODF villages
 - ODF
 ODF plus
 ODF School
 ODF *****.
A guaranteed market is provided, eg. Successful firms get a new
allocation of communities to move from stage 1 to stage 2 or are
given the entire area council or district to manage

9. What is Results Based Financing (RBF)?
 Demand Side- RBF incentives for
households to change their behaviour
through instruments such as:
 Conditional Cash Transfers to households
 Targeted subsidies
 Government transfers funds to persons who
meet certain criteria and have adopted
certain behaviours e.g. School enrolment,
vaccination etc.

10. CCT- GROW-UP WITH A TOILET
PLAN IN CAMBODIA
 Support to poor households with children under 5
years
 Targets poor mothers on the birth of their first child
– U-5 are a risk group for diarrhoea
 Assistance provided to mother to improve
sanitation over a period of 5 years
 Year 0- $15 voucher for construction
 Years 1-5 - $10 a year based on ff. criteria
 Toilet usage (verified)
 Village toilet coverage(verified)
 Completion of hygiene course
 Presence of handwashing facility

11. Designing RBF Instruments
 To note:- A number of challenges have
been identified in all RBF instruments and
most analysts conclude that great care
must be taken in their design to achieve
higher performance than through
traditional financing and avoid
introducing perverse incentives

12. Steps in Design Process
 Define objectives and evaluate
applicability of RBF i.e. identify market
failures that need to be corrected e.g.
Few ODF villages, limited scale up of CLTS,
few improved latrines, un-sustained
latrines etc
 Identify which entity needs to be
incentivised to achieve objectives
(Government, Service providers,
Households etc)

13. Steps in Design Process
 Evaluate how much risk can be transferred to
entity being incentivized
 Define the payment trigger – input, output or
outcome
 Develop the performance verification
system/mechanism- payment trigger must be
verifiable by a third (independent) party- SNV
in Kenya
 Define the payment amount and payment
schedules
 Define the fund transfer mechanism

14. Final Word
 RBF instruments have the potential to
improved the sanitation sector’s focus on
results and performance verification.
 RBF instruments are new and largely untested
particularly in the sanitation sector.
 Going forward we need to invest great care
in the design of the instruments and evaluate
the costs and benefits of such schemes in
comparison to traditional forms of financing