Output-based aid (OBA) is an approach to increasing access to basic services for the poor by linking payment of aid to delivery of specific outputs that are verified. It contracts service delivery to third parties, who receive performance-based subsidies to complement user fees. To date, over 130 OBA projects totaling $3.5 billion have been identified, benefiting over 6.6 million people. The Global Partnership on Output-Based Aid (GPOBA) supports OBA through grants and technical assistance, with donor funding totaling $242.6 million as of June 2010.
Output-based aid (OBA) is an approach to increasing access to basic services for the poor by linking payment of aid to delivery of specific outputs that are verified. It contracts service delivery to third parties, who receive performance-based subsidies to complement user fees. To date, over 130 OBA projects totaling $3.5 billion have been identified, benefiting over 6.6 million people. The Global Partnership on Output-Based Aid (GPOBA) supports OBA through grants and technical assistance, with donor funding totaling $242.6 million as of June 2010.
Output-based aid (OBA) is an approach to increasing access to basic services for the poor by linking payment of aid to delivery of specific outputs that are verified. It contracts service delivery to third parties, who receive performance-based subsidies to complement user fees. To date, over 130 OBA projects totaling $3.5 billion have been identified, benefiting over 6.6 million people. The Global Partnership on Output-Based Aid (GPOBA) supports OBA through grants and technical assistance, with donor funding totaling $242.6 million as of June 2010.
What is Output-Based Aid? How does OBA contribute to aid
• Output-based aid (OBA) is an innovative ap- effectiveness? proach to increasing access to basic services— • Knowing who will provide and who will receive the such as infrastructure, healthcare, and educa- subsidy and what it’s for helps ensure transparency. tion—for the poor in developing countries. • Payment on output delivery shifts performance risk • OBA is used in cases where poor people are to the provider by making him accountable. being excluded from basic services because they • Having a predetermined subsidy provides incentives cannot afford to pay the full cost of user fees for innovation and efficiency. such as connection fees. • The subsidy acts as an incentive to mobilize private • OBA is one of a spectrum of results-based sector finance and expertise. instruments. It is part of a broader donor effort • The focus on outputs means that OBA schemes to ensure that aid is well spent and that the internalize tracking of results. benefits go to the poor.
What makes a successful OBA
How does OBA work? project? • Unlike traditional approaches, OBA links the payment of aid to the delivery of specific services The evidence on what makes a good OBA project is or “outputs.” These can include connection of still coming in, but some key factors have already been poor households to electricity grids or water and identified. These include: sanitation systems, installation of solar heating • A sound regulatory environment. systems, or delivery of basic healthcare services. • Finding a reliable and motivated service provider • Under an OBA scheme, service delivery is (private or public). contracted out to a third party, usually a private • Linking the payment of subsidies to appropriate firm, which receives a subsidy to complement or outputs. replace the user fees. • Setting tariffs that cover at least operation and • The service provider is responsible for “pre- maintenance costs. financing” the project until output delivery. • Targeting the subsidies effectively to the poor. • The subsidy is performance-based, meaning • The availability of funds (either from the operators’ that most of it is paid only after the services or own resources or from banks) to “pre-finance” the outputs have been delivered and verified by an outputs. independent agent. • The subsidy is explicitly targeted to the poor (e.g., by focusing on areas in which poor people What has been the experience live). with OBA so far? • So far, the Global Partnership on Output-Based Aid has identified about 131 OBA projects with a total value of about $3.5 billion in the World Bank Group (WBG) and another 66 schemes outside the WBG. Funding for OBA has come from the WBG, GPOBA,
Supporting the delivery of basic services in developing countries
other donors such as KfW, and governments. opment partners through its publications and out- Most OBA projects are in infrastructure and reach activities. health, with some in education. • To date, GPOBA has signed 31 grant Contact us agreements for OBA subsidy funding for If you are interested in pursuing OBA projects, have a total of US$124.9 million, with the first experience in OBA that you would like to share, or wish grant agreement signed in April 2006. to obtain more documentation, please visit the GPOBA Nearly 6.6 million people are expected to website (www.gpoba.org) or contact: benefit from these schemes in 23 coun- Cathy Russell tries worldwide in both rural and urban Communications Officer areas. The average subsidy per capita is GPOBA US$18.8. • As of June 30, 2010, GPOBA projects Tel.: (+1 202) 458 8124 | Fax: (+1 202) 522 0761 have disbursed US$15.1 million based Email: gpoba@worldbank.org on independently verified outputs, directly impacting more than 564,000 people. This is encouraging as typically projects take at least a year to implement before the first outputs can be delivered and verified. • Initial results from OBA pilots include increased private investment in basic ser- vices and efficiency gains due to competi- tive bidding. • As more project results come in, GPOBA will continue to share them with the devel-
What is the Global Partnership on Output-Based Aid?
• The Global Partnership on Output- • As of June 30, 2010, donor funding
Based Aid (GPOBA) is a partnership for GPOBA totals US$242.6 million of donors and international organi- (contributions and pledges). zations working together to support • GPOBA provides three types of sup- OBA approaches to improving service port: technical assistance for OBA delivery for the poor. schemes, dissemination of experiences • GPOBA was established in 2003 by and best practices in OBA, and grants the UK (DFID) and the World Bank. Its for OBA subsidy funding. other donors are the IFC, the Nether- • The program’s focus sectors are water lands (DGIS), Australia (AusAID), and and sanitation, energy, telecommunica- Sweden (Sida). tions, transport, health, and education.