82681 SECTOR BRIEF A Decade of Supporting the Delivery of Basic Services for the Poor October 2013   Commemorating 10 years since the founding of the Global Partnership on Output-Based Aid (GPOBA), this special edition sector brief presents a snapshot of the projects GPOBA has funded over the course of 10 years, and the impact GPOBA has had on its clients. With the objective of supporting the delivery of basic infrastruc- ture and social services for the poor, GPOBA has piloted 37 projects in 6 sectors, with services benefitting nearly 5.9 million poor people so far. In the spirit of the 10-year anniversary, this brief showcases 10 innovative GPOBA projects, demonstrating how output-based aid (OBA) approaches are applicable across sectors and can be flexible to meet the needs of different operating environments. Highlighting experience in infrastructure projects, this brief reviews ally transmitted diseases. GPOBA supported the largest public-pri- how GPOBA has leveraged commercial financing for community vate partnership scheme to date in Africa (a new national hospital in water projects in Kenya, and formed a partnership with the gov- Lesotho), through subsidies to enhance the delivery of basic health ernment of Honduras to fund and implement the first OBA Facility care services. GPOBA is piloting its first project in education in Viet- for water and sanitation services. GPOBA has helped provide 2.4 nam, where tuition subsidies are improving access to quality upper million poor people in rural Bangladesh with solar energy through secondary education and strengthening student performance. the installation of solar home systems, and combined OBA ap- proaches with carbon finance to support the installation of more Moving forward, GPOBA is focusing on new sectors and frontiers, than 26,000 biogas plants in Nepal. GPOBA harnessed the pow- including fragile and conflict-affected situations, where OBA has er of the private sector to provide telephone and Internet services had less experience. Building on lessons learned from the current to nomadic herder communities and district centers in Mongolia, portfolio, GPOBA is working to scale up successful projects and and took advantage of community-based organizations in Senegal mainstream the use of OBA within government systems, including to boost demand for on-site sanitation services for low-income in Kenya and Uganda, where GPOBA is preparing grants to scale households. More recently, GPOBA has been working in Nepal to up the successful Kenya Microfinance for Community Water Ser- test the use of OBA to improve the quality of and increase demand vices project and the Uganda Reproductive Health Voucher Pro- for solid waste management services. gram. In addition, GPOBA is carrying out global studies to expand its scope and assess the feasibility of OBA in new sectors, including Looking at social sectors, GPOBA used an innovative OBA voucher urban transport, irrigation, and new approaches, as in education. scheme in Uganda to increase access to maternal and other repro- Through these and other initiatives, GPOBA will continue to sup- ductive health services, including screening and treatment for sexu- port results-based solutions to broader development challenges. A Decade of Supporting the Delivery of Basic Services for the Poor What is OBA? mechanisms or proxy means-testing tools to determine wealth. An alternative mechanism, self-selection targeting, seeks out the poor Increasing access to basic infrastructure and social services is by granting higher subsidies for more basic solutions (such as solar critical to reducing poverty. However, increasing access remains home systems with less capacity), or providing subsidies only some a challenge because of the gap between what it costs to deliver a time after the service has become available, under the assumption desired level of service and what can be funded through user fees, that most wealthy households will have already connected. especially for the poor. OBA is a form of results-based financing (RBF) designed to enhance access to and delivery of infrastruc- ture and social services for the poor through the use of perfor- The GPOBA Story mance-based incentives, rewards, or subsidies. OBA links the pay- ment of aid to the delivery of specific services or “outputs,” such as GPOBA is a partnership of donors working together to support connection of poor households to electricity grids or water supply OBA approaches. GPOBA was established in 2003 by the United systems, installation of solar heating systems, or prenatal care and Kingdom’s Department for International Development (DFID) as a safe delivery services for new mothers. multi-donor trust fund administered by the World Bank. Since 2003, four additional donors have joined the partnership: the Internation- Under an OBA scheme, service delivery is contracted out to a third al Finance Corporation (IFC), the Dutch Ministry of Foreign Affairs party—public or private—which receives a subsidy to complement (DGIS), the Australian Agency for International Development (Au- or replace the required user contribution. The service provider is re- sAID) and the Swedish International Development Agency (Sida). sponsible for pre-financing the project, and is reimbursed only after the services or outputs have been delivered and fully verified by an GPOBA’s mandate is to fund, design, demonstrate, and document independent verification agent (IVA). The subsidy is explicitly tar- OBA approaches to improve the delivery of basic services to the geted to benefit the poor, which can be achieved through several poor in developing countries. OBA approaches have been tested means, depending on the context of the project and environment. in every region and applied in six sectors, including energy, water For example, geographic targeting can be used to focus on areas and sanitation1, health, solid waste, education, and information in which poor people live, or individual households can be select- and communication technology (ICT). OBA projects have taken ed though an income-based method, using existing social targeting a diversity of approaches, each one with a unique design and fi- OBA Core Concepts OBA is defined by six core concepts, which make OBA unique from other RBF instruments: Targeting of Subsidies to the Poor Using Incentives to Serve the Poor Subsidies must be targeted to poor households through a OBA subsidies work as an incentive to service providers to method that employs fair and socially acceptable eligibility expand service to poor households where other market-driv- criteria. en incentives may not exist. Accountability Output Verification and Monitoring Service providers take on both the performance and financial OBA schemes require a monitoring system with baseline risks, with reimbursement upon delivery of outputs. This en- data and an IVA that can guarantee achievement of outputs. sures they remain accountable to their customers and GPO- BA to deliver quality service. Sustainability OBA subsidies are designed for use in schemes where the Innovation and Efficiency service provision can be sustainable. This means, for exam- Because OBA schemes focus on results, or outputs, rather ple, that households can afford to pay the tariff to cover oper- than inputs, they allow flexibility for innovative solutions that ation and maintenance costs after connection of service, and enable service providers to deliver outputs at efficient/lower the service provider is financially stable. costs. Efficiency is also gained through a competitive pro- curement process, allowing GPOBA to minimize the required subsidy level or maximize beneficiaries. 2 Global Partnership on Output-Based Aid | October 2013 nancial model, incorporating lessons learned from previous expe- tance activities, GPOBA is demonstrating that OBA can deliver a riences. Pilots have been implemented in urban, peri-urban, and diverse range of services and lasting results for the poor. GPOBA’s rural areas, employing public and private operators, public-private goal is to mainstream OBA approaches within projects carried out partnerships (PPPs), nongovernmental organizations (NGOs), by other development practitioners, including developing country and community organizations as implementing agencies and ser- governments, international financial institutions, bilateral donors, vice providers. and private foundations. After 10 years of experience, through a portfolio of 37 projects Read on to learn more about the work GPOBA is doing in each with $170 million2 in subsidy funding and ongoing technical assis- sector. 1 GPOBA’s portfolio contains two stand-alone sanitation projects which, for the purposes of this brief, will be considered as separate from water. 2 All monetary amounts are in U.S. dollars unless otherwise specified. 3 October 2013 | Global Partnership on Output-Based Aid ENERGY SECTOR GPOBA in Energy SHARE OF ENERGY PROJECTS IN GPOBA’S PORTFOLIO Electricity is one of the necessary conditions for development. Low electrification rates result in a loss of significant benefits, such as productivity gains in business, new job creation, improve- ments in health, and better communication. Worldwide, around Water 1.3 billion people live without access to electricity, with the ma- jority residing in rural areas. Sub-Saharan Africa accounts for al- most 45 percent of that figure. Among the key barriers to energy Health access are high connection charges for extending local grids or mini-grids and high capital costs for developing renewable ener- gy and energy efficiency measures. Energy GPOBA has addressed these challenges by providing well-target- 40% Solid Waste Management ed subsidies to decrease the investment cost and make access to energy affordable for the poor. GPOBA funding has supported Sanitation access by poor beneficiaries to grid electricity in urban areas from Education Liberia to Kenya and in rural settlements in Ethiopia, India, and ICT Uganda. It has supported solar energy development in remote ar- Energy is the largest sector represented in GPOBA’s portfolio, with 12 projects and 40 eas of Bangladesh, Bolivia, and Ghana, biogas plants in Nepal, the percent of total funding. Four of these projects increase access to renewable energy distribution of energy-efficient compact fluorescent lamps in Ethi- sources, including solar home systems, mini-grids, and biogas solutions, supporting the opia, and access to gas and heat supply in Armenia and Colombia. World Bank’s green growth agenda. GPOBA PROJECTS IN THE ENERGY SECTOR Grant Amount (US$ Number of Host Country Project millions) Beneficiaries* Armenia Gas and Heat Supply for Poor Urban Households 3.10 23,700 Bangladesh Rural Electrification and Renewable Energy Development Mini-Grids 1.10 20,000 Bangladesh Rural Electrification and Renewable Energy Development Solar Home Systems 13.95 2,406,900 Bolivia Rural Electricity Access with Small-scale Providers 5.18 60,800 Colombia Access to Natural Gas 5.09 204,800 Ethiopia Electricity Access Rural Expansion 8.00 1,142,900 Ghana Solar PV Systems to Increase Electricity Access 4.35 87,000 India Mumbai Improved Electricity Access to Slum Dwellers 1.65 131,300 Kenya Kenya Electricity Expansion 5.15 264,000 Liberia Monrovia Improved Electricity Access 10.00 80,000 Nepal Biogas Support Program 5.00 184,500 Uganda Grid-Based OBA Facility 5.50 510,000 Total 68.07 5,115,900 * These figures are best estimates based on technical calculations and projections, and are subject to change. 4 Global Partnership on Output-Based Aid | October 2013 ENERGY SECTOR Case Study 1. Expanding Rural Electrification and Renewable Energy Development in Bangladesh Only about 40 percent of rural house- holds in Bangladesh have access to grid electricity. For the rest, life essen- tially stops after sunset. The dispersed nature of rural settlements and the numerous rivers that crisscross the country make grid electrification in many areas difficult and expensive. So- lar power is often the most viable and sustainable way to provide power. In 2002, the World Bank-financed Rural Electrification and Renewable Energy Development (RERED) proj- ect began using an output-based ap- proach to address the issue of insuffi- cient grid capacity in rural Bangladesh. Specifically, RERED makes solar home systems (SHS) available to households through a network of NGOs under a microcredit scheme. The project uses a dealer credit model, whereby cus- tomers use donor-supported credit to purchase the SHS The project exceeded the initial target, supporting the instal- from partner organizations (POs), comprised mostly of lation of over 480,000 SHS, benefitting over 2.4 million peo- NGOs with a strong base in microfinance. The POs procure ple in remote rural areas of Bangladesh. The subsidy amount and install the systems in rural households, as per technical has been gradually decreased (from $50 per system when the standards set by the project implementing agency, the Infra- GPOBA project was approved to $20 per system currently). structure Development Company Limited (IDCOL). Because of the enormous success of this project, GPOBA in- tends to scale up the scheme to further expand access to solar GPOBA became involved in 2010, contributing $13.95 mil- energy. lion to help subsidize the accessibility of the SHS via a three- year microcredit system. The SHS is purchased by house- The transition to solar power has created new jobs. Children holds on a down-payment (10-15 percent of the cost net of are able to study longer, merchants to conduct business lon- grant) from certified POs. The remaining cost is repaid by ger, and communities to feel an increased sense of security the household under a microcredit scheme. After inspec- after dark. “My business is booming and my family lives much tions and verifications of SHS installations, IDCOL releases more comfortably with our increased income,” stated one refinancing (up to 70 percent of the microcredit extended beneficiary, who runs a small teahouse business. “But most to the household) and a fixed subsidy, provided by GPOBA importantly, I now have electricity at home and my children per system. can study at night.” (Ahmad 2011) 5 October 2013 | Global Partnership on Output-Based Aid ENERGY SECTOR Case Study 2. Backing a Biogas Support Program in Nepal Over 80 percent of Nepal’s population lives in rural areas, and attain their energy for the most part by burning fire- wood, agriculture residue, and dung. Yet biomass is one of the most health hazardous sources of domestic fuel, pro- ducing average smoke levels three times higher than clean fuel. In 2007, GPOBA signed a grant with the government of Nepal (GoN) to increase access to clean, safe, affordable energy by subsidizing modern biogas plans for rural Nep- alese households, as well as to further mainstream biogas as a renewable energy source. The GPOBA funds add to the fourth phase of a biogas support program (BSP-IV) initiat- ed in 1992 by the Netherlands Development Organization (SNV) in collaboration with the GoN, which aims to subsi- dize biogas plants for 200,000 rural households. BSP-IV is a partnership between the GoN, the Netherlands govern- ment, the German Development Bank (KfW), the Commu- cation of installed plants and continuous use by the target nity Development Carbon Fund (CDCF), and GPOBA. population. This project is innovative for GPOBA and the wider devel- As an added benefit to Nepal’s economy, the biogas project opment community on two fronts: it was GPOBA’s first and encourages private sector participation and the creation of only project involving biogas, a fuel source that uses anaer- local small and medium companies. Beneficiaries choose obic decomposition of organic material (mostly animal ma- among 60 local biogas companies for installation, ensuring nure) to produce a flammable gas. Second, this was the first the market remains competitive. Participating companies scheme where OBA approaches were used in combination receive training to produce quality, cost-effective plants. Be- with a carbon finance component, funded by the CDCF. cause of the incentive structure built into the output-based The project demonstrates that carbon finance and OBA are design, companies are motivated to comply with quality complementary instruments, which can be combined to standards. reduce carbon emissions, while at the same time servicing GPOBA’s objectives: in this case, to overcome affordability By the time the project had closed in 2012, over 26,000 issues and increase energy provision for the poor. biogas plants had been installed. The project won an award from the World Bank for its innovative design, combining Under this scheme, GPOBA funds are used to subsidize bio- carbon finance with OBA approaches. Based on the proj- gas plants with a capacity of up to 8m3 in order to better ect’s success, GPOBA is working with the GoN to main- target poorer populations. Subsidies are paid after verifi- stream OBA in the country’s renewable energy sector. 6 Global Partnership on Output-Based Aid | October 2013 WATER SECTOR GPOBA in Water SHARE OF WATER PROJECTS IN GPOBA’S PORTFOLIO GPOBA works to expand access to clean, quality water services to poor households. With experience working with public and private utilities and providing household water connections, yard taps, and public kiosk connections, GPOBA is demonstrating Water 29% that OBA helps address some of the major prohibitive challeng- es to access to water throughout the developing world. These include lack of incentives for utilities to serve the poor, high con- Health nection costs for piped water services, poor service delivery, and lack of financing, especially in rural areas where providers tend to be small local operators, NGOs, or community organizations. Energy Solid Waste GPOBA support has increased access to clean water in urban ar- Management eas from Indonesia to Morocco and in rural settlements from India to Uganda. In Kenya, GPOBA subsidies helped leverage commer- Sanitation cial finance to support community water projects in peri-urban Education and rural areas. In Indonesia, GPOBA supported water access for ICT informal communities through bulk supply, whereby utility asset With 13 unique projects and 30 percent of GPOBA’s total grant funding, water represents ownership stops at the entrance of the community, thus alleviat- the second largest sector in GPOBA’s portfolio. ing legal constraints where poor residents lack proper land titles. GPOBA PROJECTS IN THE WATER SECTOR Grant Amount Number of Host Country Project (US$ millions) Beneficiaries* Cameroon Water Affermage Contract for Coverage Expansion 5.25 240,000 Honduras National OBA Facility for Water and Sanitation Services 4.59 87,600 India Improved Rural Community Water in Andhra Pradesh 0.85 77,900 Indonesia Expanding Piped Water Supply to Surabaya’s Urban Poor 2.41 77,500 Indonesia Expansion of Water Services in Low-income Areas of Jakarta 2.57 58,200 Kenya Microfinance for Community Water Services 3.09 202,000 Morocco Improved Access to Water and Sanitation Services 7.00 62,100 Mozambique Private Sector Contracts– OBA for Coverage Expansion 5.00 468,000 Philippines Improved Access to Water Services in Metro Manila 2.85 171,400 Uganda Kampala Water Connections for the Poor 2.53 470,000 Uganda Small Towns Water and Rural Growth Centers 3.21 54,500 Vietnam Targeting Service Expansion through Water Loss Reduction 4.50 176,700 Yemen Water for Urban Centers 5.00 210,000 Total 48.85 2,355,900 * These figures are best estimates based on technical calculations and projections, and are subject to change. 7 October 2013 | Global Partnership on Output-Based Aid WATER SECTOR Case Study 3. Providing Microfinance for Community Water Schemes in Kenya In Kenya, community-run small-scale water systems play a critical role in supplying and improving access to water ser- vices in peri-urban and rural areas. But a host of problems complicate efforts to make these organizations reliable ser- vice providers, including their limited management capac- ity, low operating revenues, and lack of access to finance. In 2004, the Water and Sanitation Program (WSP)-Africa began to work with a local commercial bank specialized in microfinance, K-Rep Bank, to explore structures under which a commercial financier would provide loan finance to community water projects. Two years later, GPOBA ap- proved an innovative pilot project to be implemented by K-Rep Bank and supported by WSP-Africa to facilitate ac- cess to finance for community-based water providers by blending output-based subsidies with commercial finance. This was the first GPOBA funded project to use this combi- nation of instruments. Under the scheme, the community provides equity (20 percent of project cost) and K-Rep finances the remaining 80 percent through a loan with a maximum tenor of five years. Upon achievement of access and service level output targets, measured by the number of new connections and average monthly revenue generated by the system, GPO- BA provides the community with a subsidy amounting to 40 percent of the total eligible project cost. The subsidy is used to refinance the loan, so the community is ultimately responsible for 60 percent of the total capital cost of the project. This ensures that monthly loan repayments—and thus tariffs—are more affordable for the community. repay their loans. The commercial lender, which assessed the financial viability and technical feasibility of each com- The project also funded support for project development munity project, provided an additional level of oversight and implementation to ensure quality during the project typically not found in publicly funded projects. cycle, and helped create a local private sector market for business development services. This project, which closed in 2013, has benefitted over 200,000 people with piped-water supply. Its successes The experience in Kenya indicates that the sustainability of have led to the preparation of a scale-up project to support the systems is enhanced by the financing mechanism, as urban water providers in accessing loan finance from the communities are obligated to generate sufficient operating domestic private sector, with subsidies creating incentives revenues to cover operation and maintenance costs and for these providers to serve residents of low-income areas. 8 Global Partnership on Output-Based Aid | October 2013 WATER SECTOR Case Study 4. Establishing a National OBA Facility for Water and Sanitation Services in Honduras While Honduras has achieved a reasonable level of access to water supply and sanitation, gaps in coverage remain, especially in rural and peri-urban areas. Furthermore, ser- vice quality for those with access is often poor. To help the government of Honduras achieve universal coverage and improve service quality, GPOBA designed and implement- ed the first OBA Facility in Honduras to test the viability of an innovative OBA mechanism for financing water and sanitation services. The OBA Facility, housed within the Fondo Hondureño de Inversion Social, designed a framework to receive, evalu- ate, and select project proposals for eligibilty for subsidies. The objective of this selection framework was to provide a transparent and objective mechanism to allocate subsidy funding. The evaluation criteria selected projects based on a unit cost efficiency index, identifying proposals that offered to serve the greatest number of beneficiaries given the re- quested subsidy amount. The OBA Facility started operations in 2007, making $4 million available as subsidy funds for service providers or implementers at the national level. The OBA Facility for- mally assessed about 35 project proposals through 4 eval- uation phases, and found 12 subprojects eligible for subsidy funding. The government of Honduras provided $1 million in a revolving fund to provide bridge loans to public imple- menters. risks required under an OBA scheme to deliver the outputs The 12 subprojects were successfully implemented, expand- and services. The OBA Facility worked with public utili- ing and improving quality water and sanitation services to ties, private utilities, municipalities, NGOs, and communi- about 14,600 low-income households. The implementation ties-based organizations as implementing agencies. of this project demonstrated that it is possible to align in- centives so implementers and service providers can indeed GPOBA is continuing to support the design and funding of expand water and sanitation services to reach low-income OBA Facilities in developing countries as a window within the households. A combination of different partnerships was country and sector financing frameworks, to provide incen- developed in order to incur the financing and performance tives to service providers to extend basic services to the poor. 9 October 2013 | Global Partnership on Output-Based Aid HEALTH SECTOR GPOBA in Health SHARE OF HEALTH PROJECTS IN GPOBA’S PORTFOLIO Over the last decade, the development community has increas- ingly made health a priority, reflected in the fact that there has been a more than doubling of global health aid and major ad- vancements in health technologies and medicines. Yet significant Water obstacles remain—from supply-side constraints such as poor infrastructure and lack of resources to demand-side constraints, including inability to pay, lack of insurance coverage, or lack of Health access—preventing lifesaving resources from reaching the poor 14% people in developing countries who need them most. Energy GPOBA works to overcome these challenges through innovative Solid Waste OBA health schemes to increase access to affordable, quality Management health care services. GPOBA has supported reproductive health Sanitation services in the Philippines, Uganda, and Yemen. In western Ugan- Education da, GPOBA, in partnership with KfW, funded a voucher scheme ICT where users paid a low contribution for vouchers that could be used for services such as pre– and post-natal care, a birth attend- With five projects in health, this sector accounts for the third largest percentage of ed by a trained medical professional, or screening and treatment GPOBA funding, at 14 percent. While the number of OBA projects tested in health is still relatively small, the impact is substantial, with benefits expected to reach around of sexually transmitted diseases for couples. GPOBA supports a 1.8 million people. prepaid health scheme in poor areas of Nigeria, and access to quality health services at a new national hospital and filter clinics under a public-private partnership model in Lesotho. GPOBA PROJECTS IN THE HEALTH SECTOR Grant Amount Number of Host Country Project (US$ millions) Beneficiaries* Lesotho Lesotho New Hospital Public-Private Partnership 6.25 808,700 Nigeria Nigeria Pre-Paid Health Scheme 6.02 22,500 Philippines Philippines Reproductive Health 3.65 786,800 Uganda Reproductive Health Voucher Program 4.3 162,800 Yemen Yemen Safe Motherhood Program 3.91 30,000 Total 24.13 1,810,800 * These figures are best estimates based on technical calculations and projections, and are subject to change. 10 Global Partnership on Output-Based Aid | October 2013 HEALTH SECTOR Case Study 5. Launching a Reproductive Health Voucher Program in Uganda About 435 women die per 100,000 live births in Uganda due to lack of access to health service facilities and professional health care, a 2006 study found. The majority of women still rely on traditional birth attendants with lit- tle or no formal training. Uganda’s de- centralized health system has left rural areas poorly resourced; some expect- ant mothers must walk more than nine miles to the nearest health facility. In 2008, GPOBA launched an OBA voucher scheme, in partnership with KfW, to bring maternal and other reproductive health services to rural communities in western Uganda. The voucher system was used as a means to stimulate demand for facility-lev- el health care services among those who were less likely to seek care without a subsidy, by giving them purchasing power to seek care from a wide range of available providers. The outputs in this project consisted with voucher service providers, as well as the locally cre- of a safe delivery package of four prenatal visits, a delivery ated and maintained referral system. Providers initially attended by a trained medical professional and one postna- faced challenges in providing effective referrals. Together tal visit, or a screening and treatment of sexually transmit- with the service providers, the VMA addressed this by es- ted diseases (STDs) for couples. Users paid the equivalent tablishing a network of emergency care providers in two of $1.30 per voucher for a safe delivery package of services sub-regions. In one sub-region, a community group orga- costing from $70 to around $100 for a complicated delivery, nized motorcyclists to transport mothers to the hospital and $0.65 per couple for STD- related treatment services for delivery. costing $11. Marie Stopes International (MSI) Uganda was contracted as the voucher management agency (VMA) to After four years, the project succeeded in safely deliver- supervise overall operational management. Service delivery ing around 66,000 babies and providing STD treatments was contracted out to accredited, private, local clinics to to 32,000 couples. The project received recognition and offer services in exchange for prepaid vouchers. Once ap- awards from both the World Bank’s Vice President for Africa proved services had been delivered, service providers sub- and the IFC. Having provided evidence of successful results, mitted claims for reimbursement to MSI-Uganda. the scheme is being scaled up by the Ministry of Health to expand the voucher program to rural communities and oth- Important innovations in this project included the use of er districts of Uganda, as well as to build national capacity mobile phones to increase efficiency and communicate to mainstream voucher management functions. 11 October 2013 | Global Partnership on Output-Based Aid HEALTH SECTOR Case Study 6. Supporting a Hospital and Clinics through a Public-Private Partnership in Lesotho Before the Queen Mamohato Memorial Hospital (QMMH) public-private part- nership (PPP) project was initiated, Le- sotho’s national referral hospital served only the capital city, Maseru, and a nar- row fringe of its suburbs. This meant an extensive part of Lesotho’s patient popu- lation had to be referred to South Africa, consuming much of the government’s health care budget. In 2006, the government of Leso- tho contacted the IFC for assistance in building a new hospital and health care network. The government entered into a long-term (18-year) contractual agreement with a private sector con- sortium, Tsepong, to build and operate a new 425-bed national hospital and gateway clinic, and refurbish, upgrade, and operate three filter clinics. To ensure a successful start-up of the new hospital, GPOBA was invited to join the partnership in 2009 to provide subsidy funding. GPOBA support helped leverage the ic network sustainable. Second, it marshaled local capi- partners involved to increase the accountability of the tal—an effort specifically tied to the introduction and initial health service providers, expand the range and quality of management of OBA outputs. The OBA contribution was services, make more efficient use of government resourc- structured so PPP partners could easily assume respon- es, and provide incentives for efficiency and innovation. sibility for the monitoring and evaluation of the outputs Under the scheme, funds were disbursed after three key when GPOBA’s participation ended. performance indicators were met and verified: total out- patient visits, total inpatient admissions, and family and The innovative financing and implementation structure of patient satisfaction. the project positions Lesotho as a leader in health sec- tor PPP arrangements. It has received wide recognition, The project closed in 2012, supporting quality medical from winning the World Bank’s Sustainable Development services for over 800,000 patients. As the largest PPP in Network Vice President award for its strength in lever- Africa, there are significant lessons to be gained from this aging partnerships across the Bank, to being recognized project. This PPP leveraged the skills, knowledge, abilities, by the South-South Knowledge Exchange for providing and resources of all its partners in two main ways. First, a country-led development solution to the challenge of it extended the government’s health care budget, which providing high quality, accessible health care services for makes the financing for both the hospital and the clin- the poor. 12 Global Partnership on Output-Based Aid | October 2013 SOLID WASTE MANAGEMENT, SANITATION, EDUCATION, AND ICT GPOBA in Solid Waste Management, SHARE OF SWM, SANITATION, EDUCATION, AND ICT PROJECTS IN GPOBA’S PORTFOLIO Sanitation, Education, and ICT In addition to the well-tested sectors of water, health, and energy, Water GPOBA is implementing and learning from pilots in solid waste management (SWM), sanitation, education, and ICT. GPOBA is piloting a SWM project in Nepal to address both sup- Health ply-side and demand-side constraints. The OBA subsidy is de- signed to increase service quality, which should in turn increase consumer willingness to pay and enable municipalities to grad- Energy ually recover greater proportions of service delivery costs from Solid Waste new consumers and increased user fees. Management 8% Sanitation OBA subsidies can be used to support services along the “sani- 6% Education tation value chain,” from promotion of demand to collection/ac- ICT 2% 1% cess, transport, treatment, and disposal/re-use of waste. GPOBA With 7 combined projects in the pipeline and a total of 17 percent of GPOBA funding, has two stand-alone sanitation projects in Senegal and Sri Lanka, projects in these sectors provide important lessons for future GPOBA pilots and the increasing access to improved household sanitation through both development community. on-site sanitation systems and networked sewerage. GPOBA has supported the expansion of Internet, telephone, and In the education sector, OBA can be used to address not only is- other ICT services to rural areas and district centers in Indonesia and sues of enrollment and attendance, but also of quality, as is being Mongolia. In both projects, the OBA subsidy provided an incentive done in Vietnam. for private sector involvement in expanding services to rural areas. GPOBA PROJECTS IN SWM, SANITATION, EDUCATION, AND ICT Grant Amount z Number of Host Country Project (US$ millions) Beneficiaries* Indonesia Extending Telecommunications in Rural Areas 1.87 758,200 Mongolia Universal Access to Telecommunications 0.26 22,300 Nepal Municipal Solid Waste Management 4.29 800,000 Senegal Access to On-site Sanitation Services 5.76 103,500 Sri Lanka Increasing Household Access to Domestic Sanitation in Greater Colombo 5.08 77,000 Vietnam Upper Secondary Education Enhancement 3.00 8,100 West Bank Solid Waste Management 8.25 840,000 Total 28.51 2,609,100 * These figures are best estimates based on technical calculations and projections, and are subject to change. 13 October 2013 | Global Partnership on Output-Based Aid SOLID WASTE MANAGEMENT, SANITATION, EDUCATION, AND ICT Case Study 7. Improving Solid Waste Management in Nepal Nepal is undergoing a political transition and significant demographic changes; most notably, Nepal’s urban population has in- creased by over 67 percent over the past de- cade. This has placed considerable pressure on the urban environment and efforts to de- liver urban services, including SWM. Where SWM services are available, they tend to be of poor quality due to chronic underfunding and weak institutional capacity, which also leads to a low willingness to pay for services. In 2013, GPOBA signed its first grant in SWM to support improved SWM services in five low-income municipalities in Nepal. The project provides OBA subsidies to eligi- ble municipalities that improve services, as evidenced by the achievement of pre-agreed technical standards, such as waste collec- tion and cleanliness, and improved financial sustainability, as measured by an increase in user fee collections. Examples of service The project design focuses on the results to be achieved, improvements include delivering formal SWM services to without prescribing any single service delivery model to targeted users, extending services to zones not currently achieve those results. Municipalities are provided with the served, and implementing waste minimization measures. flexibility to deliver services efficiently and as they see fit, provided that: service delivery is technically, socially, and The subsidy is transitional in nature, and subsidies will be environmentally sound; services are financially sustainable; paid to municipalities to “match” revenues collected from and service provision remains accountable to beneficiaries SWM services according to an agreed upon multiplier. The and to national institutions tasked with overseeing the sec- multiplier varies such that subsidies are increasingly phased tor. Provided these conditions are met, delivering SWM ser- out over the four years of the project and are replaced with vices is the business of the municipalities. This approach is user fees. The key chain of assumptions underlying the proj- expected to lead to increased innovation in service delivery ect is that the increased service quality brought about by and to foster local ownership. The project is expected to the OBA scheme will increase consumer willingness to pay benefit around 800,000 people in participating municipal- for better SWM services, and enable municipalities to grad- ities in Nepal. ually recover greater proportions of service delivery costs from new consumers and increased user fees. 14 Global Partnership on Output-Based Aid | October 2013 SOLID WASTE MANAGEMENT, SANITATION, EDUCATION, AND ICT Case Study 8. Supporting On-Site Sanitation in Senegal In Dakar, more than a third of the population has no ac- cess to proper sanitation. Conventional sewerage is nei- ther technically nor economically feasible in most parts of the city. It is difficult to implement because of the irregular patterns of housing settlements, and requires significant water usage, which many poor households are unable to afford. As a viable alternative, on-site san- itation can be implemented in irregular settlements and requires only low consumption of water. In 2007, GPOBA signed its first grant in this sector to provide on-site sanitation facilities in Dakar. The proj- ect was designed to build on the success of the World Bank-financed Sanitation Program for Peri-Urban Areas of Dakar (PAQPUD). PAQPUD delivered over 63,000 on-site sanitation facilities between 2003 and 2005 in a demand-driven manner utilizing OBA-type approaches. The timing of the GPOBA project helped to maintain the momentum achieved by PAQPUD, in addition to meet- ing some of the demand left unmet. budget to promotion activities to reinforce outreach. Neigh- The project made on-site sanitation facilities available to borhood/community-based organizations, which had de- low-income households in targeted neighborhoods of Da- tailed knowledge about the targeted communities, helped kar through different types of facilities at varying costs. to boost demand for the facilities and carry out activities With the GPOBA subsidy, customers were required to con- such as hygiene promotion to encourage behavior change. tribute 25 percent of this cost prior to installation. During The intervention areas were expanded, as was the techno- the first 28 months, only 7 percent of the planned facilities logical package to include new service options and an in- were realized, due to a number of factors: the economic kind contribution formula using simpler and less expensive crisis reduced willingness to invest in sanitation, there was materials for very poor populations. a history of highly subsidized schemes and a lack of credit facilities in these neighborhoods, and the subsidy structure By the time the project closed in 2011, GPOBA had sup- was prohibitive for some households. ported the construction of around 11,500 on-site sanitation facilities, benefitting over 100,000 poor people. While the When piloting OBA in new sectors, there will always be un- pilot faced initial difficulties, it demonstrated the impor- expected challenges and setbacks from which lessons can tance of project flexibility and pursuing creative approaches be drawn; this pilot provides an important example of this. to overcome challenges, and provided important lessons to The team responded by reallocating some of the project strengthen future sanitation projects. 15 October 2013 | Global Partnership on Output-Based Aid SOLID WASTE MANAGEMENT, SANITATION, EDUCATION, AND ICT Case Study 9. Enhancing Upper Secondary Education in Vietnam Over the last 20 years, Vietnam has achieved nearly universal primary and lower second- ary education. However, approximately 20 percent of lower secondary students do not make it to high school, and 45 percent drop out from lower secondary school. There are still major disparities between advantaged and disadvantaged children, linked closely with factors such as gender, ethnicity, and household income. Drop-out rates among disadvantaged groups are high, generally be- cause of economic hardship or low student performance. In 2010, GPOBA signed its first grant in educa- tion to improve access to quality education for low-income students and strengthen student performance in upper secondary and profes- sional secondary schools. GPOBA’s subsidy funds tuition for targeted students admitted to the participating schools, covering 55 to 84 percent of the total cost of school. The user contribution from families entails all school-related expens- assess student performance and the quality of education es aside from tuition, including insurance, materials, travel, provided. and lodging. EMWF also bears pre-financing risks and has the incentive The project identifies beneficiaries by targeting poor to minimize implementation costs, as built into the scheme. provinces and relying on the “certificate of the poor” (an The Foundation must pre-finance half the variable oper- existing state proxy means-testing mechanism). Priority ational cost, and is reimbursed only agreed outputs have is given to students certified by the state as poor, dis- been verified. In this way, EMWF is also incentivized to help abled students, Agent Orange victims, orphans, and eco- participating schools perform. nomically disadvantaged students from ethnic minority groups. As of June 2013, over 8,100 students had been enrolled, and about 85 percent had successfully passed the first term. The Under this scheme, the East Meets West Foundation educational quality has been maintained, as evidenced by (EMWF) serves as the implementing agency and grant re- an average grade point average of 6.0 out of 10 per student, cipient. The schools, which bear the performance risk by and only 2.4 percent of beneficiaries have dropped out of fully pre-financing tuition for these students, are later reim- school due to economic hardship and/or poor performance. bursed upon verification that students maintain enrollment This pilot demonstrates that applying the OBA approach to with an adequate attendance record, and achieve a passing education not only addresses the issue of access, but can grade at the end of each term. Standard exams are given to also improve learning outcomes. 16 Global Partnership on Output-Based Aid | October 2013 SOLID WASTE MANAGEMENT, SANITATION, EDUCATION, AND ICT Case Study 10. Expanding Telecommunications Services to Rural Areas in Mongolia Mongolia is the world’s least densely populated country: 2.8 million peo- ple live across 1.5 million square kilometers. Given Mongolia’s vast and chal- lenging geography, the cost of providing rural commu- nications infrastructure is very high. One-third of ru- ral inhabitants live in 330 soum (district) centers, and the rest are herders, nomadic by occupation. These populations depend on communication means to connect with family and community members in remote areas. In 2004, when Mongo- lia conceived its univer- sal access program, the ICT sector was structured in such a way that most of the private operators, chosen through a competitive bidding long-distance network was government-owned, with only process, which were responsible for pre-financing, install- limited capacity to expand rural services. Although opera- ing, and operating the rural voice and Internet services. Es- tors were investing heavily and growing in urban areas, the timated subsidy amounts for both pilots were calculated networks’ expansion of coverage to rural areas remained separately, so as to develop a benchmark upon which pri- insufficient. vate operators would bid for the contracts. In 2006, GPOBA signed a grant to expand the provision of By the time the project closed in 2008, about 20,000 telephone services to herder communities, as well as both members of herder communities had received telephone telephone and Internet services to soum center communi- services, and over 22,000 residents of soum centers had ties. The grant constituted a first step toward implementing received telephone and Internet services. Project benefits Mongolia’s universal access strategy. The project consisted include not only reduced communication costs for people of two pilots: the first provided public access telephone ser- living in these communities, but also strengthened family vices to herder communities in approximately 27 villages, ties, allowed for better coordination among herder com- spread among six soums in two provinces; the second pilot munities in responding to harsh weather conditions and provided wireless-based telephone and Internet services to increased economic activity. The project approach man- the public, as well as Internet access for two schools. aged to harness the power of the private sector by provid- ing incentives to deliver services in rural areas. This is an The project engaged and strengthened Mongolia’s private important part of what makes output-based approaches sector in ICT. GPOBA subsidies were used to reimburse both attractive and successful. 17 October 2013 | Global Partnership on Output-Based Aid Bibliography Ahmad, N. 2011. “Solar Home Systems: Lighting up Bangladesh’s Countryside.” South Asia Region, World Bank, Washington, DC. ---------. 2012d. Semi-Annual Monitoring Report: July 2012—December 2012. GPOBA, Washington, DC. Golumbeanu, R., and D. Barnes. 2013. “Connection Charges and Electricity Access in Sub-Saharan Africa.” Policy Research Working Paper 6511, ---------. 2013a. “Senegal Output-Based Aid Sanitation Project.” Lessons Learned. World Bank, Washington, DC. Number 3 (Draft). GPOBA, Washington, DC. GPOBA (Global Partnership on Output-Based Aid). OBA-Data. ---------. 2013b. “The 2013 Sustainability Development Network (SDN) VPU http:/ /www.oba-data.org/ Team Award Nomination for the Lesotho National Referral Hospital PPP OBA Scheme Team.” GPOBA, Washington, DC. ---------. 2006a. 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GPOBA, Wash- ington, DC. ---------. 2013a. “Bangladesh: Lighting Up Rural Communities.” World Bank, Washington, DC. ---------. 2009c. Project Commitment Document: Vietnam Upper Secondary Education Enhancement. GPOBA, Washington, DC. ---------. 2013b. “Increased Utilization of Reproductive Health Services among the Poor in Western Uganda in an Output-Based Aid Voucher ---------. 2012a. Project Commitment Document: Output-Based Aid for Munici- Scheme.” World Bank Working Paper (Draft). Africa Region and Sus- pal Solid Waste Management. GPOBA, Washington, DC. tainable Development Network, World Bank, Washington, DC. ---------. 2012b. “Uganda Reproductive Health Voucher Scheme.” Lessons WSP-Africa (Water and Sanitation Program-Africa). 2010. Kenya Country Learned, Number 1. GPOBA, Washington, DC. Status Overview 2. ---------. 2012c. “Output-Based Aid in Bangladesh: Solar Home Systems for Rural Households.” OBApproaches. Number 42. GPOBA, Washington, DC. 18 Global Partnership on Output-Based Aid | October 2013 For more information on GPOBA, find us online at www.gpopa.org. ©2013 The Global Partnership on Output-Based Aid World Bank 1818 H Street, NW Washington, DC 20433 USA Website: www.gpoba.org Online data portal: www.oba-data.org E-mail: gpoba@worldbank.org All rights reserved. This report was produced by the Global Partnership on Out- put-Based Aid(GPOBA). The findings, interpretations, and con- clusions expressed herein do not necessarily reflect the views of GPOBA or the Board of Executive Directors of the World Bank or the governments they represent. Neither GPOBA nor the World Bank guarantees the accuracy of the data included in this work. Note on the data: All monetary amounts are in U.S. dollars unless otherwise specified. 20 Global Partnership on Output-Based Aid | October 2013