The following text is adapted from the GPOBA brochure “Output-Based Aid at Work in Public-Private-Partnerships”, found here: https://www.gpoba.org/sites/gpoba/files/OBA51_PPP.pdf
Output-based aid (OBA) is a form of results-based financing that facilitates access to basic services for the poor through the payment of subsidies that are disbursed against independently verified results. This innovative financing mechanism has been used to increasing access to basic services for poor populations. Many output-based aid programs were dispersed through a program called GPOBA, a global partnership program in the World Bank Group. Through a diverse portfolio of projects, GPOBA funds, designs, demonstrates and documents output-based aid approaches to improve the delivery of basic services in developing countries. In an OBA project, service delivery is contracted out to a provider, either public or private. The provider pre-finances the service provision—for example, connection to a water-supply network or energy grid, a voucher-funded health service in a hospital, or waste collection. Once the service has been delivered and verified by an independent agent, OBA pays a subsidy, generally designed to complement or replace access fees. This arrangement makes the service more affordable for the consumer, while the verification process (which can extend beyond the point of the initial connection to verify continued service) helps to ensure accountability and quality, meaning that users are more likely to continue paying for these higher quality services. From the government’s point-of-view, OBA can be used to leverage investment in infrastructure to provide services to reach all consumers. From the private sector provider’s point-of-view, the incorporation of OBA within a PPP can enable access to new markets, mitigating the risk of expanding to serve low-income consumers. From a community perspective, OBA can help to provide the critical connection in accessing safe and reliable basic services.