Output Based Aid: Lessons Learned and Best Practices

OBA projects are delivering a range of essential services, from improved water supply to electricity access, reproductive health services, roads, telephone and Internet access, and education. OBA is also encouraging service providers to improve operational efficiency and provide innovative service solutions. For instance, a scheme in Nepal is subsidizing approximately 37,300 biogas plants for rural households to increase access to clean and affordable energy for cooking and lighting. Another project in Kenya is combining OBA with microfinance to enable small communitybased water providers in 55 communities to connect poor households to water services. This book contains many other examples. The authors also identify some cross-cutting challenges in implementing OBA approaches. For instance, one of OBA’s purported advantages is that it shifts performance risk to service providers by paying them only after delivery of services. In some OBA schemes, however, the service providers—especially if they are small and local—find obtaining access to the finance they need to “prefinance” the agreed outputs difficult. Other financial instruments, such as guarantees, may be needed to mitigate this constraint.