Output-Based Aid

DIRECTIONS IN DEVELOPMENT
Finance
Output-Based Aid
Lessons Learned and Best Practices
Yogita Mumssen, Lars Johannes, and Geeta KumarOutput-Based AidOutput-Based Aid
Lessons Learned and Best Practices
Yogita Mumssen,
Lars Johannes, and
Geeta Kumar© 2010 The International Bank for Reconstruction and Development / The World Bank
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ISBN-13: 978-0-8213-8188-5
eISBN: 978-0-8213-8189-2
DOI: 10.1596/978-0-8213-8188-5
Library of Congress Cataloging-in-Publication Data
Mumssen, Yogita, 1970-
Output-based aid : lessons learned and best practices / Yogita Mumssen, Lars Johannes, Geeta
Kumar.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8188-5 — ISBN 978-0-8213-8189-2 (electronic)
1. Municipal finance—Developing countries. 2. Infrastructure (Economics)—Developing
countries—Finance. 3. Municipal services—Developing countries—Finance. 4. Economic devel-
opment projects—Developing countries. 5. Economic assistance—Developing countries. I.
Johannes, Lars, 1976- II. Kumar, Geeta, 1977- III. World Bank. IV. Title.
HJ9695.M88 2010
338.9109172'4—dc22
2009052112
Cover design by Quantum Think
Cover photo courtesy of Global Partnership on Output-Based AidContents
Foreword xi
Acknowledgments xiii
Abbreviations xv
PART I Introduction to Output-Based Aid 1
Chapter 1 Output-Based Aid: Improving Access to Basic
Services for the Poor 3
Defining Output-Based Aid 4
This Book: Analyzing the Performance of OBA 7
Notes 11
Chapter 2 Snapshot of the OBA Universe 13
Preliminary Evidence on the Effectiveness of OBA 15
Where Does the Funding Come From? 16
Variations to OBA Applications 18
Notes 22
PART II OBA Review by Sector 23
Chapter 3 Information and Communication Technology 25
Funding 28
vvi Contents
Targeting 30
Performance Risk 31
Private Sector Capital and Expertise 33
Monitoring 34
Notes 35
Chapter 4 Roads 37
Funding 43
Targeting 44
Performance Risk 44
Private Sector Capital and Expertise 47
Monitoring 48
Notes 49
Chapter 5 Energy 51
Off-Grid Systems 53
Minigrid Systems 56
Grid-Based Systems 56
Funding 57
Targeting 58
Performance Risk 60
Private Sector Capital and Expertise 63
Monitoring 64
Note 66
Chapter 6 Water and Sanitation 67
Funding 68
Targeting 69
Performance Risk 71
Private Sector Capital and Expertise 74
Monitoring 75
Note 77
Chapter 7 Health 79
Funding 84
Targeting 85
Performance Risk 86
Private Sector Capital and Expertise 88
Monitoring 88
Notes 90Contents vii
Chapter 8 Education 91
Funding 92
Targeting 92
Performance Risk 94
Private Sector Capital and Expertise 94
Monitoring 96
Note 96
PART III Cross-Cutting Lessons 97
Chapter 9 Cross-Cutting Lessons Learned:
Challenges and Best Practice 99
Transparency: Explicit Targeting of Subsidies
for the Poor 101
Accountability: Shifting Performance
Risk to Providers 107
Private Sector Capital and Expertise 117
Innovation and Efficiency 120
Sustainability, Tariffs, and the Enabling
Environment 125
Monitoring of Results in Traditional
World Bank Projects 130
Notes 133
Chapter 10 Key Considerations for Moving Forward 135
Notes 140
Appendix Output-Based Aid Projects in the World Bank
Group, March 30, 2009 143
References 159
Index 165
Boxes
2.1 Applications of OBA Subsidy Design Mechanisms 18
3.1 Telecommunications Development Fund in Chile 26
3.2 Fund for Telephony Development in Guatemala 34
4.1 Argentina: Pilot Roads Maintenance and Sector
Rehabilitation Project 41viii Contents
4.2 Successful Performance-Based Rehabilitation
and Maintenance Contracts in Chad 42
4.3 Annuity Concessions in India 47
5.1 Bangladesh: Rural Electrification and Renewable
Energy Development Project (2002–09) 54
5.2 The ESCO Model: Argentina PERMER Concession 55
5.3 Senegal’s Rural Electrification Priority Program 62
6.1 Manila Water Supply Project 70
6.2 Kenya Microfinance for Small Water Schemes 72
6.3 Expansion of Water Services in Low-Income
Areas of Jakarta 74
6.4 Phasing in Payments Because of Finance Constraints
in Uganda’s Water Sector 75
6.5 Morocco Urban Water and Sanitation Project 76
7.1 Conditional Cash Transfers in the Social Services Sectors 81
7.2 Lesotho New Hospital PPP 84
8.1 Cash on Delivery 92
8.2 Bangladesh’s Female Secondary School
Assistance Project 93
8.3 Impact of Private Sector Participation in the
Concession Schools Program in Bogotá 95
9.1 Nepal’s Biogas Support Program: Geographic
Plus Self-Selection Targeting 103
9.2 CREMA: Phases I and II 114
9.3 Limitations on Shifting Risks to Service Providers 115
9.4 Colombia’s Natural Gas Project:
OBA and the Private Sector 118
9.5 World Bank Procurement in OBA Projects 124
Figures
1.1 Examples of Results-Based Financing Approaches 4
1.2 Contrast of a Traditional Input-Based Approach to an
Output-Based Approach 5
1.3 Contracting Spectrum 6
2.1 Volume of OBA Subsidy by Sector and Region
in the WBG 14
2.2 Comparison of ICR Overall Outcome Ratings 16
2.3 Distribution of OBA Portfolio by Sector and Region 20