Output-Based Aid : Lessons Learned and Best Practices

Governments in developing countries and members of the development aid community are acutely aware of the need to find more effective ways to improve basic living conditions for the poor. Traditional approaches to delivering public support have not always led to the results intended. Results-based financing instruments are now recognized as one important piece of the aid-delivery puzzle. Results-based financing (RBF) is an umbrella term that includes output-based aid, provider payment incentives, performance-based interfiscal transfers, and conditional cash transfers. What these mechanisms have in common is that a principal entity provides a financial or in-kind reward, conditional on the recipient of that reward undertaking a set of predetermined actions or achieving a predetermined performance goal. The ultimate aim is to increase the effectiveness of scarce public resources for the provision of basic services. This book is structured as follows: part one includes chapter one, which defines output-based aid (OBA) and puts it in the context of traditional aid-delivery mechanisms and RBF instruments. Chapter two provides an overview of where OBA approaches are being implemented as well as a description of the various applications of OBA: one-off, transitional, or ongoing subsidies. Part two consists of six chapters comprising the specific sector reviews: information and communication technology (ICT), roads (transportation), energy, water and sanitation, health, and education. Part three starts with chapter nine, which summarizes the lessons learned from the specific sectors, focusing on cross-cutting issues. Chapter ten concludes the review and considers where OBA is heading and what can be done to make OBA more effective and widespread, where applicable, to help improve access to basic services for the poor. The appendix presents a table of all OBA projects identified in the World Bank Group to date.