OBA to date: Lessons, Challenges and Mainstreaming Yogita Mumssen Infrastructure Economist Global Partnership on Output-Based Aid (GPOBA) Finance, Economics and Urban Development Department World Bank February 21, 2008 SDN Week 2008

2 Preliminary Lessons Evaluation Criteria Design features mostly used in Pilots Targeting:- Mostly geographic targeting to poor communities Accounta- bility - Mostly ex post connection payment tied to service contract Innovation & efficiency -Competitive bidding on lowest subsidy required; benchmarking when incumbents - Providers paid bid price but free to design (but need to ensure quality for life of asset -- a challenge) Mobilizing private sector - Local private sector playing a larger role - Extent of “leveraging” dependent on sector and country/region Sustainability- Most projects involve a one-time connection subsidy (but part of payment with-held until several months of service delivered)

3 Key Challenges and Issues Who has the incentive to deliver outputs? Access to finance to pre-finance outputs Minimizing subsidy payment risk once outputs delivered Supportive regulatory framework (subsidy policy, tariffs) Targeting of poor beneficiaries Monitoring of outputs -- local capacity, corruption Initial transactions costs: “learning”; pilots small by nature Bank procurement: moving from input-based to OBA (but, there are no official impediments) Mainstreaming OBA: going beyond pilots

4 To become part of the “DNA of development” finance? How? Scale-up/replication of on-going pilots TA to structure OBA funds with Government and/or other Donor funds Center of expertise: GPOBA advisory services to development partners Mainstreaming OBA in Bank processing: –Guidance note to staff on how to structure OBA in Bank operations –Guidance notes on procurement and financial management aspects Mainstreaming OBA in the Bank

Thank you. Please visit us at