Output based aid

Using explicit performance-based subsidies to support basic services where conditions justify public funding to complement or replace user-fees.

Experience with OBA is new, but growing. The difference with other subsidies is that OBAs are targeted, for example, to the poorest families (Cambodia) or to the poorest neighbourhoods (Paraguay) clarifying why subsidy is given and they are performance-based. The provider largely self-finances the service, receiving reimbursement mostly after the verification of successful delivery. The latter may reduce possibilities for small providers with limited capital. A bonus-malus approach might be more feasible, perhaps linked to longer-term system performance.

OBA uses explicit performance-based subsidies to support the delivery of basic services where it is justified using public funding to complement or replace user-fees.

The core of the OBA approach is the contracting out of service delivery to a third party, usually a private firm, where payment of public funds is tied to the actual delivery of these services. The Global Partnership for OBA is supporting programmes in different regions and sectors, including working with SSPs for on-site sanitation in Dakar and utilities in Punjab.