Back in 2003, the World Bank and DFID launched the Global Partnership on Output-Based Aid (GPOBA). Output-based aid ties payment to service providers to the actual delivery of services in water, education, ICT, etc. The appeal is obvious—this is the kind of mechanism that helps "get the incentives right", thereby transferring risk to the service provider, increasing efficiency, and enhancing targeting of the poor.
The Partnership was launched with high hopes for improving aid effectiveness, as the GPOBA team explained on the PSD blog a few years ago. But as can happen, new initiatives sometimes founder on the rocks of entrenched aid bureaucracies. What about OBA?
As Figure 2 above indicates, OBA projects show pretty impressive results. The figure is taken from GPOBA's new book, Output-Based Aid: Lessons Learned and Best Practices. It compares the outcome ratings given to all OBA projects in fiscal year 2007 to all projects in OBA sectors in the same year. The report states that "OBA projects score on average half a category higher than traditional projects."
There are of course caveats—speakers at an event to launch the report last week pointed out in particular that (1) providers must be able to access finance in advance until receiving payment; and (2) households must demand the services, e.g. they have to be able to fill out the necessary forms. But I think the results so far make it clear that this approach deserves greater scale. So where do things stand in terms of donor support? Currently:
...OBA is only a small share of the World Bank portfolio. The largest share of OBA projects was 9.1 percent of funding volume in the ICT sector, followed by health (7.1 percent) and transport (3.6 percent).