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EmailMarch, 2010 – The Global Partnership on Output-based Aid (GPOBA [3]) recently published two new titles in the OBApproaches [4] series, OBApproaches Note No. 32: Output-Based Aid in Education: A Solution for Quality Education, and a French translation of Note No. 30: Leveraging Private Sector Finance for Rural Piped Water Infrastructure in Kenya.
OBApproaches is a forum for discussing and disseminating recent experiences and innovations in supporting the delivery of basic services to the poor. The new publications are part of a series focusing on the provision of water, energy, telecommunications, transport, health, and education in developing countries, in particular through output-, or performance-, based approaches.
Output-Based Aid in Education
A number of approaches have been tried to improve school attendance and educational attainment, including the use of Output-Based Aid [5] (OBA). OBApproaches Note No. 32 highlights key indicators, based on experiences in five schemes, about the successful use of OBA in education including:
- More manageable targeting of scheme beneficiaries
- The use of private sector funds, where government resources are limited or unavailable, to address education and school management issues
- Independent verification, a core component in OBA, to ensure that subsidies are only paid for outputs that have been achieved.
Appropriate targeting
According to the review, using OBA in educational schemes allows for services to be appropriately targeted to suit the local need or priority. For example, where a gap in literacy between boys and girls is identified, the project can be designed to benefit girls in particular.
Geography has also been used to target low income households, as in the Concession Schools Program [6] in Colombia which specifically targeted marginalized low-income areas of Bogota.
In some cases, where a project seeks to avoid subsidizing wealthier students already enrolled in private schools, means testing or social stratification mechanisms have been used to target.
Balancing quality and quantity
One of the key issues discussed by the review is the question of how to balance quantitative factors like higher attendance and school completion rates with the qualitative, like actual improvements in knowledge and skills.
In general, OBA projects have opted to embed a more balanced set of outputs that address enrolment and attendance issues as well as quality issues, into project design. The review highlights evidence that shows the engagement of the private sector in education, can result in improved operations and learning outcomes without additional cost.
Although the review recognizes the limited use of OBA in education to date, it does conclude that an OBA approach in education can work.
Read OBApproaches Note No. 32 [7]
Kenya: Innovative financing for community-based water schemes
Access to finance is recognized as one of the challenges when using OBA in low-income countries. Note No. 30 highlights what is possible when innovation and collaboration are applied to meet that challenge.
Maji ni Maisha is a community-based water scheme in Kenya [8], made possible by a partnership between K-Rep, a local commercial bank specializing in microfinance, the Water and Sanitation Program (WSP), GPOBA, and the European Union’s Water Facility.
Innovative microfinance model
The use of microfinance in the Kenya rural water schemes came out of discussions in 2004 to try and resolve constraints that identified when exploring ways to encourage commercial financiers to provide loans to community-owned water providers. Constraints identified included:
- Limited collateral available due to immobility of assets
- Undefined and untested regulatory environment and
- Communities’ limited capacity in project development
Emerging lessons
The lessons that have emerged from Maji ni Maisha and other community-owned waters schemes using an innovative financing structure can act as a road map for addressing similar challenges when using OBA schemes in low-income countries. Key lessons identified include:
- The lender must have the capacity to blend working with communities, traditional mircrofinance skills and sophisticated credit analysis
- There must be regulatory clarity in order for the lender to clearly weigh and accept risk. This can be addressed with the use of time-bound service contracts which clearly define service areas, tariff levels and asset ownership and
- The water service providers must have the capacity to deliver efficient, competitive service that also meets regulatory standards
The French translation of Note No. 30 adds to GPOBA’s growing number of multilingual publications which includes French [9] and Spanish [10] language section in the Document Center.
Read OBApproaches Note No. 30 in French [11] or English [12]