Output-Based Aid: challenges for OBA Facility for the water and sanitation sector in Honduras

Updated - Friday 22 January 2010

The Global Partnership on Output-Based Aid (GPOBA) is sharing interesting results and lessons learned from a pilot Output-Based Aid (OBA) facility in Honduras in a new note [1]. The project tested the viability of an innovative output-based aid mechanism for financing water and sanitation services. It aims to improve access to water and sanitation services for about 15,000 low-income households, and to increase efficiency and transparency in sector investment funding.

The establishment of this OBA Facility is not without challenges. Unlike a traditional OBA project, the OBA Facility funds a number of projects with many characteristics.

Some of the key lessons learned from the implementation include:

The original structure envisaged that the regulatory agency ERSAPS would act as the OBA Facility’s independent verifier of outputs. However, the regulator’s actual capacity (both technical and financial) is very weak. Accordingly, it was necessary to hire consultants to act as verification agents.
The use of technical assistance funds is crucial for enhancing implementers’ capacity to execute projects, particularly in the case of poor municipalities or communities.
The increase in construction prices has made it necessary to lower physical targets and to adjust benchmark costs used to determine eligibility and rank projects.
Establishing a more efficient and accountable way to use public money for investments in the sector will take time.

[1] Mandri-Perrott, C., Schiffler, M. and Aguilera, A.S. (2009). Output-based aid in Honduras : an OBA Facility for the water and sanitation sector in Honduras. (OBApproaches note ; no. 29). Washington, DC, USA, Global Partnership on Output-Based Aid (GPOBA). 6 p. Download full note (PDF file)

Related news: Output-based aid: community water project in Andhra Pradesh, India, Source South Asia, 23 Jan 2009

Related web site: Global Partnership on Output-Based Aid (GPOBA)

Contact: GPOBA, e-mail: gpoba@worldbank.org