1. Output Based Incentives for
Sanitation Services to
Urban Poor Households
Isabel Blackett and Almud Weitz
WATER AND SANITATION PROGRAM

2. The context
A rationale for sanitation subsidies but subsidy delivery
mechanisms lack clarity about:
... who and what should be financed
•
•
due to fragmented sector supervision, and
fragmented delivery, weak and/or informal service providers
... what funds should be used for
•
•
•
•
as hardware subsidies „wasted‟, insufficient focus on behaviour
„too much‟ spent on wastewater treatment, rather than connecting
households expected to invest in adequate on-site sanitation, woth
limited public support, despite strong public benefits
insufficient focus on environmental impacts of poor sanitation
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3. What is an output based incentive?
•
Targeted performance-based payment to reduce the
gap between what users can afford and the cost to the
provider
•
“Payments” made to service providers after preidentified outputs are delivered and independently
verified
and
• Results-Based Financing includes conditional cash
transfers (CCT), COD, performance-based financing
•
Used in other sectors e.g. roads, telecoms, health,
education, electricity, water etc
3

4. How OBA differs
Traditional
Approach
Inputs
Government purchases
specific “inputs”, builds
assets and contracts out
or provides services itself
eg materials
Output-Based
Approach
Inputs
eg materials
Commercial
Finance
Service
Provider
Service
Provider
Public
Finance
Outputs
(Services for End
Users)
OBA reimburses the
service provider after the
delivery of outputs
Outputs
(Services for
End Users)

5. The sanitation “value chain”
Environmental focus
MDG focus
Value chain
Types of services
Demand
creation
Collection
Transport
Treatment
Disposal /
Re-use
Promote sanitation , create
demand, community
organisation
On-site
with
reuse
On-site
w/out
reuse
Sewer
connections
Main actors
• Local governments
• CBOs, NGOs
• Households (investors)
• Masons /Businesses
• Utilities
• Pit-latrine emptiers
(manual emptying,
trucks, etc)
• Utilities (sewers)
Partial
on-site
treatment
Decentralised
treatment
facilities
Treatment
Plants
Re-use:
energy,
agriculture
Environment
• Local governments
• Utilities
• SSIPs
• Local governments
• Local farmers, etc..

6. MDG focus
Potential packaging of output incentives
Promote sanitation , create demand,
community organisation
Demand
creation
NGP awards India
PLM Mozambique
Collection
On-site with
reuse
On-site w/o
reuse
Environmental focus
Partial on-site
treatment
Transport
Treatment
Disposal /
Re-use
Payments to
septic tank/pit
emptier
Decentralised
treatment
facilities
Payments for
Re-use sludge
(energy,
re-use
agriculture)
Environment
Sewer
connections
Morocco
Indonesia,
Brazil
Treatment
plants

7. Examples of services and indicators
Value chain
Demand
promotion
Services
Output indicators
Sanitation marketing
No. households who build/rehabilitate a
latrine following demand promotion
Social mobilisation, triggering
No. villages/communities becoming ODF
Build on-site sanitation
facilities
No. facilities built and still operating xmonth down the line
Build and operate public toilets
No. toilet blocks in disadvantaged areas
(used/paid for)
Transport pit waste to
designated points
Volume of waste transported to and
disposed in designated locations
Build and operate transfer
stations
No. transfer stations built and functioning
x-years later
Treatment
Build, maintain and operate
WWT plants
Volume of waste collected and treated to
required standard
Disposal/reuse
Build and maintain biogas
facilities
Volume of agricultural inputs generated
and sold to farmers
Collection and
latrine access
Transport

8. Output based grants for water and sewerage in
Morocco
The system
• Connecting 11,300 poor households in unplanned urban
settlements to water and sewerage
• Subsidy paid to service provider in installments 60% after
connection, 40% after 6 months of sustained use
• Verification carried out by independent third party.
Lessons and Findings
• Initial progress slow due to new scheme, land ownership and
investment delays
• Later investment substantially increased, some cities
delivering ahead of schedule
• Subsidies vary USD420-910, due to different unit costs

9. Some potential challenges and solutions
Common challenges
Measuring
outputs
difficult and costly
Potential solutions
is
Measure behavior change associated with
sanitation
High costs for performance verification built-in
Sewerage subsidies per
household tend to be
higher than for other
services
Conveying message that although investment
costs are high, economic and social benefits
to society are also high!
Demand for sanitation
services poorly
understood
Conduct demand assessment studies as part
of the design (with adequate funding)
Little attention paid to
ongoing operational
costs e.g. pit and septic
tank wastes or sewerage
OBI designed to make public funding of
operations more efficient and accountable
Build sewerage tariff increases as a condition
for subsidy release
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10. Take home messages
• Business-as-usual subsides will not
generate improved urban sanitation
outcomes
• Output based incentives provide a new
innovative targeted approach
• Expect new learning from Indonesia,
Egypt, Senegal, Morocco and India.
For more information:
Output-Based Aid and Sanitation, WSP 2010
Indentifying the Potential for Results-Based
Financing for Sanitation, Sophie Trémolet, WSP
and SHARE, 2011
On www.wsp.org and at WSP conference booth
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11. www.wsp.org | www.worldbank.org