This presentation shares experiences from output-based aid (OBA) pilot schemes to provide access to water services for low income households in poor, peri-urban areas of Morocco.

1. Morocco:
Output-Based Aid (OBA) Subsidies
for Water & Sanitation Connections
in Poor Peri-urban Areas
Xavier Chauvot de Beauchêne
Sr. Water & Sanitation Specialist
Middle East and North Africa
International African Water Congress & Exhibition
March 16, 2010

2. Morocco OBA Pilots – Project Background
 Growing informal peri-urban settlements, with no water
and sanitation service.
 Unaffordable service connections, priced to cover
network expansion.
 National Human Development Initiative (INDH) to
promote basic services in poor communities.
 Broad water sector reform program, supported by a
Bank DPL.
 Output-Based Aid (OBA) as potential tool to promote
access to service.
Morocco: A lower MIC,
11 km from the EU

5. Morocco OBA Pilots – Scheme design
 Objective: Test OBA to enable WS&S service connections
in poor peri-urban areas of Casablanca, Meknes and
Tangiers.
 Outputs: Household water & sewerage connections.
 OBA subsidy: Gap between optimized connection costs
and estimated maximum affordable household
contribution.
 Grant Agreement: Signed Jan 2007 for 3 years.
Number of Connections Grant Amount
Water Supply Sanitation (USD million)
LYDEC 6 218 6 218 3.5
RADEM Urban Areas 602 794
1.5
RADEM Rural Areas 1 209 -
Amendis – Tangiers 3 200 3 200 2.0
TOTAL 11 229 10 212 7.0

6. Morocco OBA Pilots – Subsidy Amounts & Disbursement
 Subsidy disbursement in two tranches:
 60% of subsidy amount upon verified working connection;
and
 Remaining 40% upon satisfactory service provision for six
months
Subsidy level Beneficiary
Subsidy levels MAD Per connection to
(% of combined Contribution to
(USD)
water supply Sanitation connection cost) Connection Cost
MAD 1 458 MAD 3 609
LYDEC 28% MAD 4 000 W&S
(USD* 162) (USD* 401)
MAD 1 467 MAD 4 158
Amendis - Tangiers 24% MAD 12 000 W&S
(USD* 163) (USD* 462)
MAD 1 422 MAD 7 821
RADEM Urban areas 53% MAD 9 240 W&S
(USD* 158) (USD* 869)
MAD 5 319 Ineligible to MAD 4 620
RADEM Rural Areas 74%
(USD* 591) GPOBA funding (water supply only)
* MAD/USD exchange rate as defined in the Grant Agreement. Disbursements are made in MAD.

7. Institutional Framework: Roles and Responsibilities
World Bank supervision
Ministry of Interior / Ministry of Finance
Grant agreement with GPOBA
operators and
5. Makes
Municipalities or delegating authority government
subsidy
3. Reports to payment per
Legal connection to
Mandate authorities
Operational pre-financing
and GPOBA
responsibility operator
Operator
(Amendis Tanger, LYDEC, RADEM)
2. Pre-finances
connection to
Output Delivered =
1. Requests requested water 4. Verifies outputs
Connection to piped
connection supply and/or reached and makes
water supply and/or
and provides sanitation and recommendation on
sanitation services
discounted provides service subsidy payment
installed and providing
contribution
good quality service
Poor household living in peri-ruban
area without access to service Independent technical
reviewer
Operator’s Water and Sanitation Service Area
Fund flow Information flow Contractual relationship

8. Progress to date
Connection Progress as of Progress in
Operator (City) Grant size Progress rate
target December31, 09 2009
Service USD million Water Sewerage Water Sewerage Water Sewerage Water Sewerage
LYDEC (Casablanca) 3.5 6 218 6 218 1 401 1 401 22,5% 3% 3%
RADEM (Meknès) 1.5 1 811 794 717 498 39,6% 62,7% 26% 19%
AMENDIS-TANGER 2.0 3 200 3 200 2 856 2 856 89,3% 50% 50%
TOTAL 7.0 11 230 10 213 4 974 4 755 48,7% 46,6% 25% 19%
80.0%
70.0%
60.0%
Casablanca/LYDEC
50.0%
40.0%
Meknès/RADEM -
30.0% Water
20.0% Meknès/RADEM -
10.0% Sanitation
0.0% Tanger/AMENDIS
Delivery progress per operator

9. Key lessons learned and next steps
 Key lessons learned include:
• Strengthened local partnerships led to local governments’ involvement
to develop pragmatic solutions, including
• Countersigning beneficiaries’ lists;
• LG-backed guarantee scheme for household
with no legal status;
• Revolving fund for 0% interest loans.
• Operators developed proactive and dynamic client relations approaches
to integrate their new clients
• Improvement of operators’ internal processes (e.g. monitoring, filing)
• Obstacles faced independent of the OBA approach, linked to the
involvement of third parties.
• Demand exceed expectations
• Recovery level often exceed average
of the operator
 Next Steps:
Operators, local governments, and
GOM interested scaling up at the
national level.