Hi Marijn,
I think the point really to note is that in OBA/PPP arrangements (OBA programmes delivered by private sector), the subsidy feature of the OBA essentially limits the financial risk/provides the economic incentives necessary for private participation in service delivery for the poor. Private operators (in conventional PPPs or ODA/PPP combinations) do seek economic viability on projects, but this is not to say that they will not bear other types of project risks. From my limited knowledge of the Nepal biogas project, the private party does appear to bear a certain amount of operational and performance risks (eg.ODA subsidy is provided only on independent verification of outputs, private sector is responsible for collection of (non-subsidy) user charges, generating demand, guaranteeing maintenance in the post project period, etc.)

Regards,

Sujatha

Dear Elizabeth,

It is starting to help, but I am not quite there yet. As far as I can see, the biogas sector in Nepal is more OBA than PPP. Despite the project always being "sold" as a PPP.

David Ehrhardt's response confuses me a bit. For example:

It is common for there to be a private operator responsible for providing services to customers (a PPP)

To me reads, that if a private sector company provides a service to a customer and is paid for that, this means it is a PPP. Which I am fairly sure is not what he wanted to say.

From the second paragraph, I get the impression that a PPP means that the end users and/or the government, pay for a service to themselves. But that it becomes OBA once either government or donors (partially) pay for a service to end users.

I have a feeling that this is also not what David intended to say.

To add to the confusion, from Wikipedia:

PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project.

en.wikipedia.org/wiki/Public%E2%80%93private_partnership

Where it seems to me that in many of the PPP/OBA arrangements in the development sector, there is very limited risk for the private partners. Skill trainings are often provided, and if the private sector needs to pre-finance something, it is often under a contract that they will get re-reimbursed for an agreed sum at an agreed time.

So, I guess I am still a bit lost in the definitions. Could you ask David for a more detailed response?

Regards

Marijn

EMW (East Meets West) has applied OBA payment to private operator in rural water supply using donor's money. Government approved the project (public participation), regularly checked the water quality (every six months), and joined EMW in verification of results. Private operators pre-financed the project, got reimbursed partially for the cost of household connections upon verification by government and EMW (reimbursement is from EMW's fund supported by donors), and also another amount after verification of operation (6 months after completion). The beneficiaries pay directly for the services delivered from the private operators.

PPP in this context is the ownership of assets which were public property, and then transferred to private operators who operated, expanded, and had the right to collect tariff from the private operators. To encourage private operators to go to remote areas, serving the poor, we used OBA to provide incentives.

Not sure what is done in biogas and whether it is the same.

Hope this helps.
MC

Hi Marijn,

David Ehrhardt from Castalia Advisers just sent me this answer to your question on

Could anyone explain what the crucial difference is between OBA and PPP?

+++++++

PPP and OBA are often combined. It is common for there to be a private operator responsible for providing services to customers (a PPP), and for that private operator to also be paid by government or a donor for providing services to people, with the payment being per output (OBA).

In our report where we distinguished PPP from OBA, we said the two are different because in a standard PPP people are paying for the services themselves, or government is paying for the service from the private operator—so there is not really ‘aid’ from a third party to someone else, just a purchase relationship. However, where there is a payment by government or a donor for outputs provided to someone else, then that can be considered as OBA, and that would create OBA combined with PPP.

++++++

I hope this help?

Note: for abbreviations, just click on the abbreviations button below this post.
PPP = Public private partnership
OBA = Output based aid

Regards,
Elisabeth

Very interesting topic.

The OBA system, to me, looks very similar to what is done under the PPP flag in the biogas sector here in Nepal. However, the summary report by Castalia states that RBF (of which OAB is one type) is not the same as PPP. Could anyone explain what the crucial difference is between OBA and PPP?

Regards

Marijn

David Ehrhardt of Castalia, and one of the key speakers of the webinar that started this thread has sent me the following responses to a couple of questions raised during the webinar and posted on this thread:

Tripti asked: "investments from MFIs and donors is also limited, often due to high risk ...does that mean we haven’t been able to meet the expectations of the people at the bottom wrt products, services offered?"

David's response:
The question is about support from donors, so the answer must lie in what drives donors (which may or may not be the same thing as whether the services are right for bottom of the pyramid consumers). In my opinion donors do not channel their funds through RBF schemes to the extent they should because, while RBF schemes have the promise to be more effective, they are more costly and time-consuming to design and implement. Also, because they are innovative, they are seen as more risky. Unfortunately the officials in aid agencies are not generally rewarded on scheme effectiveness, but on getting projects up and running and money disbursed. Whether or not the money spent achieves the intended effect is, sad to say, often less important.(DfID is a notable exception to this). So in my opinion, too many aid agency decisions are driven by considerations of risk to people’s careers, not risk that the aid will not achieve the intended effect. I think this is the root cause of limited donor support to RBF schemes.


Edward Guzha asked: "How do we deal with possibility of service provider selling to non-WASH consumers for cash instead of vouchers?"

David's response:
Does this question really make sense? If the service provider is selling a WASH product, how could they sell it to someone other than a WASH consumer? If I’m selling soap, or improved latrines, surely the person buying my product is using the soap for washing, or better sanitation? And if they are paying cash for it, so much the better –right?– more resources going into WASH!

Perhaps you meant a different question: “can the voucher be sold for cash, and no service be provided?”. This scenario is easy to imagine. Let’s say the voucher is for an improved latrine which costs $30. A household is given the voucher, and it is intended that the household will give the voucher to a latrine-builder, who will build the latrine, and then redeem the voucher for $30 from the government agency. An opportunistic households might instead sell the voucher to the latrine builder for $15, and require a latrine to be built. The latrine builder would take the voucher and cash it in for $30. So the household and the builder each get $15, but there is no latrine.

To avoid this, the agency paying out to providers would have to audit the providers to check that the output was provided. If the auditing was not good, the risk of people scamming the system is very real. This is why OBA schemes (where payment is made only after the paying agencies has verified the output) may be better than voucher schemes, in many cases.


Thanks David for the follow up!

[[Start of Page 2 of the discussion thread]


And for those who don't have access to Youtube, you can download the video recordings from the Webinar from this link at One Drive (which will be valid for a few weeks/months):

1drv.ms/1ziz3MN

Enjoy!

Like Arno, I also found this webinar really very high calibre and have learnt a lot about results-based financing for sanitation.

In this webinar, I also heard about three large projects that are funded by DFID which are also using results-based financing (or payment by results (PBR) which is another term for it). They are being implemented by Oxfam, SNV and Plan and are now included here in the project database:
www.susana.org/en/resources/projects?search=rbf

It would be good if we could hear more about those projects here on the discussion forum as well.

Thanks to Pippa, the presenters and all involved for making this webinar a success and for making the information available to us all!

Regards,
Elisabeth

Here is the link to the webinar held by SEI/SuSanA on April 29, 2015 dealing with Results-Based Financing in Sanitation.

Link to the Playlist containing all 7 videos:

www.youtube.com/playlist?list=PL0gMdVBup...c0dL9j338ztxnxMzBlZr

Links to the individual videos below:

Peter Feldman (introduction):




Wil Goldenberg of CASTALIA Strategic Advisors (USA):






Minh Chau Nguyen & Per Ljung (Thrive Networks, USA & Vietnam):






David Ehrhardt of CASTALIA Strategic Advisors:







Robert Chambers (IDS, UK):




Leonard Tedd (DFID, UK):




Peter Feldmann (Euforic Services) - wrap-up:



The webinar was organized by SEI and the SuSanA secretariat along with Pippa Scott, Peter Feldman and Pete Cranston of Euphoric Services who have been working on knowledge management within the Building Demand for Sanitation Programme at the Bill and Melinda Gates Foundation. The webinar was chaired by Peter Feldman and consisted of several papers covering what Results-Based Financing is and a review of experience by Will Goldenberger and David Erhardt of Castalia Strategic Advisors, a specific case from Vietnam provided by Minh Chau Nguyen and Per Ljung of Thrive Networks, a critique from Robert Chambers of the Institute of Development Studies in Sussex and a further assessment by Leonard Tedd from DFID. Each paper can be seen separately in the individual MP4 files.

I found the caliber of the webinar and the papers given by the 6 speakers to be top class. The webinar provides a good overview of what RBF is and examines the challenges surrounding monitoring of results in development projects in order to earn full funding. Although there are additional costs incurred in monitoring performance, and there is a risk of compromised flexibility when things go wrong, project goals tend to be better defined and accountability and the level of innovation tend to be higher than for input-based financing. Also the element of profit can be introduced in a transparent fashion thus enabling private sector participation. RBF can take the form of output-based aid, conditional cash transfers and redeemable vouchers for performance. These are further explained in the webinar.


[[End of Page 1 of the discussion thread]

pippa wrote: On improving accountability to deliver results

• Blake McKinlay: I understand the concerns around the costs of RBF, however, one of the key strengths of RBF is increasing accountability on implementers to deliver results. Still if people are opposed to RBF, what are some other ideas regarding how to increase accountability? I would argue we have all been frogs in a pot of producing unsatisfactory results for too long and are now 'ok' with it.

I like the frog metaphor in that regard; Glad I am not the only one that feels like that.

While RBF seems like a great idea in theory, in practical terms it seems more suitable towards encrusted government programmes (both in the developed and the developing countries) where the flexible engagement of large private sector service providers that are operating on their own risk can reduce costs and improve the service even when factoring in their profit. One can argue about problems with democratic accountability, or that government agencies should be reformed to be more effective, but many practical examples show that here some sort of flexible out-contracting can work well.

In the "NGO world" however, RBF seems to be a "fix" to an entirely different problem, which was created by an equally well meaning and theoretically sound idea that (in my opinion) turned out to really hurt accountability and implementation results:
The idea to shift from direct implementation by the international NGO itself, to work with "local partners".
Without bad intentions, this has turned into a very convenient way to shift the blame if something goes wrong to often tiny and hardly established (and sometimes corrupt) local NGOs (however as the int. NGO knew before, e.g. "we will build their capacity" this is in my eyes a weak excuse). Under such constructs, the only real accountability left to int. NGOs is financial (as one can easily see by their staff structure), and under such circumstances RBF seems like an "convenient" way to try and shift even that away (again to local partners that lack the capacity and thus this "scheme" will not really work).

As such I wouldn't really mind if institutional donors would turn the stick around and offer RFB funding to international NGOs (that often are capable of taking the risks if not constrained by other non-RBF funding requirements) as that would probably make them return to direct implementation and thus more tangible results.

(Disclaimer: limited(!) cooperation with "local partners" can of course do good, and working together with one local partner over decades, like the Red Cross societies are for example doing it, can result in an sufficiently strong local partner to also do RBF with them).

I would like to answer some of the questions that came up in our RBF webinar yesterday (RBF = results-based financing) which Pippa had listed above. Perhaps others want to answer the other questions, namely those on RBF’s ability to reach the right people and the poor; or others may want to add their own perspective on these questions and answers.


On improving accountability to deliver results

Blake McKinlay asked: I understand the concerns around the costs of RBF, however, one of the key strengths of RBF is increasing accountability on implementers to deliver results. Still if people are opposed to RBF, what are some other ideas regarding how to increase accountability? I would argue we have all been frogs in a pot of producing unsatisfactory results for too long and are now 'ok' with it.

My answer:

I would agree with Blake about increasing accountability. I think people oppose to RBF because of its market disruption nature. In EMW (East Meets West) case, EMW Board was reluctant in the beginning as it was too much risk but once they understood the benefits of RBF, they even put their own resources behind it in case we did not perform to relieve the organization from the financial risk. Fortunately we did not have to call on this reserve. Our partners also opposed to it in the beginning as they thought this was unheard of and too difficult. But now they apply RBF with their own resources as they see the benefit of delivery of results and increasing accountability, not to talk about transparency from the cost side. RBF time will come with more evidence, but we also need to come out with clearer evidence on whether this is more preferable than traditional financing with good implementers. If I can be so bold to say that we would succeed with traditional financing, but RBF gives us the flexibility and the incentives to become even more efficient.


On sustainability

Goutam Aryabhusan asked: How to verify that the changed behavious stands for long?

My answer:
On sustainability question, RBF instrument does not really allow us to verify sustainable changed behaviors. In CHOBA case, RBF is one of the instruments used along side with other tools such as CLTS, value chain development, finance, behavioral change (BC) campaign etc. The difference is that the payment for the mobilizers is based on results, which are defined as the hygienic latrines built and used. If you go back to watch the video that we sent prior to the webinar (see above), you will see the definition of hygienic latrines and the activities that took place in order to arrive at results. We can only verify the BC by observation and alert our partners to step up their campaign. We cannot withhold the payment that is based on hygienic latrines.


Tripti asked: do you think that lack of enabling services such was water for the facility is a challenge?

My answer: Our experience demonstrates that the lack of water facility is an inconvenient factor, but not a constrained factor for sanitation and hygiene. Where people prefer to upgrade to septic tank or pour flush latrines then they will need water. We see an accelerated demand from the communities for sanitation when there is a piped water connection. Quite often when households decide to invest in hygienic latrines (in Vietnam, mostly septic tank), they would like to invest also in bathing facilities next to the latrines, and thus water helps facilitate it.

And a couple of questions specifically to Thrive Networks:

Blake McKinlay: From my understanding the verification process is essential and can be quite time consuming. Have there been any challenges and/or lessons learned here you can share?

Here are some lessons:
1. Invest in technology from the start of the project if one can afford it. We made the mistakes to start our M and E (Monitoring and Evaluation) system which is essential for the verification manually, with paper excel sheets. We were also too ambitious in information gathering from households in enumerating them. We were concerned about gaming and therefore we verified more than 70% of the list submitted to us from our partners. The quality of data was very bad to start with and we had to generate our own data. So the lesson learnt here is that you should assess the quality of the existing baseline data, be clear about what you want to verify, and stick to the most simple way to verify the results. But agree in advance with donors the lag time for establishing the M&E system and test it out. Maybe donor would be willing to have a development period when this testing would be carried out.

2. We can get away with verification for the Conditional Cash Transfer without the laborious verification process that we have now from the enumerated database. For household rebate, one cannot avoid the enumeration process

3. Train your partners well in data collection and reporting. Structure incentives in quality data collection, but also penalties when they are bad.

4. There will be gaming, so need to enforce a firm policy of rejection of results submitted that are incorrect. But there is a nuance to this. We were concerned in the beginning that the zero tolerance policy that we designed was too tough and would discourage our partners. We did encounter this problem among others, and hence we did miss our first year target. We adjusted the policy (but not abandoned it) while at the same time built capacity of our partners. Once our partner realized that RBF is beneficial to them, then they can tolerate the strict policy better and therefore less gaming, and hence less risk for us in meeting the target
There are other short cuts we could take to reduce the time, but once we get our partners in the routine, we hesitate to refine it for fear of confusing them. But you really need to invest time in the beginning to think through and consult implementing partners. Our partners in Vietnam have not been engaged in M&E before and it was such a challenge to implement it. I think it was easier in Cambodia with the Provincial Department of Rural Development (PDRD). But now, it is a piece of cake for our partners and they also apply to other sectors that we are not engaged in.


Theodora Adomako-Adjei asked: can you elaborate on what you mean by product innovations not yet proven?

For example, we were considering to promote some technology from reinventing the toilet and thought that it would solve our FSM problem. Yet the technology was not proven in Vietnam and not accepted, and thus it would be risky for us to spend our resources on this product with uncertain results. So unless you are certain about the consumers' acceptance of the product, you should not use RBF to promote the product. I think Jan Willem also referred to this point from his experience, RBF works best where results can be predicted with certainty.

Regards,
Minh Chau

Minh Chau Nguyen

Formerly with Thrive Networks & responsible for the CHOBA project before handing over to Jeff Albert in January 2015
Now with Results for Development
Washington, DC, USA
www.r4d.org


* Note by moderator:
Abbreviations:
MFIs = Micro finance institutions
EVM = East meets West / Thrive Networks
FSM = Fecal sludge management
CHOBA = Community Hygiene Output Based Aid
PDRD = Provincial Department of Rural Development in Cambodia
RBF = Results-based financing

We have started a full list of abbreviations here and invite everyone to add to it:
en.wikipedia.org/wiki/Wikipedia:WikiProj...iations_and_acronyms

Hi everyone,

Many thanks to all who joined the RBF webinar yesterday. It was great to see so many people and such a high level of interest and excellent questions. Many of the questions were answered in the chat rooms but as always we couldn’t get to you all so as promised I am posting a few outstanding questions here and encourage all of you to continue the discussion here.

On improving accountability to deliver results

• Blake McKinlay: I understand the concerns around the costs of RBF, however, one of the key strengths of RBF is increasing accountability on implementers to deliver results. Still if people are opposed to RBF, what are some other ideas regarding how to increase accountability? I would argue we have all been frogs in a pot of producing unsatisfactory results for too long and are now 'ok' with it.

On RBF’s ability to reach the right people and the poor.

• Tripti: investments from MFIs and donors is also limited, often due to high risk ...does that mean we haven’t been able to meet the expectations of the people at the bottom wrt products, services offered?
• Edward Guzha: How do we deal with possibility of service provider selling to non-WASH consumers for cash instead of vouchers?

On sustainability

• Goutam Aryabhusan: How to verify that the changed behavious stands for long?
• Tripti: do you think that lack of enabling services such was water for the facility is a challenge?

And a couple of questions specifically to Thrive Networks:

• Blake McKinlay: From my understanding the verification process is essential and can be quite time consuming. Have there been any challenges and/or lessons learned here you can share?
• Theodora Adomako-Adjei: can you elaborate on what you mean by product innovations not yet proven?

Of course there was much more debate to be had on many aspects of the call including upwards vs. downwards accountability, and if RBF stifles or encourages innovation and we hope we can get into this more once the video is made available.

More to follow soon,
Pippa

If you are planning to attend this webinar which starts in two hours (15:00 time in Germany, but come a bit earlier if you can to mingle with other participants), then you may like to read up about the CHOBA project in Vietnam and Cambodia which will be used as an example for results based financing in this webinar.

I have just posted some more information about the CHOBA project here on the forum:
forum.susana.org/forum/categories/164-fi...-thrive-networks-usa

It is not yet too late to register, using the link provided earlier in this thread, i.e.
www.susana.org/en/webinar-registration