Results based financing

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  • jonpar
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  • As part of the Engineering team, my role at IMC is to lead on the delivery of projects requiring specific expertise on urban sanitation (including excreta/waste/wastewater/stormwater management) focusing on technical, institutional and financial aspects in project design and implementation.
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Results based financing

Dear WG2 members,

Please take a few minutes to read the short article by Antoinette Kome (Global Sector Coordinator for Water, Sanitation and Hygiene, SNV) entitled "The promise of results based finance in WASH" at:

sanitationandwaterforall.org/partner_per...ased-finance-in-wash .

A very pragmatic perspective of results based financing which I concur with.

It would be interesting you opinions/experience of results based financing as applied to sanitation.

For further information about results based financing, I encourage you to read
"Identifying the Potential for Results-Based Financing for Sanitation" by Sophie Trémolet (November 2011)

www.wsp.org/sites/wsp.org/files/publicat...-Based-Financing.pdf

best regards,

Jonathan Parkinson
Dr. Jonathan Parkinson
Principal Consultant – Water and Sanitation
IMC Worldwide Ltd, Redhill, United Kingdom
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  • christoph
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Re: Results based financing

Dear Jonathan,

thanks for posting and interesting reading indeed.... but... what comments do you expect?

This is an extremely broad field. I will concentrate in my answer to the aspect of non sewer sanitation.

I think/hope the Results-Based Financing for Sanitation approach "City Partnerships for Urban Sanitation Service Delivery (BMGF and DfID funded)" will show interesting results.

My very strong belief is that mass movement can only be achieved when the countries see in practical examples that integral non sewer santiation solutions are possible. And hopefully they start using their own (and let them be limited) funds to promote Results-Based Financing for Sanitation approaches for the sanitation utilities.
Let’s see what happens.

Regards

Christoph
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  • jonpar
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  • As part of the Engineering team, my role at IMC is to lead on the delivery of projects requiring specific expertise on urban sanitation (including excreta/waste/wastewater/stormwater management) focusing on technical, institutional and financial aspects in project design and implementation.
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Re: Results based financing

Dear Christoph,

I'd be interested to read about people's opinions/experience of results based financing as applied to sanitation. I've been involved on the preparation of the proposal to BMBF for Freetown (the different cities are listed in Roshan's posting on the link in your message).

I too think that there is a lot of potential and can be used at various points in the sanitation chain. One example of results based financing (not a non-sewer based solution) that I think has great potential is the River Basin Clean-Up Program (PRODES) in Brazil. I think the programme stopped for a while and then recommenced but I've only read brief documentation. I'd be really keen to read a more detailed evaluation of PRODES because to date. Could India adopt a similar approach for the Ganges Action Plan which seems to have already failed twice ?

What other examples are there where RBF has been applied ? What are the experiences ? How successful have the projects been - can we conclude that they RBF does achieve greater cost efficiency? Or is it too early to say?

Jonathan
Dr. Jonathan Parkinson
Principal Consultant – Water and Sanitation
IMC Worldwide Ltd, Redhill, United Kingdom
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  • JKMakowka
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Re: Results based financing

Yes a very broad field, and very different depending on the scale you look at it, i.e. are you doing RBF with national governments, international NGOs, local NGOs or even local community initiatives?

Another point often overlooked are the very different credit access conditions, with a government or other large organisation being able to pre-finance very cheaply, while a local organisation in a developing country might have to pay a huge interest rate (or not get any credit at all). This is also a question of cost efficiency by the way.

I wouldn't claim to be an expert on the topic, but I recently looked into it for a project here in Uganda. My impression is that can make a lot of sense for direct bilateral government support on paper, but usually the administrative budget structures have a hard time adjusting to it.

When it comes to local NGOs, the above limits in credit apply, but more in general one also have to acknowledge that a shift in risk should also come with a shift in benefits. This is still a big taboo in development circles, but if one talks about RBF one also needs to talk about potential profits and employee bonuses (also because as mentioned in the article they are often the ones that go without pay for months).

In regards to international NGOs it doesn't seem to make a big difference unless the donors would give them more leeway in designing their own approaches instead of just applying to pre-determined calls as it is usually the case. However here again I see issues in conflicting spending with individual earmarked donations which do not allow easy shifting.

Overall I am a bit sceptical when it comes to RBF outside of what it seems to have been originally invented for (bilateral government support and large utility parastatals contracts).
If implemented at NGO level it will result in a further commercialisation of those, just like many already operate on a quasi consultancy level. This has certainly some good aspects to it, but I think the sector as a whole is not really willing to go down that road. This is especially because people employed in development aid largely fall into the charity / social worker or alternatively government like administrator categories, plus some technicians... however all of these are not business minded people for the most case. Thus a top down donor driven RBF approach is doomed to fail.

A bit outside of the typical RBF debates, a community fund piloted here in Uganda is a nice example of creative thinking though. Instead of funding typical "software" activities directly, the target communities are invited to apply for a financial support to a self administrated "village bank" under the precondition that certain criteria are met. This is what I would call a "soft RBF" as from a community perspective the donor intended results are only a side effect and the resulting "profits" can be used as they see fit.
In addition it lowers the efforts and costs of monitoring by the donor agency, as it is in the interest of the communities to provide the "proof" of the met criteria themselves (and that at a much lower opportunity cost than the donor agency could do it).
Edit: however lessons need to be learned from unintended negative effects of "ODF awards" in government run CLTS programmes, which is ultimately not that different.
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  • F H Mughal
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Re: Results based financing

Dear Jonathan,

Sophie Trémolet's publication is interesting. RBF is a relatively new approach. Here, we do have contract-based performance approach (mainly initiated by the donor agencies in their projects). Though microfinancing is fairly common in urban areas here, it is yet to find its place in rural areas in the sanitation field. Purely local and community-based, small-scale financing approach (called "committee" in local jargon - pooling of financial resources among few houses) is common in rural areas.

I would love to see the RBF approach experiences in other countries, and the case studies. I see, you have also desired for that.

I have one question to ask: Assuming there are no significant experiences and case studies in the field of RBF, will it be safe to assume that RBF is still in its infancy stage?

Regards,

F H Mughal
F H Mughal (Mr.)
Karachi, Pakistan
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  • JKMakowka
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Re: Results based financing

Well drilling has been done with "no water - no payment" clauses on a quite large scale with very mixed results. But I guess it is probably the most well studied and tested form of RBF.
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  • christoph
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Re: Results based financing

the FSM book
correctly "Faecal Sludge Management
Systems Approach for Implementation and Operation"
treates this subject as well in
Chapter 13 pp. 273
Financial Transfers and Responsibility in Faecal Sludge Management Chains
Elizabeth Tilley and Pierre-Henri Dodane

Christoph
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