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This activity funded the first comprehensive evaluation to measure the effectiveness of GPOBA Bangladesh's solar home system (SHS) technology in serving the needs of the low-income recipients (by raising the quality of life and meeting energy needs for productive purposes). The evaluation also analyzed SHS costs, service quality, and the role of the subsidy.
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The project's aim was to improve and preserve rural bridges to support connectivity and climate resiliency, and strengthen institutional management.
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This case study is part of a series prepared by the World Bank’s Global Partnership for Results-Based Approaches (GPRBA). The objective is to highlight project components that have enabled GPRBA to successfully deploy Results-Based Finance (RBF) approaches for the provision of basic services to low-income communities, with efficiency, transparency, and accountability. The present analysis is focused on the Output-Based Aid (OBA) Sanitation Microfinance program in Bangladesh.
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In 2009, a pilot project was initiated with support from the World Bank's Water and Sanitation Program (WSP). This pilot aimed to leverage private sector resources and help poor households in rural areas access affordable, high-quality sanitation facilities from local businesses. In 2016, this project was scaled up with finance from the World Bank and the Global Partnership for Results-Based Approaches (GPRBA), through the Bangladesh OBA Sanitation Microfinance Project.
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The World Bank Group—along with international and local nongovernmental organizations (NGOs)—is a longtime partner of the Bangladesh government in improving access to sanitation. Strong progress has been achieved, and the Bank Group continues to support the government’s initiatives, particularly by mobilizing the country’s well-developed microfinance sector. A $3 million GPOBA grant, supported by technical assistance, crowded in $21 million of commercial financing so that rural households could affordably invest in hygienic latrines.
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Output-based aid (OBA) is helping low-income households in rural Bangladesh access microloans to invest in hygienic sanitation facilities. The OBA grant subsidizes the cost of the facilities, reducing the overall cost for cash-constrained households, and the microloans help them to spread repayment over time. The OBA grant also serves as an incentive for local microfinance providers to participate in the program.
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In Bangladesh, a blended finance approach has been used to extend access to off-grid electricity for rural low-income households. An output-based aid (OBA) grant in combination with microcredit from local partner organizations (POs)—mostly nongovernmental organizations (NGOs) with experience in microfinance—enhances affordability of clean energy technology for low-income consumers. The POs also benefit from concessional finance through a World Bank line of credit, improving liquidity for renewable energy development.
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Image: Shutterstock
Given the significant financing gap to meet the needs of developing countries and achieve the United Nations’ Sustainable Development Goals*, governments, multilaterals and other development partners are increasingly looking to the private sector to help fill this gap. This means applying innovative financing instruments which address investor risks to help crowd in private capital, optimizing the use of scarce public resources to advance development objectives. However, this leads to another challenge—how do we achieve inclusive development while remaining attractive to the private sector?
Results-based financing (RBF) approaches provide innovative financing solutions that link funding to actual results. By shifting the focus to results, RBF enables stronger service provider and/or implementing agency accountability and provides flexibility for innovation and thus efficiency in the means to achieve those results. While a variety of RBF instruments exist to achieve a multitude of objectives, these core features make RBF an important tool for addressing specific investment barriers and strengthening blended finance approaches.
RBF adds value to blended finance investments through:
- Reduction of repayment risk: RBF can leverage private investment by reducing the risk to lenders through performance/results-based grants paid to project implementers against pre-agreed results.
- Inclusion of the poor: As private capital providers have been reluctant to lend to projects primarily targeting low-income consumers, RBF can provide the incentive for them to do so.
- Complementing other de-risking financial instruments: RBF has successfully been used alongside other risk-mitigating instruments such as partial credit guarantees.
Over the past 15 years, the Global Partnership on Output-Based Aid (GPOBA) has been building evidence on the ability of RBF to mobilize additional resources through a diverse portfolio of projects involving a mix of private finance, results-based grants and guarantees to deliver basic services to low-income communities. The following examples provide lessons on how these projects can be replicated in other countries.
Maximizing Finance for Development for the Poor (Blended Finance Overview)
Extending Access to Clean Energy for Low-Income Households in Rural Bangladesh
Expanding Hygienic Sanitation in Rural Bangladesh with Microfinance
Expanding Electrification to Low-Income Households in Rural Ghana with Microfinance
Building the Market for Urban Sanitation in Ghana
Kenya: Using Private Financing to Improve Water Services
*Based on current estimates, it could cost as much as US$4.5 trillion a year to meet the SDGs.
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"Bangladesh has one of the world’s largest domestic solar power programs, covering 14 percent of the population. This achievement was made possible through a longstanding partnership wherein the government and the World Bank worked together to expand access to clean and renewable energy, especially in rural and remote areas." GPOBA partnered with the World Bank/IDA and IDCOL to make solar irrigation and solar home systems more affordable.
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GPOBA has collaborated with the World Bank/IDA to help meet Bangladesh’s increased demand for electricity. "To preserve the environment and power up isolated off-the-grid areas, the country has invested heavily in green energy through solar home systems, solar irrigation pumps, and solar mini-grids. Now, rural Bangladeshis can access round-the-clock cheap energy to run their businesses and lighten up their homes."