Results-based financing (RBF) has emerged as an important way of financing public services in general and basic services in particular. One type of RBF known as output-based aid (OBA) tends to be used to target subsidies for poor customers by providing service providers the incentives to serve the areas of greatest need. Unfortunately, experience with OBA in sanitation is limited. One of the motivation for this paper is to consider why this is the case.

The objective of this study is to investigate how output-based aid could be used to increase sustainable access to sanitation services. It looks at how such OBA schemes might be designed by analyzing the sanitation value-chain, and what institutional, financing and risk mitigation measures would be required for each type of OBA scheme. Questions discussed include "what" outputs should be subsidized and "who" are the most likely candidates to provide output-based sanitation services.