Facilitating Access to Finance for Household Investment in Sanitation in Bangladesh, August 2016. World Bank.
Approach to Blended Finance: The provision of an output-based aid (OBA) subsidy to microfinance institutions (MFIs) in Bangladesh is used to help MFIs develop sanitation products and extend their reach to poorer households.
Microfinance (the provision of financial services to low-income people) is emerging as a viable avenue to facilitate increased access to finance for households to water and sanitation products, and for small-scale water service providers’ business development.
OBA is a form of results-based financing where subsidies are paid to service providers based on verification of pre-agreed water and sanitation project targets defined during project design, thereby offering a strong incentive for the delivery of results.
Combining an OBA subsidy with a microfinance loan helps reduce households’ cash constraints by spreading repayment over time, and makes investment in improved sanitation more affordable overall.