Using Output-based Aid in Urban Projects

Against the backdrop of rapidly rising
urbanization in the developing world and the growing demand
for basic services such as water and power, there is an
increasing need to improve service delivery, particularly in
low-income urban settlements. Output-based aid (OBA)
approaches, with their pro-poor targeting, have been piloted
in cities around the world. This note discusses the benefits
and challenges of using an OBA approach in urban projects
for low-income residents, provides examples of successful
innovations, and highlights features that will improve the
likelihood of success.