Private Utilities and Poverty Alleviation

Private Utilities and Poverty Alleviation

Market Initiatives at the Base of the Pyramid

Edited by Patricia Márquez and Carlos Rufín

Drawing on cases from electricity distribution and other infrastructure industries, and from experiences spanning Asia, Africa and Latin America, this book examines new business models to bring basic utility services to the four billion people comprising the base of the socio-economic pyramid.

Chapter 8: Delivering Utility Services to the Poor Using Output-Based Aid Approaches

Patricia Veevers-Carter and Cathy Russell

Subjects: development studies, development economics, economics and finance, development economics, industrial economics, public sector economics


Patricia Veevers-Carter and Cathy Russell CONTEXT FOR OUTPUT-BASED AID Improving access to basic infrastructure and social services for poor people around the world is critical to improving their health, environment and opportunities for development. In recent decades both donors and developing country governments have put major efforts into achieving this goal, but the challenges are great. Despite progress since 1990, around 884 million individuals lack access to safe drinking water and 2.5 billion individuals lack access to basic sanitation (WHO/UNICEF, 2008). Nearly 75 percent of sub-Saharan Africans and 50 percent of South Asians, or 1.25 billion people, still do not have access to electricity. In South Asia and sub-Saharan Africa, less than 50 percent of births are attended by skilled health staff (World Bank, 2008). One of the challenges in increasing access to basic infrastructure and social services is the gap between what it costs to deliver a desired level of service, and what can be funded through user charges. Subsidies have often played a role in funding this gap because of, for example, limited ability to pay by the poor; the ‘public-good’ characteristics of the service, which make it difficult to collect user charges; and positive economic externalities of a service, so that the benefits of one individual’s consumption are felt much more widely in society, as in the case of health care and sanitation. However, given concerns about aid effectiveness and fiscal viability, it is critical to ensure that donor or government resources are achieving the desired results...

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