Morocco is a middle-income country withgood water infrastructure that provides access to safedrinking water and sanitation to the majority of the urbanpopulation. In 2005, Morocco made it a priority to extendservice to poor peri-urban settlements, and encouragedoperators and local governments to reduce connection feesfor their inhabitants. These connection fees had been pricedat marginal cost, which represented a major obstacle forpoor populations to connect to piped service. The governmentand the operators of water utilities in Casablanca, Meknes,and Tangiers consequently requested a grant from the GlobalPartnership on Output-Based Aid (GPOBA) to pilot theintroduction of performance-based subsidies to encourageservice expansion under an innovative output-based aid (OBA)approach. Initial results show that this approach is helpingto refocus service provision on household demand, which hasincreased accountability, strengthened partnerships betweenlocal authorities and operators, and made monitoring ofservice delivery a priority. The World Bank is now workingwith the government to plan a scale-up program.