Abstract
There is increasing awareness that supply subsidies for health and education services often fail to benefit those that are most vulnerable in a community. This recognition has led to a growing interest in and experimentation with, consumerβled demand side financing systems (CLβDSF). These mechanisms place purchasing power in the hands of consumers to spend on specific services at accredited facilities.
International evidence in education and health sectors suggest a limited success of CLβDSF in raising the consumption of key services amongst priority groups. There is also some evidence that vouchers can be used to improve targeting of vulnerable groups. There is very little positive evidence on the effect of CLβDSF on service quality as a consequence of greater competition. Location of services relative to population means that areas with more provider choice, particularly in the private sector, tend to be dominated by higher and middleβincome households.
Extending CLβDSF in lowβincome countries requires the development of capacity in administering these financing schemes and also accrediting providers. Schemes could focus primarily on fixed packages of key services aimed at easily identifiable groups. Piloting and robust evaluation is required to fill the evidence gap on the impact of these mechanisms. Extending demand financing to less predictable services, such as hospital coverage for the population, is likely to require the development of a voucher scheme to purchase insurance. This suggests an already developed insurance market and is unlikely to be appropriate in most lowβincome countries for some time. Copyright Β© 2004 John Wiley & Sons, Ltd.