The role of benefit-cost analysis in water supply and sanitation project decisions: A qualitative study of three multilateral development banks

Abstract Benefit-cost analysis commonly guides resource allocation in multilateral development banks (MDBs), but there has been limited qualitative evidence exploring its role in decision-making processes. This study examines how benefit-cost analysis is deployed in water supply and sanitation projects financed by three major MDBs: the World Bank, the Asian Development Bank, and the African Development Bank. We employed an applied qualitative approach, utilising interviews and focus group discussions with MDB staff. Topic guides focused on experiences from 13 recent projects, and on processes through which benefit-cost analyses were developed and how results informed decision-making. We analysed data using an interpretivist approach, applying both inductive and deductive coding in framework analysis. In doing so, we develop a conceptual framework for benefit-cost analysis development in MDBs, and its use in their decision-making. We find that benefit-cost analysis is generally performed before project approval and regarded as a critical element of project appraisal. However, we identified several barriers, including data quality limitations, difficulty in identifying and measuring health and non-health impacts, and inadequate planning for the monitoring of benefits during project implementation. Furthermore, while stakeholders beyond MDBs (e.g. partner governments) are often consulted during model development, their role in the process was typically limited to provision of input data and contextual information rather than in-depth contributions. Recommendations emerging from the analysis include: updating guidelines (particularly with respect to identifying benefit types); linking benefits to external data sources; training MDB staff on guideline implementation; and establishing a database of benefit-cost models to support cross-learning across projects and contexts.