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DIBs bring together private investors, non-profit and private sector service delivery organizations, governments and donors to deliver results that society values. They provide upfront funding for development programs by private investors, who are remunerated by donors or host-country governments—and earn a return—if evidence shows that programs achieve pre-agreed outcomes. If interventions fail, investors lose some or all of their investment. The DIB Working Group explored the challenges and benefits of this new funding model for development and contexts in which it could be applied, including six case studies outlined in the group’s final report. The report includes technical considerations for implementing DIBs, and recommendations for how all actors involved can help to develop DIB pilots and the emergence of a market for this kind of approach.
The Center for Global Development, in partnership with the London-based organization Social Finance, formed a working group to explore a new development financing mechanism, Development Impact Bonds (DIBs). DIBs are an iteration of Social Impact Bonds, first launched in the UK as a way to shift incentives and accountability to results, transfer performance risk to the private sector, and increase efficiency in program implementation. Public sector entities, including the governments of developing countries and donors engaged in those countries, face many of the same problems that the SIB model was responding to in developed countries, and the DIB Working Group convened to explore how this model could address these problems and improve development outcomes.
The report of the DIB Working Group sets out proposals for Development Impact Bonds, and the Working Group’s conclusions on how this approach could improve the quality and efficiency of public services in developing countries.
Owen Barder, Center for Global Development
Toby Eccles, Social Finance
Elizabeth Littlefield, Overseas Private Investment Corporation
Bob Annibale, Citigroup
Vineet Bewtra, Omidyar Network
Nancy Birdsall, Center for Global Development
Chris Egerton Warburton, Lion’s Head Global Partners
Rebecca Endean, UK Ministry of Justice
Stefan Isaksson, Swedish Ministry of Foreign Affairs
Kippy Joseph, Rockefeller Foundation
Dan Kress, Bill & Melinda Gates Foundation
Susan McAdams, World Bank
Steve Pierce, USAID
Oliver Sabot, Kepler/Slingshot
Sonal Shah, Board Member Social Finance US/Independent
Smita Singh, Independent
Rachel Turner, UK Department for International Development
Peter Wheeler, Board Member Social Finance UK/Independent
No one said creating development impact bonds (DIB) was going to be easy, but that hasn’t stopped the development community from trying to get them off the ground. The Fred Hollows Foundation, based in Australia, has been hard at work on a DIB to address cataract blindness in Africa. As the Foundation attracts partners to help fund and implement a pilot of the cataract bond, Dr. Lachlan McDonald, the Foundation’s senior health economist, and Alex Rankin, their Global Lead for Policy, Advocacy & Research, shared some lessons learned so far. With Lachlan and Alex’s permission, we’re turning some of those lessons over to you – we hope they’re useful to others seeking to move ahead with their own DIB.
From the article:
Girls’ education in India, malaria in Mozambique, African sleeping sickness in Uganda — all are development challenges that will likely be the test cases for a new financing model known as development impact bonds. Modeled after social impact bonds, DIBs can help leverage private capital to tackle development challenges: Investors put up the money to fund a development project, a service provider or implementer carries out an intervention to tackle a project, and then an outcome payer or group of payers (in this case development finance institutions or donor agencies) pays for the success of the intervention. Under this pay-for-success model, the outcome payer disburses a return on the initial investment at a rate determined by the progress made in addressing the development challenge. But while DIBs have been generating quite a buzz, the model has yet to be tested or proven.
From the article:
Development Impact Bonds (DIBs) would work just like their big SIB brothers and sisters (also known as ‘Pay for Success Bonds’ and ‘Social Benefit Bonds’) that are being rolled out in rich countries: some delivery agent (an NGO, for example) figures out how to make a measureable improvement in some social problem, someone (usually government, perhaps philanthropy) agrees to pay for that outcome if, and only if, it is achieved, and investors provide the financing that pays for the intervention, earning some profit on the deal if the intervention is successful, measured in terms of the desired social outcome. That’s the principle. What the CGD report does extremely well is draw together detailed case studies of how this might work in practice. From reducing sleeping sickness in Uganda, to providing basic education in Pakistan, to supporting entrepreneurs, the report explains how DIBs could be the solution.
Read the full article.