Development Impact Bonds - private investors, NGOs, governments and donors to deliver results
Promoting global development through private investments oriented towards demonstrable results. That's the main objective of Development Impact Bonds
Development Impact Bonds
Center for Global Development (CGD) and UK-based Social Finance explored a new development financing mechanism, Development Impact Bonds (DIBs), as a way to shift incentives and accountability to results, transfer performance risk to the private sector and increase efficiency in development programs implementation.
Basically, DIBs provide upfront funding for development programs by private investors, who are remunerated by donors or host-country governments - and earn a return as well – if specific sustainability and social targets or objective are met. Otherwise, investors lose some or all of their investment.
DIBs are therefore different from traditional bonds, since repayment doesn't come at fixed intervals but it depends on the achievement of specified outcomes.
The DIB Working Group - formed by CGD and Social Finance experts - explored the challenges and benefits of the new mechanism for development and contexts in which it could be applied. The Working Group made a final report which includes six case studies, technical considerations for implementing DIBs and recommendations for how actors involved can help to develop DIB pilots and the creation of a market for this model.
UBS-Educate Girls case in India
Swiss banking giant UBS and Mumbai, India-based NGO Educate Girls are currently involved in the world’s first and only commercial-scale development impact bond.
UBS is the main investor, providing $267,000 over a three-year period towards funding educational programs and boosting primary school enrollment rates in India. Educate Girls is the service provider and operates a program that aims to enroll 18,000 children from 150 villages across Rajasthan.
According to the contract, the Children’s Investment Fund Foundation, as the outcome payer, will pay UBS a portion of a return on its investment just in case of female enrollment increase and other educational achievements. Again, if any targets or objective aren't met, UBS will lose some or all of its investment.
Links
Expo - EU–ASEAN Days to enhance business and investment opportunities
EBRD - West Balkans, study for investments in food-processing sector
Photo credit: CIMMYT / Foter / CC BY-NC-SA
