| Notes |
IMPACT BONDS IN
DEVELOPING COUNTRIES:
Early Learnings from the Field
2 | IMPACT BONDS IN DEVELOPING COUNTRIES
Emily Gustafsson-Wright is a fellow at the Center for Universal Education at Brookings
Izzy Boggild-Jones is a research analyst at the Center for Universal Education at Brookings
Dean Segell is a manager at Convergence
Justice Durland is a knowledge associate at Convergence
SEPTEMBER 2017
IMPACT BONDS IN
DEVELOPING COUNTRIES:
Early Learnings from the Field
4 | IMPACT BONDS IN DEVELOPING COUNTRIES
ACKNOWLEDGEMENTS
The authors would like to thank
many people for their contributions
to this study. First, Alison Bukhari,
Toby Eccles, Safeena Husain, Jane
Newman, Peter Vanderwal and Maya
Ziswiler for their helpful comments,
feedback and insight on earlier drafts
of the report. In addition, we would
like to thank all those who supported
with data collection for the Deal Book,
and provided real time updates on the
factsheets for each deal. We would
also like to acknowledge those who
participated in the impact bonds
workshop in London in November
2016, whose valuable insights have
formed the core of this report. We
are particularly grateful for the
contributions of stakeholders involved
in the contracted impact bonds with
whom we have had more in-depth
conversations over the last several
years.
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connects, educates, and supports
investors to execute blended finance
transactions that increase private
sector investment in emerging
markets. Convergence features three
offerings: (1) Investment Network:
An online platform where investors
can connect with deals in emerging
and frontier markets. (2) Market
Building Tools: Knowledge resources
to help investors improve their
blended finance understanding and
capabilities. (3) Design Funding: Grant
funding for practitioners to design
innovative financial instruments that
would otherwise be too risky or
complex to pursue.
5 | EARLY LEARNINGS FROM THE FIELD
TABLE OF CONTENTS
INTRODUCTION
IMPACT BOND PRIMER
GLOBAL LANDSCAPE AND DEAL BOOK ANALYSIS
IDENTIFYING APPROPRIATE INTERVENTIONS
AND SERVICE PROVIDERS
MANAGING RELATIONSHIPS WITH GOVERNMENT
AND DONOR OUTCOME FUNDERS
IDENTIFYING METRICS AND STRUCTURING PAYMENTS
DEVELOPING THE OPERATING MODEL,
STRUCTURING THE VEHICLE, AND RAISING CAPITAL
IMPLEMENTING THE IMPACT BOND AND MEASURING IMPACT
CONCLUSIONS AND NEXT STEPS
REFERENCES
ANNEX A:
CASE STUDIES OF CONTRACTED IMPACT BONDS IN DEVELOPING
COUNTRIES
ANNEX B:
GLOSSARY OF ACTORS
ANNEX C:
POTENTIAL EVALUATION METHODOLOGY BY OUTCOME FUNDER GOALS
ANNEX D:
DEAL BOOK
06
08
14
24
29
35
42
49
54
58
61
66
74
76
6 | IMPACT BONDS IN DEVELOPING COUNTRIES
INTRODUCTION
While remarkable progress has
been made in human development
indicators in recent decades,
significant global challenges remain.
Over 800 million people are living on
less than $1.25 a day (United Nations
Development Programme, 2017;
World Bank, 2017), and 263 million
children and young people are out
of school (Education Commission,
2016). The United Nations’ sustainable
development goals (SDGs) outline
an ambitious global agenda for
ending poverty and hunger, ensuring
good health and quality education,
and promoting jobs and reduced
inequalities. However, governments
and multilateral organizations will face
considerable challenges achieving
these aims. In education alone, the
Education Commission in 2016
estimated a funding gap of $1.8 trillion
per year to ensure quality education
for all children.
Achieving the SDGs will require
governments and multilaterals
to develop and apply innovative
financing tools to make the best
use of existing funds. Results-based
financing represents one tool that
governments and multilaterals can
use to ensure that funds are directed
most effectively toward populations
in need. Ensuring that resources
are spent only on interventions
that achieve desired results has
the potential to better target social
services and to hold funders and
service providers accountable
for what they deliver. Social and
development impact bonds, one
form of results-based financing,
have the potential to shift the
focus of participants to outcomes,
encourage performance management
and adaptability, promote learning
through evaluation, and create a clear
case for investing in what works.
In 2015, the Brookings Institution
published a report on the potential
and limitations of impact bonds,
which chronicled the development
of the first 38 impact bonds in highincome countries and analyzed
the landscape (Gustafsson-Wright
et al., 2015). This report takes the
field further forward, exploring the
lessons learned in the development
of impact bonds in low- and middleincome countries, bringing together
the findings from interviews with
stakeholders and research into the
impact bond space conducted by
the authors over the course of a
year. In addition, the report draws
on discussions from an intensive
daylong workshop held in London
in November 2016, in which impact
bond practitioners from developing
countries shared their experiences
7 | EARLY LEARNINGS FROM THE FIELD
and early lessons learned. The report
includes a Deal Book with detailed
fact sheets for all impact bonds in
developing countries, featuring both
the four contracted and 24 in design
phases, as of August 1, 2017.
The following analysis indicates the
wide range of deals in design phases
in developing countries, ranging
in terms of country, sector, size of
returns, and evaluation methodology.
Emerging from the analysis, the
recorded discussions in a one-day
workshop with practitioners, and indepth interviews with stakeholders
from the contracted deals, we have
identified five key issue areas in the
design and implementation of impact
bonds, which the following sections
will explore.
1. Identifying appropriate
interventions and service
providers.
2. Managing relationships with
government and donor outcome
funders.
3. Identifying metrics and structuring
payments.
4. Developing the operating model,
structuring the vehicle, and raising
capital.
5. Implementing the impact bond and
measuring impact.
8 | IMPACT BONDS IN DEVELOPING COUNTRIES
Impact bonds blend impact investing,
results-based financing, and publicprivate partnerships (see Figure 1).
In an impact bond, private investors
provide up-front capital for social
services and are repaid by an
outcome funder contingent on the
achievement of agreed-upon results.
In the case of a social impact bond
(SIB), also called pay-for-success
(PFS) in the United States and social
benefit bonds (SBB) in Australia, the
outcome funder is a government
entity. In the case of a development
impact bond (DIB), “development”
referring to their primary application
to low- or middle-income countries,
this is usually a third party such as
a donor or foundation (Center for
Global Development and Social
Finance, 2013). Since there are
only three DIBs with operational
experience, much of the analysis of
this report focuses on the design and
negotiation phases of the impact
bond contracting process.
Impact Bonds: A Confluence of Trends
PUBLIC PRIVATE
PARTNERSHIP
IMPACT INVESTING
PAYMENT
BY RESULTS
IMPACT
BONDS
FIGURE 1
Source: Authors’ elaboration
IMPACT BOND PRIMER
9 | EARLY LEARNINGS FROM THE FIELD
IMPACT BOND STRUCTURE AND MECHANICS
While impact bonds are structured in
multiple ways, the basic mechanics
can be described as in Figure 2.
Most impact bonds involve three
main types of actors: the investors,
who provide up-front capital to the
service providers to deliver social
services to the population in need.
Contingent on the achievement
of results, the outcome funder
repays the investors their principal
plus an agreed-upon return on
investment. Impact bonds often also
involve several other key players.
These include an evaluator, usually
external to the service provider,
who verifies or evaluates whether
agreed-upon outcomes have been
achieved. Other evaluations of the
intervention itself may also take
place in parallel, and performance
management of the service provider
is also typical, but the role of the
evaluator is to assess whether
impact metrics are achieved. An
additional, but not necessary, actor
can be an intermediary who often
has the responsibility of raising
capital and arranging negotiations
among the participants. The
intermediary can also support the
service provider in performance
management. Sometimes another
entity can provide technical
assistance in, for example, selection
of outcome metrics and repayment
terms. Legal support from lawyers
who are knowledgeable in this form
of contracting is almost always
required.
While the basic structure of impact
bonds in developing countries
has tended to follow the same
patterns observed in high-income
countries, a key difference is the
greater need for a risk management
element. Implementing impact
bonds in low- and middle-income
countries involves the development
of contextual understanding about
the needs of outcome payers and
investors in a riskier environment
than the one faced by participants
in high-income countries. For SIBs
in high-income countries, one of
the driving forces has been the idea
that the payment by government is
drawn from the future cost savings
provided by successful preventive
interventions. In developing
contexts—and particularly in DIBs, in
which the outcome payer is not the
government—quantifying the value of
interventions to each organization is
much more complicated, and in these
cases future savings are less likely to
be a driving force.
10 | IMPACT BONDS IN DEVELOPING COUNTRIES
VARIATIONS ON THE IMPACT BOND STRUCTURE AND
MECHANICS
Although each impact bond follows
a unique path to development, four
major stages have been identified
(Gustafsson-Wright et al., 2015):
a feasibility study; structuring the
deal; implementation; and evaluation
and repayment. Within the feasibility
study, the social challenge is
identified and the feasibility of using
an impact bond to resolve that
challenge is explored. To structure
the deal, an outcome funder must
agree to enter the contract, capital
must be raised, the technical details
such as the specific intervention and
outcome metrics are decided, the
service provider is procured, and
contracts are finalized. After this, in
FIGURE 2 Impact Bond Mechanics
2
OUTCOME FUNDER
3 INVESTOR 1
SERVICE PROVIDER
11 | EARLY LEARNINGS FROM THE FIELD
the implementation stage, services
are provided to the population in
need, and the performance of the
service provider is monitored and
managed. Finally, verification of
agreed-upon outcomes takes place
and payment to investors occurs
contingent upon their achievement.
Table 1 summarizes the types of
organizations that are active in each
role in impact bonds in developing
countries. A more comprehensive
overview of the organizations
working in each impact bond can be
found in the Deal Book, later in the
report. Some of the same types of
organizations are taking on different
roles in different impact bonds: For
example, foundations are acting
as outcome funders and investors,
while international organizations
are both investors and service
providers. Even within the same
impact bond, the same actor may
play different roles, for example
acting as both an investor and a
service provider.
Role Types of organization
Outcome funders Foundations or philanthropists; multilaterals, bilaterals or intergovernmental
financial institutions (IFI); governments; non-profits; corporate giving;
investment funds
Investors Foundations or philanthropists; multilaterals, bilaterals or intergovernmental
financial institutions (IFI); impact investing firms; banks; investment funds;
institutional investors
Service providers Nonprofits, international organizations, nongovernmental organizations,
development organizations, charities, impact investors, community organizations
Intermediaries Advisory organizations
Technical assistance
providers
Social consultancy organizations, law firms, think tanks, universities
Evaluators Research institutes, academics, professional services firms
TABLE 1 Actors in impact bonds in developing countries
Source: Authors’ research
12 | IMPACT BONDS IN DEVELOPING COUNTRIES
Impact bonds can be developed
on their own, as an individual
transaction outcome bond contract,
or as part of an impact bond fund,
in which multiple impact bonds
are contracted for the same issue.
Seven outcome funds have been
launched in the United Kingdom
(U.K. Centre for Social Impact
Bonds, n.d.): The first, launched in
2012, was the Innovation Fund, a 30
million-pound pilot program that
contracted for outcomes for young
people aged 14 and over (Griffiths
et al., 2016); this was followed by
the Youth Engagement Fund (U.K.
Cabinet Office et al., 2014), launched
in 2014, aimed at disadvantaged
young people, and the Fair Chance
Fund, also launched in 2014, for
youth homelessness. The Social
Outcomes Fund and Commissioning
Better Outcomes Fund ran in
parallel to support the development
of SIBs for complex policy areas
and closed to applications in 2016
(Big Lottery Fund, n.d.). A fund for
preventing rough sleeping (DCLG
Rough Sleeping SIB Fund) was
announced in 2016, providing up
to 10 million pounds in outcome
funds for reducing homelessness
(U.K. Department for Communities
and Local Government & Prime
Minister’s Office, 2016). Finally, the
U.K. government has committed
80 million pounds to the Life
Chances Fund (U.K. Cabinet Office
& Department for Digital, Culture,
Media, and Sport, 2016), for
prospective impact bonds.
With an impact bond outcome fund,
a rate card may be issued in which
the outcome funder lays out the
price it will pay for each outcome,
and multiple service providers can
be engaged to achieve different
results. In the Innovation Fund rate
card, the Department for Work and
Pensions set maximum prices for the
outcomes it wanted: For example,
it was willing to pay a maximum of
700 pounds per participant for an
improved attitude to school and 2,000
pounds for sustained employment
(U.K. Government, n.d.).1 Funding for
SIBs was awarded after a competitive
bidding process.
In South Africa, two impact bonds
in design for maternal and early
childhood outcomes have also been
designed as impact bond outcome
funds (Gardiner & Gustafsson-Wright,
2016). Another outcomes fund is
under discussion for India, and other
outcomes funds for education and
refugees are also under discussion.
Some have suggested that outcome
funds could be a means to reach
more beneficiaries, given that the
individual transactions to date have
been relatively small (Bellinger et al.,
2016; Rogerson & Schäferhoff, 2016;
Schäferhoff & Burnett, 2016).
1. Equivalent to approximately
$1,200 and $3,300, respectively,
in June 2011.
13 | EARLY LEARNINGS FROM THE FIELD
FIGURE 3 Potential and Limitations of Impact Bonds
INVEST
IN PREVENTION
REDUCE RISK
FOR GOVERNMENT
SUPPORT EXPERIMENTAL
INTERVENTIONS
DRIVE PERFORMANCE
MANAGEMENT
INCENTIVIZE
COLLABORATION
SUSTAIN
IMPACT
FOCUS
ON OUTCOMES
ACHIEVE
SCALE
BUILD A CULTURE
OF MONITORING + EVALUATION
CROWD IN
PRIVATE FUNDING
DEMONSTRATED EVIDENCE
LACKING EVIDENCE
14 | IMPACT BONDS IN DEVELOPING COUNTRIES
GLOBAL LANDSCAPE
AND DEAL BOOK
ANALYSIS
As of August 1, 2017, there were 90
SIBs contracted around the world, with
all but one (the Colombia Workforce
Development SIB) in high-income
countries. Three DIBs have been
contracted: Educate Girls in India
(Gustafsson-Wright & Gardiner, 2016),
which aims to boost enrollment and
learning, a DIB for improving cocoa
and coffee production in Peru (Finance
MAP 1 Contracted Impact Bonds Globally
>30
10–30
5–10
3–5
<2
15 | EARLY LEARNINGS FROM THE FIELD
Alliance for Sustainable Trade, 2015)
and the International Committee
of the Red Cross Programme for
Humanitarian Impact Investment (PHII).
The Deal Book in Annex D includes
the four contracted impact bonds in
developing countries, as well as 24
other impact bonds currently in design.
Map 1 displays the contracted impact
bonds around the world as of August
1, 2017, with the darker shades of
blue representing a higher number
of impact bonds. The U.K., where the
first impact bond was developed,
has the largest number, at 36, and
the United States follows with 16.
The Netherlands has eight impact
bonds, Australia has six, Canada four,
Portugal four, Israel, France, Finland
and South Korea have two each,
and Austria, Belgium, Colombia,
Germany, India, Japan, New Zealand,
Peru, Sweden, and Switzerland have
one each. The ICRC PHII is being
implemented in three countries: Mali,
Nigeria and the Democratic Republic
of Congo.
The 24 impact bonds in design
stages in developing countries can
be seen in Map 2. South Africa has
the most, with four impact bonds in
design, while Brazil, Cameroon, India,
Palestine, and Uganda each have
two.
MAP 2 Impact Bonds in Design Process in Low- and Middle-Income Countries
4
3
2
1
16 | IMPACT BONDS IN DEVELOPING COUNTRIES
SECTORS IN IMPACT BONDS IN LOW- AND MIDDLE-INCOME
COUNTRIES (CONTRACTED AND IN DESIGN)
Of the 28 impact bonds in developing
countries either contracted or in
design phases, 11 are for interventions
in the health sector, including the
treatment of cataracts, nutritional
education for prediabetic women, and
improved maternity care. After this,
employment (six), agriculture (five),
and education (four) are the next
largest sectors. Social welfare has
two impact bonds. The dominance
of the health sector in low- and
middle-income countries contrasts
with the sectors represented in
currently contracted impact bonds
in high-income countries, where (as
of August 1, 2017) employment is the
largest sector (38 impact bonds),
followed by social welfare (28).
These sectoral differences between
high-income and developing
countries likely indicate different
needs and priorities. Several of the
health interventions in developing
countries focus on areas less likely to
be needed by populations in highincome countries, such as water and
sanitation or malnutrition. Moreover,
the priorities in developing countries
will also be driven by the priorities
and strategic objectives of the
HEALTH
AGRICULTURE
EDUCATION
EMPLOYMENT
SOCIAL WELFARE
11
5
4 2
6
Sectors in Impact Bonds in Low- and Middle-Income Countries
(CONTRACTED AND IN DESIGN)
FIGURE 4
17 | EARLY LEARNINGS FROM THE FIELD
outcome payers; the emphasis on
health also indicates an alignment
with the goals of the SDGs.
However, employment appears
to be a popular sector for impact
bonds across both high-income and
developing countries, many of which
focus on young people as target
beneficiaries. In the U.K., education
and employability outcomes for
14- to 24-year-olds were targeted
by the Innovation Fund as a means
of reducing long-term dependency
on the welfare state (Griffiths et al.,
2016). As a sector, employment may
therefore be particularly suited to
the impact bond model, because
of the potential for positive public
and private benefits—particularly if
the targeted population is younger
and will spend more time in the
workforce.
BENEFICIARIES IN LOW- AND MIDDLE-INCOME COUNTRIES
(CONTRACTED AND IN DESIGN)
The target populations for many
of the impact bonds contracted or
in design in developing countries
are marginalized, or vulnerable
groups that meet specific sets of
criteria. Many of the impact bonds
target low-income individuals,
or those living in disadvantaged
areas, while women and young
people are also frequently targeted.
Some of the impact bonds have
specific criteria to target a number
of these groups; for example, the
Colombia Workforce Development
SIB targets poor, vulnerable high
school graduates displaced because
of political conflict. The number
of beneficiaries that the impact
bonds target range from 100 for the
Palestine Type II Diabetes Mellitus
(T2DM) DIB to 400,000 for the India
(Rajasthan) Maternal and Newborn
Health DIB. Several target families or
households, rather than individuals,
such as the Sustainable Cocoa and
Coffee Production DIB in Peru.
CONTRACT LENGTH IN IMPACT BONDS IN LOW- AND
MIDDLE-INCOME COUNTRIES (CONTRACTED AND IN DESIGN)
The length of the impact bond
contracts ranges from 10 months
to five years, with an average
length of 42 months. As Figure 5
indicates, for those deals for which
the contract length is available,
more than half are for 30 to 50
months. Two impact bonds have
contracts of under two years: the
cocoa and coffee DIB in Peru and
the Colombia Workforce SIB, both
of which have been contracted. For
currently contracted impact bonds
in high-income countries, short
18 | IMPACT BONDS IN DEVELOPING COUNTRIES
Length of Contract of Impact Bonds in Low- and
Middle-Income Countries (CONTRACTED AND IN DESIGN)
FIGURE 5
LENGTH OF CONTRACT (IN MONTHS)
5 10 15 20 25 30 35 40 45 50 55 60
Source: Impact Bonds Deal Book
19 | EARLY LEARNINGS FROM THE FIELD
contract duration is also the norm.
The average contract length is 54
months, or 4.5 years, although the
median is 48 months, indicating that
half of the contracts are shorter
than four years. Contract lengths are
likely to emerge from negotiations
among stakeholders and need to be
long enough to ensure that results
can reasonably be expected in
that time, but not too far into the
future to discourage investors or to
constrain the budgets of outcome
funders.
CAPITAL COMMITMENT IN IMPACT BONDS IN LOW- AND
MIDDLE-INCOME COUNTRIES (CONTRACTED AND IN DESIGN)
Many of the impact bonds in the
Deal Book are still in their design
phases, which means that data
availability on up-front capital
commitments vary among the deals:
For some of the impact bonds, no
figure is publicly available, while for
others only a range can be reported.
The up-front capital commitments
for the impact bonds in the Deal
Book range from an estimated
$110,000 to $7.5 million, with an
average commitment of $2 million.
Five impact bonds have capital
commitments of below $1 million,
with another five between $1 million
and $5 million. The remaining impact
bond is above $5 million.
TYPE OF INVESTOR IN LOW- AND MIDDLE-INCOME
COUNTRIES (CONTRACTED AND IN DESIGN)
Foundations are the most prominent
type of investor organization
within impact bonds in developing
countries: Eight of the twelve
impact bonds for which investor
data are available involve a
foundation or philanthropist.
Four impact bonds will be funded
upfront by a multilateral, bilateral
or an intergovernmental financial
institution (IFI). As the Deal Book
indicates, foundations range from
major international philanthropic
organizations such as UBS Optimus
Foundation (UBSOF) to nationally
based foundations such as Fundación
Corona, which works only in
Colombia.
20 | IMPACT BONDS IN DEVELOPING COUNTRIES
TYPE OF OUTCOME FUNDER IN LOW- AND MIDDLE-INCOME
COUNTRIES (CONTRACTED AND IN DESIGN)
The most common type of outcome
funder across the impact bonds in
developing countries is government.
Twelve of the 20 impact bonds with
available data will be funded by
some kind of government entity—
these include funding at different
levels of government and from
different departments. Nonprofits
are also frequent outcome funders
of the impact bonds in the Deal
Book. Multilaterals, bilaterals and IFIs
are also outcome funders in eight
impact bonds.
Investor by Number of Impact Bonds They Are Involved in
(CONTRACTED AND IN DESIGN IN LOW AND MIDDLE-INCOME COUNTRIES)
FIGURE 6
Source: Impact Bonds Deal Book
FOUNDATION OR
PHILANTHROPIST
MULTILATERAL, BILATERAL
OR INTERGOVERNMENTAL
FINANCIAL INSTITUTION (IFI)
IMPACT INVESTING FIRM
BANK
INVESTMENT FUND
INSTITUTIONAL INVESTOR
8
4
2
1
1
1
21 | EARLY LEARNINGS FROM THE FIELD
RANGE OF RETURNS (CONTRACTED AND IN DESIGN)
Only limited data are available on
the maximum returns available to
investors. Since many of the impact
bonds in the Deal Book are still in
design phases, only 11 provide values
for this indicator. The maximum
returns possible are defined in several
ways across the impact bonds.
Some provide a maximum internal
rate of return (IRR), others have a
maximum percentage return, and
some cap the returns at a dollar
figure. Both the Peru coffee DIB and
the Uganda Empowering Women
and Youth in the Coffee Value
Chain DIB cap returns at $110,000.
Impact bonds that cap returns on
investment at a percentage value
range from 0.05 percent, for the
Mozambique Malaria DIB, to 10
percent for the Tajikistan Oxfam
WASH DIB. Several impact bonds
have a cap on the IRR, with India
Educate Girls DIB capped at 15
percent and the two South African
SIBs capped at 16 percent.
Outcome Funder by Number of Impact Bonds They Are Involved in
(CONTRACTED AND IN DESIGN IN LOW AND MIDDLE-INCOME COUNTRIES)
FIGURE 7
Source: Impact Bonds Deal Book
4
8
2
1
12
FOUNDATION OR
PHILANTHROPIST
MULTILATERAL, BILATERAL
OR INTERGOVERNMENTAL
FINANCIAL INSTITUTION (IFI)
GOVERNMENT
NON-PROFIT
CORPORATE GIVING
INVESTMENT FUND
4
22 | IMPACT BONDS IN DEVELOPING COUNTRIES
Impact bond name Maximum returns
Cameroon Cataract DIB 8%
Colombia Workforce Development SIB 8%
India Educate Girls DIB 15% IRR
India (Rajasthan) Maternal and Newborn Health DIB* 8% IRR (UBSOF)
15% (implementation partnership)
India Education DIB 7% IRR
Mozambique Malaria DIB 0.05%
Peru Sustainable Cocoa and Coffee Production DIB $110,000 (return of principal)
South Africa ECD Impact Bond Innovation Fund - Health 16% IRR
South Africa ECD Impact Bond Innovation Fund - Social
Development
16% IRR
Tajikistan WASH SIB 10% (estimated)
Uganda Empowering Women and Youth in the Coffee Value
Chain DIB
$110,000
Maximum Returns in Impact Bonds in Low- and Middle-Income
Countries (CONTRACTED AND IN DESIGN)
TABLE 2
*8% annualized for UBSOF component (80% of total investment); 15% return possible for the implementation partnership investment (20%).
23 | EARLY LEARNINGS FROM THE FIELD
EVALUATION METHODS IN LOW- AND MIDDLE-INCOME
COUNTRIES (CONTRACTED AND IN DESIGN)
Validated administrative data is the
most commonly used evaluation
method in developing countries, with
12 impact bonds using this type of
evaluation. This method has also been
the most popular among impact bonds
in high-income countries. This may
be unsurprising given the high cost of
quasi-experimental evaluations and
experimental designs, or randomized
controlled trials (RCTs). Two impact
bonds will evaluate their results using
historical comparison. Two impact
bonds will use an experimental design
or RCT, and two more will use an
RCT in conjunction with validated
administrative data (hybrid). Because
of the relatively early development
stage of some of the impact bonds
in the Deal Book, information on
evaluation methodology is available
for only 18 impact bonds.
12
Evaluation Methodologies in Impact Bonds in Low- and Middle-Income
Countries (CONTRACTED AND IN DESIGN)
FIGURE 8
Source: Impact Bonds Deal Book
VALIDATED
ADMINISTRATIVE DATA
HYBRID
HISTORICAL
EXPERIMENTAL DESIGN (RCT)
2
2
2
24 | IMPACT BONDS IN DEVELOPING COUNTRIES
IDENTIFYING
APPROPRIATE
INTERVENTIONS AND
SERVICE PROVIDERS
Impact bonds can address a
wide range of development
challenges in developing countries.
As described in the previous
section, most impact bonds in
the design or implementation
stage in developing countries
have focused on interventions
related to health, employment,
agriculture, or education. Given
the broad application of impact
bonds, the process for identifying
an appropriate intervention—and
often the service provider(s)—
typically depends on the “lead”
organization. Broadly, the impact
bond process in developing countries
has been initiated through two main
approaches:
1. Outcome funder driven: An
outcome funder—such as a domestic
government, aid agency, or
foundation—interested in an impact
bond selects a sector and region
of its interest. This could be driven
by a desire to innovate or solve a
problem of scaling, effectiveness, or
broad political will for a particular
sector. Alternatively, sectorally
focused teams or individuals within
outcome funding entities explore
an impact bond to solve a specific
challenge (such as incentivizing
results). Often a service provider that
the funder is familiar with—typically
a previous grantee—is the focus
of the impact bond. This approach
to service provider selection is not
always possible since some outcome
funders, particularly aid agencies,
adhere to strict procurement policies
and therefore up-front selection is
not possible, even when preferable.
2. Intermediary driven:
Intermediaries can also play a lead
role in initiating an impact bond by
identifying appropriate interventions
and service providers.
a. Often, the intermediary identifies
the development intervention
based on the priorities of potential
outcome funders or investors.
This approach ensures alignment
25 | EARLY LEARNINGS FROM THE FIELD
between these key stakeholders
during the structuring phase.
b. In other cases, an intermediary
interested in developing an impact
bond may conduct a market
analysis on a specific sector or
region to determine interventions
and service providers that
are appropriate for an impact
bond before approaching key
stakeholders.
It is essential that practitioners take a
considered approach to determining
whether to pursue an impact bond.
In general, the first step is to clearly
define the challenge that could
potentially be solved using this
mechanism. Impact bonds should
be considered if current approaches
do not produce intended results (for
example, paying for inputs is not
yielding desired impact). Second,
a variety of approaches or tools
should be considered, including
some that may not necessarily be
finance-related. Some practitioners
have started with the objective of
structuring an impact bond without
carefully considering whether the
tool is appropriate. Many warn
against this “hammer looking for
a nail” approach. Several criteria
for identifying an appropriate
development intervention and
service provider have been codified
in the following sections.
CRITERIA FOR AN APPROPRIATE INTERVENTION
A critical first step is to understand
whether any type of results-based
financing will improve efficiency
and effectiveness of service
delivery. If paying for inputs
(such as grant funding for service
providers to perform a specific set
of interventions) is not achieving
intended development outcomes,
then results-based financing, and
therefore potentially impact bond
mechanisms, may be an appropriate
tool to finance the intervention.
The rationale for using impact bond
financing can vary depending on
the impact bond and the actors.
Some view impact bonds as having
the potential to provide flexible
funding for promising but unproven
interventions to stretch their impact
(drive more results, for example).
Impact bonds benefit from a
relatively flexible structure because
the key metric(s) for success is the
desired outcomes or impact rather
than inputs. In theory, impact bonds
allow service providers to refine
and adapt their interventions (the
inputs) during the term of the impact
bond to achieve a set of agreedupon outcomes. Under this scenario,
impact bonds could be appropriate
as a transition form of financing to
determine the best-practice set of
interventions to achieve maximum
impact. Practitioners argue in this
case that impact bonds should not
be the steady state form of financing
but rather a transition form, as
they are too costly to establish and
implement, among other reasons.
The amount of flexibility enjoyed by
service providers will depend on the
26 | IMPACT BONDS IN DEVELOPING COUNTRIES
specific nature of the deal and the
demands of the investors. Investors
are likely to place more emphasis
on scaling up evidence-backed
interventions.
Other practitioners argue that
impact bonds represent an
approach to financing the scaleup of proven interventions. A
priori, outcome funders should be
willing to pay directly for the scaleup of interventions with proven
impact (and even potential cost
avoidance). The sweet spot for
impact bonds is likely somewhere
between experimentation and
scale—the middle phase—where
evidence is insufficient (or there is
some potential political barrier) for
outcome funders to pay but sufficient
for investors to engage. Thus far,
enormous scale (large number of
beneficiaries) in absolute terms has
not been seen in the use of impact
bonds, although some target very
particular populations so scale may
be present in relative terms.
An evidence-based theory of change
is helpful in determining whether
an impact bond is appropriate for
the intervention since payments
are tied to outputs (such as school
attendance) and outcomes (such as
school achievement). There is a need
to have a high degree of confidence
in the relationship between the
intervention’s proposed inputs and
outputs, and desired outcomes
and impact. All stakeholders—
investors, outcome funders, and
service providers—must agree
that the proposed intervention (a
specific curriculum, for example)
will deliver the desired outcomes
(improved learning progress, school
completion) and impact (higher
income as a result of obtaining a
well-paying job).
While the value of an evidencebased theory of change is clear,
practitioners caution that lack of
data can be a challenge in lowincome countries and that scoping
research—such as an experimental
or quasi-experimental evaluation—to
establish an evidence-based theory
of change may be a prerequisite,
while at the same time may be
expensive and time-consuming. As a
result, there is an important trade-off
between establishing an evidencebased theory of change and
keeping design costs within reason.
In some situations, an evidencebased theory of change may exist
for a similar intervention or the
same intervention in a different
region, which can be leveraged as
a proxy. Regardless, it is essential
to ensure that evidence is adequate
to attract all stakeholders to the
proposed intervention. In particular,
as mentioned, an investor requires
I do think there is a danger that
we talk about impact bonds
as if they are all the same.
Rather, impact bonds can fund
risky, transition interventions
at one end of the spectrum
and more secure and proven
interventions at the other end.
—Impact bond practitioner
27 | EARLY LEARNINGS FROM THE FIELD
enough evidence to be comfortable
that investment in an intervention
will result in impact and therefore
repayment from the outcome
funder. At the same time, if there is a
very strong evidence base, outcome
funders might rather fund the
intervention directly, as they can be
confident that the inputs will result
in outcomes and impact.
You can either identify an
intervention that already has a
strong evidence-based theory
of change or invest significant
time and effort into building
the evidence base, but the
transaction costs may get
prohibitively large.
—Impact bond practitioner
CRITERIA FOR APPROPRIATE SERVICE PROVIDER(S)
A performance-oriented service
provider with implementation
capacity is critical to the success
of an impact bond. Practitioners
note that most service providers
would describe themselves as
performance-oriented, and therefore
it is important to dig deeper into a
service provider’s track record and
management team to ensure that this
is the case.
In addition to a performance culture,
the service provider must have the
capacity to carry out the impact
bond activities: to implement
performance management systems,
monitor key metrics, and refine
the underlying business model and
approach to ensure that maximum
impact is achieved. This may mean a
dramatic culture shift, indicating that
another key element for selecting
service providers is choosing an
organization that is open to change
and capable of adapting to new
demands, which could include, for
example, changing recruitment
practices and training structures.
When we look at service
providers, we ask three key
questions:
1. What impact is the service
provider having currently?
2. Do they have adequate
systems in place to
implement the intervention
and measure impact?
3. Do they have learning
systems and a habit of
servicing problems in an
open manner?
—Impact bond practitioner
28 | IMPACT BONDS IN DEVELOPING COUNTRIES
KEY TAKEAWAYS:
There are two main approaches to identifying an appropriate
development intervention for an impact bond: An outcome funder
selects an intervention based on its priorities, or an intermediary
selects an intervention based on the priorities of outcome funders
/investors or by conducting a top-down analysis of a particular
sector and region.
There is debate on whether impact bonds are more appropriate
for transition financing to determine the best-practice set of
interventions to achieve maximum impact, or for scale financing
to expand reach and impact of proven interventions.
An evidence-based theory of change for the interventions under
consideration is a critical component, as payments are linked
to outcomes and therefore investors must be confident the
intervention will drive desired impact.
Service providers should be performance-driven and have the
capacity to implement the intervention.
The costs of designing and structuring an impact bond can be
prohibitive and should be considered and managed from early in
the development process.
1
2
3
4
5
IDENTIFYING APPROPRIATE INTERVENTIONS AND SERVICE PROVIDERS
29 | EARLY LEARNINGS FROM THE FIELD
MANAGING
RELATIONSHIPS WITH
GOVERNMENT AND
DONOR OUTCOME
FUNDERS
A NEW ROLE FOR OUTCOME FUNDERS
The research identified several issues
related to impact bonds being a
very different way of doing business.
Impact bonds require governments
and donor organizations to adapt
to a different role from that which
they have held in the past. At the
moment, outcome payers do not
have established contracting and
procurement mechanisms, meaning
that negotiations are often extended
and expensive, and each contract
process follows its own logic, with
little opportunity to learn from
the experience of other deals. The
relationship between outcome funders
and service providers may have to
change, from being more handson to simply setting the outcome
metrics and letting service providers
make decisions about the specifics of
interventions.
Historically grant-making institutions
may have difficulty loosening control
and taking a step back from frontline
services; there is a sense among
outcome funders that impact bonds
might give them less control over their
funding. This is perhaps an unexpected
finding, since at the heart of the
impact bond structure is the idea
that outcome funders will pay only
for results, and hence gain a stronger
control over their finances.
Although designing impact bonds
requires paying considerable attention
to the price of an intervention,
detailed discussions about costs
may actually increase an outcome
funder’s perceptions of risk. This is an
interesting finding from discussions
with impact bond practitioners, and
somewhat counterintuitive, since more
clarity about costs and prices should
allow for more reliable budgeting and
less risk.
30 | IMPACT BONDS IN DEVELOPING COUNTRIES
Outcome funders may also be
wary of the potential for impact
bonds to damage their credibility;
in particular, some critics worry
about paying returns to private
investors (Rosenman, 2014).
Although the money paid to
investors above the return of the
up-front capital is intended to
reflect the savings gained from
intervention, governments especially
have responsibilities to their
electorates and will be keenly aware
of the potential for negative media
coverage in handing over public
funds to private bodies.
New is expensive relative to
old, right? Any new system
involves learning how to do
things, learning how to write
the contracts, learning how to
evaluate the results, learning
how to put together the
coalitions.
—Impact bond practitioner
Spectrum of Service Inputs to Outcomes
INPUTS PROCESS OUTPUTS QUALITY OUTCOMES
FIGURE 9
Source: Martin, 2005
1 2 3 4 5
•Staff
•Facilities
•Equipment
•Supplies
•Material
•Funding
•Service recipients
•Service
definitions
•Statements of
work
•Measures of
service volume
•Units of service
•Timeliness
•Reliability
•Conformity
•Tangibles
•Other
dimensions
•Results
•Impacts
•Accomplishments
31 | EARLY LEARNINGS FROM THE FIELD
THE OUTCOME FUNDER PLAYS A CENTRAL ROLE
When an outcome funder has not
driven the development of the impact
bond, our research suggests that it
is important to engage the outcome
funder early in the design process.
Since the outcome funder will be
paying for the results of the impact
bond, it needs to be on board with
the timeline, costs, and metrics. Early
engagement is particularly important
when the outcome funder is going
to be the government, since elected
governments have the democratic
legitimacy to set policy priorities,
meaning government buy-in should
lend credibility to the impact bond.
Even if the eventual outcome funders
will be donors, it is still important to
engage with the domestic government
in developing countries to ensure
that the impact bond aligns with the
administration’s policy priorities.
However, outcome funders may also
be uncomfortable with the relatively
untested nature of the impact bond
product and may prefer to stick to
more traditional methods of service
provision. Our research with impact
bond practitioners suggests that while
funders may be wary about getting
involved at the beginning of a project,
they may be more comfortable
coming on board with something
that is more developed. There may
therefore be a trade-off between
getting early buy-in and credibility
from an outcome funder, versus a
higher comfort level for outcome
funders in later involvement.
If the outcome funder is not present
from the beginning of development,
other stakeholders will need to
find out who cares about the issue
and who is willing to pay for it.
The outcome funders in currently
contracted impact bonds (for which
there are available data) have almost
all been national or local government
entities, but as Figure 7 shows, this
field of outcome funders is widening
as the impact model is applied in a
broader range of contexts. Social
impact bonds do not have to be
funded by one organization; a pool of
outcome funders may each contribute
a share. This can provide more
outcome funding, and for interventions
at a larger scale, but may also add
more complexity, with each additional
organization bringing a new set of
priorities and interests.
Engaging with governments and
donors means establishing not only
who the outcome funder will be, but
also who within an organization is the
right person, or people, to engage with
directly on an impact bond. Working
with the right people within an
organization is crucial for the success
of an impact bond. One element of
Engage government very early
on. Even if they will not be
paying for outcomes. One way
or the other, all governments
are there to implement a social
agenda and they have the
social legitimacy to set public
policies.
—Impact bond practitioner
32 | IMPACT BONDS IN DEVELOPING COUNTRIES
this is ensuring that the impact bond
has a champion at a senior enough
level, as well as other levels, that it can
gain sufficient support and exposure.
If the outcome funder is to be the
government, then decisions need to
be made about whether to engage
with bureaucratic or political actors (or
perhaps both): While politicians may
have political capital and legitimacy,
civil servants may have more
permanence and lend the impact bond
more consistency.
CHALLENGES TO ENGAGEMENT
1. Aligning interests: Key to
managing partnerships on impact
bonds in developing countries
is identifying the development
challenges and social issues that
stakeholders want to work on. With
both governments and donors, it is
necessary to understand their areas
of interest and their priorities. With
governments these priorities may
be explicit and transparent, and can
be gleaned from ministry plans or
strategies.
Engaging with outcome funders may
also involve negotiating tensions
among participants and aligning
competing priorities. This may be in
terms of impact metrics: For example,
outcome funders may be drawn to
outcomes targets, especially if there
is not a clear idea of what works,
while service providers and investors
may prefer less risky options, such
as funding outputs. Individual donors
may also have multiple motivations
for their participation: For example,
they may seek not just specific
outcomes, but also to project a
certain image or secure employment
opportunities. Understanding the
wider priorities of the different actors
is important to negotiate a process
that is agreeable to all.
2. Changing circumstances: One
of the main challenges to effective
relationships with outcome
funders is navigating the changing
circumstances they face. This is
particularly the case when the
outcome funder is a government
or a political entity. The election
cycle can mean that support for
impact bonds can disappear very
quickly, for example after a change
in government following an election,
if the incoming administration does
not share the commitment to impact
bonds. Conversely, time constraints
can also work in the other direction:
In some countries and organizations,
policy shifts and processes may
be slow, meaning it takes time for
support for impact bonds to build.
3. Instability: A wider context of
political instability also creates
If we did make one mistake, it
was that we had somebody who
wasn’t senior enough
championing it within the
ministry.
—Impact bond practitioner
33 | EARLY LEARNINGS FROM THE FIELD
challenges when engaging with
outcome funders, particularly if
governments are unstable and
future support for impact bonds
cannot be guaranteed. In these
situations, and perhaps specifically
in developing countries, donors and
foundations can play a continuity
role, to facilitate working with
different governments over time. If
the civil service is permanent, there
are also advantages to engaging with
government at the bureaucratic level,
because this will ensure stability for
the impact bond even when political
power changes hands.
Even in nonpolitical contexts,
personnel changes within
organizations can create challenges
for impact bonds. Institutional
knowledge about impact bonds
may leave when people change
departments, creating a sense
of instability and slowing down
communication among actors in the
impact bond. These issues emphasize
the importance of intermediaries in
developing country contexts and the
risk management role they can play.
4. Crowding-in funding: Separating
financing for impact bonds from
existing funding is a key concern
for outcome funders. Governments
do not want to face competition for
their limited funding, and charitable
organizations interested in impact
bonds are keen to ensure that funding
is additional and that they will not be
diverting money from their donor base.
5. Coordinating timelines: Some
donors are also unwilling, or unable,
to commit to paying for outcomes
so far in the future, as budgets may
be done on an annual basis. There is
a pressure to spend existing funds,
since underspending may result
in tighter budgets in future years.
Governments that have previously
engaged in payment by results may
have an easier time. A potential
solution is a special purpose vehicle
(SPV): In this way money can be
allocated up-front to fund the
outcome payments in future years.
In the case of failure to achieve
outcomes, outcome funders would
have to reclaim those preallocated
funds.
6. Power imbalances: Another
potential area of tension is specific
to development impact bonds:
There may be power imbalances
between international investors
and governments in developing
countries, which could result in
contracts that are disadvantageous
to the government.
The main challenges came
when most of the people who
worked on the impact bond in
the beginning started moving
to other departments or leaving
the government.
—Impact bond practitioner
34 | IMPACT BONDS IN DEVELOPING COUNTRIES
KEY TAKEAWAYS:
To identify an outcome funder, find out who cares about the issue
and is willing to pay for it.
Engage the outcome funder early in the process of designing an
impact bond.
Key to the success of an impact bond is finding a champion in
the outcome funder organization who is senior enough to take
the process forward. This may involve sensitizing all levels of
government to the impact bond mechanism, including at the local
implementation level.
Outcome funders will need time to adapt to the new processes.
Challenges include aligning stakeholder interests; coping with
changing circumstances; institutional and personnel instability;
crowding-in funding; coordinating timelines; and stakeholder
power imbalances.
1
2
3
4
5
MANAGING RELATIONSHIPS WITH GOVERNMENT
AND DONOR OUTCOME FUNDERS
35 | EARLY LEARNINGS FROM THE FIELD
IDENTIFYING METRICS
AND STRUCTURING
PAYMENTS
METRICS
WHEN TO DISCUSS METRICS
Metrics are at the heart of an impact
bond, since the payment is contingent
on the achievement of a specific set
of results. This means the discussion
of metrics will likely be lengthy and
time-consuming, and will need to
begin early. Centering the process on
the metric could mean establishing
the goal of the outcome funder and
what it wants to pay for, and then
planning backward from that point.
CRITERIA FOR A STRONG METRIC
Several criteria for selecting effective
impact metrics in developing
countries have been collected
through practitioner experience.
These include the need for metrics to
be measurable, meaningful, and set
at the right level over an appropriate
timeframe. These criteria are similar
to those found in impact bonds in
high-income countries, where the key
feasibility criteria were that metrics
should be measurable and meaningful
(Gustafsson-Wright et al., 2015).
1. Measurable: It is important for
metrics to be readily captured in the
process of tracking the progress of
an impact bond, since the release
of outcome payments will depend
on whether the targets have been
achieved. Certain desirable outcomes
may be difficult to pin down and may
therefore be less suitable for inclusion
in an impact bond. A key part of this
is ensuring that metrics are simple;
if targets are too complicated, they
will be difficult to communicate to
service providers or wider audiences.
Service providers should understand
what they are meant to be achieving.
Simplicity may also mean cutting
It starts with defining the
metrics. That’s the heart. If you
don’t have the metrics, you
don’t have an impact bond.
—Impact bond practitioner
36 | IMPACT BONDS IN DEVELOPING COUNTRIES
down on the number of metrics. For
example, having just one headline
metric can communicate the central
goal of the impact bond.
2. Meaningful: The metrics should
also be meaningful. They should be
aligned to outcomes or changes
that the outcome funder wants to
see and that represent a meaningful
improvement in a beneficiary’s life.
There may therefore be some tension
between the first and second criteria,
and a balance needs to be struck
between selecting metrics that are
easy to measure, and measuring
the things that are truly valuable to
resolving the development challenge
at hand.
3. Set at an appropriate level:
Choosing the payment threshold is
integral to setting the impact metrics.
If targets are set too high, service
providers might hold back from
making more innovative decisions,
but setting the targets too low could
mean paying up when impact isn’t
really achieved. Setting the targets at
the right level is important to avoid
perverse incentives, or temptations
to game the system. The type of
metric that is selected will also have
consequences for risk-bearing within
the impact bond. There needs to be
a balance between selecting metrics
ambitious enough to transfer some
risk away from the outcome funder,
but not transferring so much risk
that investors are discouraged from
engaging.
4. Timeframe: The timeframe for
the impact metrics should be short
enough to please investors, but long
enough to show results.
OUTPUTS OR OUTCOMES?
Impact bonds are meant to shift
focus from inputs to outputs or
outcomes. The choice between
outputs and outcomes depends
on multiple factors. When outputs
are not good proxies for outcome
achievement, then using outcomes
as the metrics for repayment in an
impact bond is preferable. Identifying
outcomes as success criteria can
allow for more flexibility on the part
of service providers. This means, for
example, that if more effective ways
of delivering an intervention are
discovered during the project impact
bond period, then delivery can be
adapted. This is likely to be preferred
by outcome funders when it is unclear
what works to achieve the desired
outcomes.
If outputs are, however, a reliable
measure of outcome achievement, it
may be preferable to select outputs
If you’re setting, for example,
targets way too high, it can
actually be quite stifling for
providers. If you are setting
them way too low, you risk
calling it a success and then
it’s really not.
—Impact bond practitioner
The beauty of an outcomedriven payment model is
that actually you’re going to
be … incentivized to kind of
change that around.
—Impact bond practitioner
37 | EARLY LEARNINGS FROM THE FIELD
since they are often easier to measure,
which could streamline the evaluation
process. Moreover, outputs may also
be measurable over a shorter period,
which is likely to be preferred by
investors. A combination of outputs
and outcomes may be most desirable,
allowing for interim payments to be
made on outputs and longer-term
payments to be made on outcomes.
A selection of both can also distribute
risk across different types of investors
or reduce overall investment risk.
NEGOTIATING AMONG ACTORS
Stakeholders will need to decide
on what will be measured (inputs,
outputs, and outcomes), as well as
the specific indicators the metrics
will capture. This will often mean
negotiating the priorities of different
actors, a process that may slow the
development of the impact bond.
In particular, investors may be
uncomfortable with outcome metrics,
perhaps because of the perception
that they are more difficult to achieve
and therefore that the impact bond
is a more risky investment, while
outcome funders will likely seek
metrics that come closer to measuring
outcomes or impact. Each stakeholder
is situated in a specific context, which
may also have consequences for the
selection of metrics. Investors and
donors have wider responsibilities and
will have to convince their respective
constituencies of the value of their
involvement in the impact bond.
DATA QUALITY
Identifying impact metrics can be a
challenge when working in contexts
with low data quality, which can be
a particular challenge in low-income
countries. It is important to establish
whether data are available on the
metrics of choice or whether the
necessary data can be collected during
the intervention.
Low data quality can exacerbate
the tensions among stakeholders. In
these environments, outcome funders
may prefer to fund on outcomes, if
there are no strong data about the
relationship among outcomes, inputs,
or outputs. On the other hand, lack of
data may discourage investors and
service providers from agreeing to
outcome metrics, because they may
perceive the situation as more risky.
Price setting might also be inhibited by
low data quality. Without quality data,
it is difficult to cost out interventions
and then to determine how much
will be paid out for the achievement
of the metrics. Gathering quality
data on the costs of interventions
allows governments and donors to
make cost/benefit decisions and to
set achievable targets for service
providers.
Short-term solutions to low data
quality include using proxy measures,
or relying on indicators that the
government is collecting already. Yet
The fact that we have poor
data in emerging markets is
exactly why [impact bonds
are needed], because it drives
everyone to start collecting
data about things that matter,
like impact.
—Impact bond practitioner
38 | IMPACT BONDS IN DEVELOPING COUNTRIES
the low quality of data in developing
countries may be exactly the reason
that impact bonds are appropriate for
those contexts: Impact bonds can drive
a focus on the importance of data, and
data collection. This emphasis has the
potential to lay the groundwork for
improvements in data quality.
COSTS AND PRICING
Identifying impact metrics cannot
be disconnected from pricing
outcome payments. First, this means
establishing how much weight, and
therefore importance, different
metrics will have in the distribution of
payments.
An element of adaptability in the
decisions around metrics and prices
may be desirable in impact bond
metrics. Incorporating flexibility
into the design allows for learning
to take place during the process,
for example if prices or metrics
need to be changed in light of
experience. This could mean
designing the impact bond such that
payment triggers shift from outputs
to outcomes over the course of
transaction, or that metrics can
be changed during the life span of
the impact bond contract with the
agreement of all parties. However,
this type of design carries risks,
such as lack of clarity about what
constitutes success, and therefore
safeguards to protect the various
parties would be necessary.
INCENTIVE STRUCTURES
Designing the impact metrics
includes considering the incentive
structures, if any, that will be put in
place for service providers. Financial
incentives may not be necessary,
since the reputational risk of a
failed impact bond may be enough
to encourage service providers to
perform effectively. Indeed, financial
incentives may even be undesirable
if they create perverse incentives
for service providers, diverting them
from achieving the desired impacts.
However, safeguards can be put in
place to mitigate this potential risk.
Impact bond practitioners report
that investors have asked for
service provider incentives, to drive
performance and to align incentives
among the actors. Financial returns
to service providers could come in
the form of a bonus for overdelivery
of targets or as a share of the returns,
or providers could put their own
money at risk in the contract.
Incentives can also be incorporated
to target the interventions at
specific groups of individuals. This
could be in the form of setting
[We are] thinking about
how we can price metrics by
incentivizing people to go after
the hardest to reach.
—Impact bond practitioner
You can also moderate the
outcome payment triggers.
At the beginning they can be
more output based and at the
end more outcome based.
—Impact bond practitioner
39 | EARLY LEARNINGS FROM THE FIELD
different outcome payments for
different groups—for example,
incentivizing service providers to
work with the poor or marginalized.
This should push service providers
to serve those most in need, rather
than those who might be easiest to
reach.
STRUCTURING PAYMENTS
Once the metrics have been
established, the next step is to agree
on the level of payments and the
payment schedule.
DETERMINING THE LEVEL OF
PAYMENT
There are two main elements to
consider when determining the level
of payments. The first is the full cost
(staff time, resources, and so on)
of achieving the selected metrics.
These costs in results-based payment
structures tend to be higher than
the total cost of traditional grants.
Traditional grants pay only for inputs,
while results-based payments pay
for outcomes, which may be more
expensive to achieve because,
among other factors, they require
monitoring and evaluation. Since
this is generally a new way of doing
business, outcome funders may need
support to understand the reasoning
behind these cost differences.
Some practitioners advocate that
monitoring and evaluation costs
should be included in the payments,
so that the service provider is
responsible for its own performance
management. Others advocate that
monitoring and evaluation costs
should fall outside of the structure.
In this case, as a separate line item,
these costs may be funded by
someone other than the outcome
funder.
Second, an estimate of the value, or
price that can be attributed to the
set of metrics, is often estimated
by the outcome funder. This value
or price will have a relationship to
the cost of inaction—the cost that
would be incurred in the absence
of preventive services. These can
include everything from the cost of
remedial services to broader costs—
for example, crime and reduced labor
productivity. It must be noted that
few outcome funders can confidently
place a price on a set of metrics.
Over time, outcome funders should
be in a better position to place a
value on specific metrics as more
of an impact bond evidence base is
built in specific sectors and regions.
Impact bonds may be more
expensive than traditional grantbased funding in two ways. First, the
cost of performance management
will need to be incorporated into
cost estimates. These costs will
support service providers to develop
tools and strategies for tracking
progress and adapting to feedback.
The second set of costs involves the
evaluation at the end of the contract,
which determines whether impact
metrics have been achieved. Given
potentially high costs of evaluation,
whether to include evaluation costs
into payments is a key consideration.
One concern in determining the level
40 | IMPACT BONDS IN DEVELOPING COUNTRIES
of payments, as well as the wider
requirements of the impact bond
structure, is whether the demands
will preclude the involvement of
smaller actors, which have less
bandwidth than larger service
providers, to engage with the
changes that these deals are likely to
involve.
SEQUENCING AND TIMING OF
PAYMENTS
Payments are made to the investor
as metrics are achieved. The payment
schedule outlines the sequencing
and timing for payments from the
outcome funder to the investor, and
the level of payment depends on
the results achieved by the service
provider.
There are two approaches to
structuring payments. In some cases,
the outcome funder makes one
bullet payment to the investor at
the conclusion of the impact bond.
This approach is relatively simple to
structure but represents a high risk
for the investor because of the length
of time between the initial investment
and the outcome payment.
Alternatively, the outcome funder
makes a series of payments to
the investor. This tiered approach
reduces risk for investors and is more
appropriate for impact bonds with
long tenors. In some cases, initial or
interval payments are tied to output
metrics and then graduate toward
outcome and impact metrics later
in the life cycle of the bond. This
approach ensures that investors can
be paid multiple times during the
impact bond while still maintaining
long-term focus on desired impact.
In some impact bonds, outcome
funds are then “recycled” to support
further service provision, a process
that also has the advantage of
necessitating smaller up-front capital
commitments.
Another important consideration is to
incorporate incentive payments for
service providers into the payment
structure. For example, some impact
bonds set a maximum return for
investors based on service provider
performance. If the service provider
performs at a high level, it receives an
incentive payment directly from the
outcome funder.
Finally, it can be beneficial to include
price adjustment mechanisms in the
payment structure of an impact bond.
Estimating the payment size and most
efficient payment schedule during
the design phase can be difficult
and inaccurate: In particular, the
extended design process, as well as
lack of evidence on costs, can result
in underpricing. Therefore, including
a price adjustment mechanism in the
payment structure can be useful, so
that the payment size or schedule can
be adapted as necessary during the
impact bond. The price adjustment
can either occur continuously or be
re-evaluated at predetermined times
(such as every 18 months) over the life
of the impact bond.
When you have staggered
payment metrics, from outputs
to intermediate outcomes, you
have the opportunity to learn
and see what’s working.
—Impact bond practitioner
41 | EARLY LEARNINGS FROM THE FIELD
KEY TAKEAWAYS:
Criteria for a strong impact metric are that it is measurable,
meaningful, and set at the appropriate level.
Impact bonds are designed to shift the emphasis from inputs to
outputs or outcomes. Outcomes provide more flexibility, while
outputs may be easier to measure in the short term.
Selecting impact metrics means negotiating priorities among
stakeholders.
Data quality can be a challenge for identifying impact metrics in
developing countries.
Incentive structures for service providers can be used to align their
incentives with investors or to target marginalized populations.
Determining the level of payments can be either cost based, in which
the service provider estimates the total cost of achieving a set of
metrics, or market based, in which the outcome funder sets a price
it is willing to pay for a set of metrics. There is debate on whether to
include monitoring and evaluation costs in payment amounts.
Payments from the outcome funder to the investor can be a bullet
payment at the end of the impact bond, or a set of interim and final
payments, which can reduce investor risk. Recycling of outcome
payments over the course of the bond can also reduce up-front
capital commitments.
It is important to create incentives for service providers through
payment structures and to ensure that there are price adjustment
mechanisms on a continuous basis or at set intervals.
1
2
3
4
5
6
7
8
IDENTIFYING METRICS AND STRUCTURING PAYMENTS
42 | IMPACT BONDS IN DEVELOPING COUNTRIES
DEVELOPING THE
OPERATING MODEL,
STRUCTURING
THE VEHICLE, AND
RAISING CAPITAL
OPERATING MODEL
While implementation of impact
bonds in developing countries
remains too nascent to effectively
draw lessons on the operating model,
practitioners agree that performance
management and reporting capacity
are a critical part of the operating
model. Effective performance
management ensures that service
providers track and adapt activities to
achieve the greatest possible impact.
Performance management of the
service provider can be supported by
the investor, the intermediary, or the
technical assistance adviser.
Further, service providers should
have capacity to report interim
achievements. Also, since reporting
requirements for impact bonds can
be burdensome, additional resources
or capacity building that may be
required to support back office
functioning should be built into the
operating model from the outset. In
addition, these reporting structures
need to be adapted to suit the
structure of impact bonds.
LEGAL STRUCTURE
The legal structure is an
important issue for establishing
contractual relationships among
key stakeholders; however, many
practitioners note that the legal
structure is relatively easy to
determine once the other key
components (such as metrics and
payment structure) are in place.
There are two possible models:
43 | EARLY LEARNINGS FROM THE FIELD
individual impact bonds and impact
bond funds. In an individual impact
bond, there is a single outcome
payment contract, while in an
impact bond fund there are several
payment contracts between the
outcome funder and different service
providers on the same social issue.
As Figure 10 indicates, to date
there are four types of impact bond
structure, depending on which actor
has the contract with the outcome
funder. Further details on each
structure can be found in Table 3.
1. Direct: The contract is between
the outcome funder and the service
provider, which conducts its own
performance management.
2. Intermediated: The contract is
between the outcome funder and
the investors. The intermediary
is still likely to play a central role,
which may involve defining outcome
metrics and procuring service
providers.
3. Managed: The outcome funder
has a contract with the intermediary,
which is responsible for raising
capital and overseeing performance
management.
4. High-risk managed: Another
potential structure, perhaps most
relevant in developing countries,
is the high-risk managed, where
further specialist knowledge
provided by the implementation
manager and investor intermediary
can mitigate the challenges of
working in contexts with constrained
data capacity and political or
financial instability.
A special purpose vehicle (SPV)
may be created as a conduit for
funds, in which case the outcome
payment contract is with the SPV.
In this case, contract structures
depend on the contract between
the outcome funder and the actor
with the leadership role within
the SPV. In a managed impact
bond structure, the intermediary
leads the SPV, which contracts
with the outcome funder; in an
intermediated structure, the
contract is between the outcome
funder and an investor-led SPV;
and in a direct structure the service
provider contracts directly with
the outcome funder. Other entities
may also take on a similar role to an
SPV: For example, in the Colombia
Workforce Development SIB, the
Multilateral Investment Fund (MIF)
of the IDB will channel the outcome
funds of the Swiss government.
Regardless of approach, the legal
structure must be tailored to the
specific needs of the relationship
between the entities. For example,
some practitioners noted that it
may not be necessary to include
performance management processes
in the contract between the outcome
funder and the investor, while it is
vital to ensure that this component is
included in the contract between the
investor and the service provider.
As can be expected, considerations
around legal structure depend on
the frameworks available within the
specific country of implementation
or chosen jurisdiction of domicile.
These will vary country by country
and are driven by numerous
considerations.2
2. Instiglio, with the support of
several legal firms, published A
legal road map for social impact
bonds in developing countries
in November 2014, a valuable
resource for understanding the
legal considerations for Colombia,
Mexico, South Africa, Mauritius,
India, Chile, and Brazil.
44 | IMPACT BONDS IN DEVELOPING COUNTRIES
FIGURE 10 Impact Bond Contracting Structures
DIRECT
INTERMEDIATED
MANAGED
HIGH-RISK MANAGED
Source: Adapted from Goodall, 2014
OUTCOME FUNDER
SERVICE PROVIDER
SOCIAL
SERVICE PROVIDER
SOCIAL
SERVICE PROVIDER
SOCIAL
SERVICE PROVIDER
SOCIAL
INTERMEDIARY
INVESTOR
INTERMEDIARY
MANAGER
IMPLEMENTATION
INVESTORS
INVESTORS
INVESTORS
OUTCOME FUNDER
OUTCOME FUNDER
OUTCOME FUNDER INTERMEDIARY
45 | EARLY LEARNINGS FROM THE FIELD
Role Managed Intermediated Direct High-risk
managed
Identify social
challenge
Outcome funder and/
or intermediary and/
or service provider
and/or technical
assistance provider
Outcome funder and/
or intermediary
Outcome funder and/
or intermediary
Outcome
funder and/or
implementation
manager
Determine
feasibility based
on impact bond
criteria
Intermediary Intermediary and/or
service provider and/or
outcome funder
Outcome funder and/
or service provider
and/or investor
All parties
Raise capital Intermediary Intermediary Intermediary and/or
service provider and/
or investor
Investor
intermediary
Define outcome
Metrics
Outcome funder and/
or service provider
and/or investor
Intermediary and/or
outcome funder
Outcome funder and/
or service provider
and/or investor
All parties
Procure service
provider
Intermediary and
outcome funder
Outcome funder and/
or intermediary and/or
investor
Outcome funder or
intermediary
Implementation
manager
Contract with
Outcome
Funder
Intermediary
or majority
intermediarycontrolled SPV
Intermediary or
majority intermediarycontrolled SPV
Service provider
or majority service
provider-controlled
SPV
Investor
intermediary
Provide
Services
Service provider Service provider Service provider Service provider
Manage
performance
Intermediary Intermediary
(commissioned by
investors or majority
investor-controlled SPV)
Service provider Implementation
manager
Measure/
Validate
Outcome
Achievement
Evaluator or outcome
funder
Evaluator or outcome
funder
Outcome funder or
external validator
External
validator
TABLE 3 Actor responsible by type of impact bond structure
Source: adapted from Goodall (2014)
46 | IMPACT BONDS IN DEVELOPING COUNTRIES
GOVERNANCE STRUCTURE
The governance structure is another
important component of an impact
bond. Investors tend to require strong
governance representation, given
they are invested in ensuring that
service providers are performing as
contracted. Long-term sustainability is
one consideration in the governance
structure. For example, one impact
bond has a governance structure
that includes representatives from
institutions that are likely to be followon investors or outcome funders. This
allows these institutions to develop
a strong understanding and build
a sense of ownership of the impact
bond before committing funding.
RAISING CAPITAL
Raising capital from investors is a
critical component of any impact
bond. While the long-term objective
of impact bonds may be to catalyze
large sums of commercial private
capital, to date impact bonds have
relied heavily on investors that are
not seeking market returns. These
investors—such as corporate or
family foundations—provide soft
investment capital, which is often
concessional. These investments
are critical for building the evidence
base for impact bonds and to
demonstrate financial and social
returns.
Impact bonds can be both costand time-intensive to establish. The
design can be particularly costly
if extensive research or an RCT is
requested to validate the impact
model or theory of change, but
other steps—such as identifying the
service provider(s) and outcome
funder(s) and agreeing on the
payment structure—can be timeconsuming and costly as well.
Practitioners emphasized that it is
important to consider the design
costs in relation to the fundraising
target.
Up-front payment from the investor
to the service provider can be
partial or in full. Some impact bonds
are structured more like debt, and
others like equity. In some impact
bonds, returns to investors are
directly invested back into the
service provider through the impact
bond. This results in a much lower
up-front level of commitment.
HOW TO ATTRACT INVESTMENT
CAPITAL
Several criteria for attracting
investment capital to impact
There’s an interesting question
at the strategic-level around
governance: How do you set it
up in a way that provides the
investors with a certain degree
of control?
—Impact bond practitioner
47 | EARLY LEARNINGS FROM THE FIELD
bonds have been collected through
practitioner experience.
1. Evidence-based theory of change:
Potential investors must understand
and buy into the proposed
intervention’s theory of change. That
is, each investor must accept that
the proposed inputs could produce
the desired metrics in a timely and
efficient manner, and therefore allow
the investor to understand the risk
profile of the investment. This can
require some education if an investor
is not familiar with the sector, region,
or intervention.
2. Attractive risk-return profile:
Ultimately, the risk-return profile of
the investment must be attractive
to investors relative to other market
opportunities. The investor must
understand the risks involved in the
investment, and returns must be
commensurate to the risk.
3. Patient capital: Given the nascent
state of impact bonds, there remains
a need for investment capital that will
tolerate limited information, difficult
market conditions, and adaptation
during the impact bond life.
WHEN TO APPROACH INVESTORS
The timing on approaching investors
is important. Investors should be
engaged early enough in the process
to ensure that the impact bond
meets their risk-return expectations,
while making certain that the design
process maintains focus on the
desired outcomes and impact.
On one hand, it can be easier to
raise investment capital later in the
design process, once the impact
bond is structured and the outcome
funder(s) is in place. Investors
may have more confidence in the
viability of an impact bond once all
key stakeholders are engaged and
key terms are defined. On the other
hand, it can be more difficult to raise
investment capital once the structure
is finalized if the metrics and the riskreturn profile of the investment do
not suit investors.
Alternatively, investors can be
engaged early in the design process,
allowing the investor to play an
important role in determining the
metrics and structure. There may be
consequences in involving investors
at this stage, such as a shift from
impact metrics—which are often
difficult to measure—to output
metrics, which are more tangible and
easily realizable in the short term. A
compromise may be to reach out to
investors to gain initial interest and
approach them again once the impact
bond is further along in development.
The timing of engaging investors will
be highly dependent on context and
actors. However, the process can
be lengthy, and investors may lose
patience if brought on too early.
We haven’t finished
fundraising. It’s something
that takes a lot of time. You
have to educate many of the
different players.
—Impact bond practitioner
48 | IMPACT BONDS IN DEVELOPING COUNTRIES
KEY TAKEAWAYS:
Performance management and reporting capacity are a critical
part of the impact bond operating model.
Legal structure is relatively easy to determine once the other key
components are in place. The common approach is a contractual
arrangement between the investor and service provider and
outcome funder and investor.
Investors typically require robust governance representation
given their strong interest in monitoring service provider
performance; governance can also be a useful tool in attracting
key stakeholders that can support the future sustainability of the
impact bond.
While much impact bond discussion centers on the potential
of impact bonds to attract commercial private capital to
development, in reality, investors often provide soft, concessional
investment and aren’t considered commercial investors.
In theory, raising investment capital after all key pieces,
particularly outcome funders, are in place is easy; in reality,
however, investors often want to be involved in early-stage
structuring to ensure that the risk-return profile of their
investment is acceptable.
1
2
3
4
5
DEVELOPING THE OPERATING MODEL, STRUCTURING
THE VEHICLE, AND RAISING CAPITAL
49 | EARLY LEARNINGS FROM THE FIELD
IMPLEMENTING THE
IMPACT BOND AND
MEASURING IMPACT
EVALUATION
The validation of output and/or
outcome achievement is crucial
in impact bonds, so considerable
energy will go into deciding how
success will be measured. For impact
bonds in high-income countries,
the methods of evaluation have
fallen into four categories: validated
administrative data, historical
comparison, quasi-experimental, and
randomized controlled trials. Validated
administrative data is by far the most
frequently used method in highincome countries, used in over half of
the currently contracted impact bonds
for which evaluation methodology
data are available.
The choice of evaluation methodology
in impact bonds depends on five
considerations: what the outcome
funder is seeking to achieve;
contextual issues, such as the
availability of data or the presence
of a comparison group; the timeline
of the contract and how much time
there will be for data collection; the
evaluation budget; and the political
sensitivities around the transaction or
the intervention.
GOAL OF THE IMPACT BOND
The most desirable method of
evaluation is likely to depend on
the individual impact bond, and the
question that the outcome funders
(other actors may have interests as
well) want to answer or what they
are trying to achieve. An outcome
funder might have several potential
goals: to achieve a set of outcomes
and pay only for success; to achieve
a set of outcomes at the lowest
possible price; to determine if a
particular intervention or service
provider delivers better outcomes
than a counterfactual; to compare
outcomes among interventions or
service providers; to determine which
of a set of interventions or service
providers delivers a set of outcomes
for the lowest price; to determine
whether the impact bond structure
delivers better outcomes than funding
50 | IMPACT BONDS IN DEVELOPING COUNTRIES
inputs; or to determine whether the
impact bond structure delivers better
outcomes than traditional resultsbased financing.
Beyond this question, other
determinants of evaluation could
include data availability, measurement
tool availability, evaluation costs,
capacity to collect and analyze data,
and the existence of comparison
groups. For example, if the goal is
to simply achieve a set of outcomes
and pay only for success, validated
administrative data can be used,
but if the aim is to determine the
achievement of outcomes relative to
a counterfactual, an RCT may be the
most appropriate methodology. For
more detail, see Annex C.
There is considerable concern around
whether impact bonds are suitable
for evaluation through an RCT. In
some cases, pressure may come from
stakeholders to evaluate with an RCT,
because of the rigor of this method
and the perception that it represents
the “gold standard” of impact
evaluation.
For several reasons, however, an
RCT may not be the best strategy.
First, with impact bonds the focus is
on results achieved, rather than on
the effects of specific interventions,
so there may be less value in an
evaluation method that demands
strict adherence to particular
treatments. Moreover, if the goal is to
meet a set of targets, rather than to
test the causal relationship between
treatments and outcomes, an
expensive RCT may be less necessary
for this purpose.
If an RCT is desired, one option for
incorporating this method could be
to randomize intervention. Simply
randomizing treatment, rather than
insisting that everyone be treated
identically, could preserve flexibility
for providers. In this way, those who
receive interventions, regardless of
how or when they were treated, could
be compared with those in a control
group.
Selecting the right evaluator for the
impact bond is also likely to depend on
the kind of evaluation the stakeholders
have in mind. Part of the process will
be understanding the methodologies
that different evaluators plan to use
and whether these suit the design of
the impact bond or the demands of
stakeholders.
CONTEXT AND POPULATION
The complexity of the populations who
are often served by the interventions
is a key challenge for evaluating the
success of impact bonds. Dealing
with this effectively might involve
setting different targets by gender,
socioeconomic status, or location in
rural or urban areas. If baseline levels
of the indicators of interest differ
systematically by these groups, setting
different targets, or measuring growth,
may be preferable to a universal
target.
I’m just not sure we can do
[an RCT] effectively without
compromising flexibility and
creating rigidities that will
scare the investors.
—Impact bond practitioner
51 | EARLY LEARNINGS FROM THE FIELD
METRICS AND DATA AVAILABILITY
Attribution is an additional challenge
for evaluating impact bonds in lowand middle-income countries. If a
number of different interventions
are taking place on the population of
interest, it will be difficult to establish
how much of the change is due to the
actions of one service provider. Since
the focus will likely be on results, this
may not be an issue for measuring
the success of the impact bond, but it
may be a consideration for outcome
funders that would like accurate
information on the price of outcomes
in the future.
Data limitations are a key concern for
evaluating impact bonds, especially
in developing countries, where
data quality is often low. Effective
evaluations depend on good data
collection to evaluate the results
achieved against the targets.
COST
Evaluation can be a costly part of an
impact bond, and the total cost will
depend on the specific requirements
of the various parties. Collecting
baseline data, following large samples,
and organizing RCTs can be expensive
and time-consuming. Who pays for
the evaluation, and how it is paid for,
will depend on the specific impact
bond. The cost of the evaluation may
be incorporated into the cost per
beneficiary or be paid directly to the
outcome evaluator by the outcome
funder.
PERFORMANCE MANAGEMENT
As demonstrated above, performance
management is extremely important
to investors whose capital is at risk.
Three broad parties may take on
the responsibility for partner and
performance management, depending
on the capacity of the service provider,
the involvement of the investor, and
the desire for long-term sustainability.
1. Investor-led: Donors, outcome
funders, and other intermediaries are
often happy to leave performance
management to the service providers
or the investors. Investors that are
very involved in the impact bond
process may take a management role
given their expertise and resources in
performance management.
2. Service provider-led: Many
practitioners argue that performance
management should be the
responsibility of the service provider.
Service providers are the closest to
performance data, and building out
performance management frameworks
can contribute to the long-term
sustainability of their work. A key
question for this approach is whether
the service providers have sufficient
capability to implement effective
performance management. Adding a
capacity-building component to the
project can assist in the transformation
of a service provider into a resultsfocused organization.
52 | IMPACT BONDS IN DEVELOPING COUNTRIES
3. Third party-led: An alternative
approach is for the impact bond
to be structured to include a thirdparty performance manager. The
performance manager would serve
an intermediary function, managing
the relationship with the service
provider. A key advantage of this
approach would be providing external
consultation and the ability to
problem-solve in the field. This may
be especially valuable in the context
of developing countries, where these
organizations can fulfill a confidencebuilding role in a risky environment.
However, this requires additional
capital.
Effective performance management
requires strong management
information systems. These could
comprise work planning and
forecasting systems, data collection
and analysis systems, and performance
reports and dashboards. Each system
needs to be tailored to the unique
context of the underlying impact bond.
Systems must be well-structured
to ensure that new data can be
interpreted appropriately, as well
as flexible enough to adapt should
data structures change. The system
should also be able to handle different
data types (such as service provider
reports and field reports) from
several organizations. These systems
must effectively provide analysis
on a continuous basis to monitor
performance and manage it where
required.
On building in-house capacity
for performance management,
I think that’s key. At some
point, you are going to want
this to be sustainable, and the
service providers must be able
to continue without an impact
bond structure.
—Impact bond practitioner
53 | EARLY LEARNINGS FROM THE FIELD
KEY TAKEAWAYS:
The most desirable method of evaluation will depend on what the
outcome funder is seeking to achieve by using payment by results
financing.
The choice of evaluation methodology may depend on contextual
issues, such as the complexity of the populations served by the
intervention, the availability of data, or the presence of a control
group.
The timeline of the contract may affect the choice of
methodology, depending on how much time there will be for data
collection.
The evaluation budget may constrain the choice of methodology:
RCTs can be expensive, and there may not be adequate funding.
Political sensitivities around the contract or the intervention itself
may shape the choice of evaluation, for example if there is a need
to demonstrate the causal role of a particular program.
Effective performance management requires strong management
information systems. These could comprise work planning and
forecasting systems, data collection and analysis systems, and
performance reports and dashboards.
1
2
3
4
5
6
IMPLEMENTING THE IMPACT BOND AND MEASURING IMPACT
54 | IMPACT BONDS IN DEVELOPING COUNTRIES
CONCLUSIONS AND
NEXT STEPS
Tackling the outsize challenges facing
the developing world today will
require large amounts of money, but
it will also take creativity, flexibility,
collaboration, and perseverance from
a range of actors across the globe
including the public, private, and
philanthropic sectors. This report aims
to capture the early learnings from
one innovative tool that attempts to
bring all of those components to bear.
Social and development impact
bonds are in their nascence globally
but in particular in the developing
world, with the first DIB contracted
only in early 2015 and a total of three
launched to date (along with one SIB
in a developing country). While much
remains to be learned, thus far the
practitioners engaged in designing
and implementing impact bonds have
gathered a great deal of knowledge
about what works and what does not.
As this and similar tools, which tie
payments to outputs or outcomes,
continue to grow in their use, our
hope is that their application improves
with the broader goal of improving
systems of social service financing and
delivery and achieving the sustainable
development goals set forth in 2015.
LOOKING FORWARD
At present, most of the impact bond
transactions are small and bespoke
(including those in high-income
countries). For impact bonds and
more traditional payment by results
mechanisms to reach greater scale
in terms of beneficiaries served, a
number of factors will be critical.
1. EXPAND THE EVIDENCE BASE
Funders want to support
interventions and service providers
that have a record of achieving
outcomes. In impact bonds, in
which investors also hope to make
a financial return, this is even truer.
This means that some evidence is
needed to demonstrate to investors
that results achievement is likely.
What is tricky is that at least to
date, impact bonds seem to fill
a niche where there is sufficient
evidence for investors to take the
risk of investing but perhaps not
55 | EARLY LEARNINGS FROM THE FIELD
enough evidence for outcome
funders to take the risk of scaling
the intervention. Risk-averse
investors may require evidence from
rigorous experimental or quasiexperimental evaluations to be able
to attribute outcome achievement
to the intervention, while for more
risk-friendly investors, historical data
may be sufficient. Regardless of
the rigor needed, data on program
performance are crucial. For many
service providers, however, the cost
of data collection and evaluation
is prohibitive, and others have
limited capacity to collect and
manage data to evaluate impact.
Philanthropic funding will be critical
to help service providers build
their evidence base. Investments in
data collection and in evaluation of
programs will be money well-spent,
as this is a first step in shifting the
focus away from inputs to outcome
achievement. Moreover, the more
providers are delivering certain
outcomes with some evidence
behind them, the greater the
potential to attract larger sums
of (even potentially commercial)
capital (see Point 5 “support
legislation”).
2. BUILD CAPACITY OF SERVICE
PROVIDERS
Just as evidence is needed to
demonstrate that an intervention
or service provider is likely to
deliver promised outcomes, there
needs to be evidence that service
providers can use data to regularly
monitor performance and improve
service delivery in an iterative way.
To date, most service providers
engaged in impact bonds globally
had some experience in performance
management or at least had the data
available to be used in monitoring and
course adjustment. In some cases,
such training was provided in the
lead-up to the implementation of the
impact bond, and in others, capacity
building in this area occurred over the
course of the impact bond. Support
to build capacity of service providers
in data collection and performance
management is imperative not only
to expanding the use of impact
bonds and other payment by
results mechanisms, but for broader
systems improvement and outcome
achievement.
3. EDUCATE POTENTIAL
OUTCOME FUNDERS
Historically, most governments,
donor agencies, and foundations
have funded the delivery of services
based on inputs or process, and
one of the key arguments for using
impact bonds is that in the past
this funding has been unable to
demonstrate impact effectively.
Since paying for outcomes is
not the norm, some education or
sensitization will be key to opening
the door to this manner of funding.
Learning about impact bonds,
and gaining experience of the
complex process of negotiations,
takes time and money. To develop
internal expertise, organizations and
governments will have to invest in
learning about how impact bonds
work. Outcome funders may also
be concerned about the time and
cost of setting up an impact bond.
Negotiating among a range of
stakeholders is a daunting process
compared with simply funding the
same intervention up-front. Tapping
into potentially similar experiences
56 | IMPACT BONDS IN DEVELOPING COUNTRIES
could be a good place to start.
For example, some governments
have used performance-based
contracting in military contracts
while others have used traditional
results-based financing for social
services. Examples from other
countries (or the subnational level
within a country) may provide useful
guidance for potential outcome
funders. Clear guidelines and steps
to take will also facilitate this
shift. Both scale and sustainability
of financing based on outputs
and outcomes will depend on
government engagement. While
DIBs may be a short-term solution
providing evidence for the use of
this model, SIBs, or a variation of
the SIB model with government as
outcome funders, will be critical.
4. EDUCATE POTENTIAL IMPACT
INVESTORS
As with outcome funders, impact
bonds represent a new way of doing
business for impact investors, even
for those with experience investing
in programs with social returns.
Impact investors have a key part
to play in the development of the
impact bond field and will need
educating about the nature of the
contracts, the relationship with the
other stakeholders, and their role in
the deal. Impact investors will likely
have different priorities and interests
in the issues they wish to engage
with, different risk profiles, and
differing levels of emphasis on social
versus financial returns.
5. SUPPORT LEGISLATION
In some cases, legal issues may
constrain the contracting of an
impact bond (Instiglio, 2014; Zülow
et al., 2017). There are three main
legal aspects to consider. The first
is related to investments and has
multiple levels of complexity. For
example, on the investor side, it
may not be possible to transfer
funds (equity or debt) to the holder
of the investment funds, such as
an intermediary or to a service
provider before service delivery.
Contracting between investors and
(government) outcome funders may
also be subject to legal constraints
requiring, for example, public-private
partnership laws. The second legal
aspect is related to procurement and
outcome funding. The procurement
of service providers may be subject
to open procurement regulations
and will likely also require legal
frameworks related to publicprivate partnerships, for example.
Moreover, because payments based
on outcomes are rarely the norm,
rules and regulations must allow for
this. This can become more complex
if the monetizable savings for the
provision of preventive services are
distinctly located from the payments
for those services. Finally, fiscal
implications for the investments
(debt and equity) and their
dividends must be considered. Tax
laws may be more or less favorable
for investors engaging in these kinds
of financing structures. Within each
of those three categories, numerous
factors related to risk must be
considered. Entities interested
in enabling the growth of impact
bonds should consider supporting
efforts to enact or modify legislation
that facilitates and incentivizes such
contracting.
57 | EARLY LEARNINGS FROM THE FIELD
6. ESTABLISH OUTCOME FUNDS
In 2015, $153 billion was spent by
donors on official development
assistance (ODA) (World Bank, n.d.)
to developing countries. This was
in addition to the money spent by
domestic governments on public
services. International organizations
have recognized the importance
of domestic resource mobilization
(DRM), as well as the challenges that
developing countries face in raising
taxes, including poor governance
and high levels of informality (World
Bank, 2016). Despite the levels of
donor aid, and the encouragement
of DRM, poor human development
outcomes persist: 800 million
people around the world are living
on less than $1.25 a day (United
Nations Development Programme,
2017), and 263 million children and
young people are out of school
(Education Commission, 2016). In
the U.S., accountability and use
of evaluation in foreign aid have
increased in recent administrations,
but more emphasis on data is still
needed (Ingram, 2016). Indeed,
despite high levels of ODA, results
are far from guaranteed, and gaps
in political will or poor governance
may constrain the effectiveness of
donor spending (The Economist,
2015). One way of ensuring that
this money is better spent is to
tie funding to the achievements
of the desired results. Outcome
funds, which pool donor funding,
represent a mechanism for putting
this into action. In the international
development context, outcome
funds are under discussion for
education and refugees.
7. CREATE GLOBAL INVESTMENT
FUNDS
While spending better is critical, and
in fact should be the No. 1 priority
in tackling the SDGs, there is also a
need for simply more capital. The
annual funding gap to achieve the
SDGs is estimated at $2.5 trillion
(United Nations Conference on
Trade and Development, 2014).
Private capital could help to bridge
this gap: In 2016, the Annual Impact
Investor Survey conducted by the
Global Impact Investing Network
found that its respondents invested
$22.1 billion in almost 8,000
impact investments and planned to
increase their investments in 2017
(Global Impact Investing Network,
2017). However, the landscape for
investors in impact bonds remains
fragmented, and potential investors
may be put off by the lengthy
negotiation period and often small
scale of the contracts. Investment
funds, such as the Bridges Social
Impact Bond Fund in the U.K.,
which directs private capital toward
impact bonds, offer a potential
solution to this challenge (Bridges
Fund Management, n.d.). A global
investment fund that pools the
resources of impact investors
with an interest in development
outcomes could reduce the
transaction costs of the impact bond
process and increase the scale of
impact investments in results-based
financing.
58 | IMPACT BONDS IN DEVELOPING COUNTRIES
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61 | EARLY LEARNINGS FROM THE FIELD
ANNEX A:
CASE STUDIES OF CONTRACTED IMPACT
BONDS IN DEVELOPING COUNTRIES
COLOMBIA WORKFORCE DEVELOPMENT SIB
CASE STUDY
The Colombia Workforce
Development SIB is the first social
impact bond to be launched in a
developing country. Just under
half of the outcome payment for
this project is being provided by
Colombia’s Department for Social
Prosperity, with the remaining
payment made by the Multilateral
Investment Fund (MIF) of the InterAmerican Development Bank (IDB),
with funds provided by the Swiss
State Secretariat for Economic
Affairs (SECO). The SIB finances
employment measures such as skills
training, psychosocial support, and
intermediation services for formal
job placement and retention for
514 vulnerable individuals. With
the contracts signed in March 2017,
service provision began in May, and
the contract will end July 31, 2018.
Q: WHAT IS INTERESTING ABOUT
THIS SIB?
A: The SIB has several interesting and
unique features. First, it is the first
social impact bond to be launched in
an emerging market or developing
country. Second, the Colombian
government will pay for outcomes
with co-financing from the Swiss
Cooperation – SECO (paid through
IDB-MIF), demonstrating a model of
blending development aid and finance
with government funding for outcome
payments. Third, three of Colombia’s
largest foundations will be impact
investors for the first time, serving
to catalyze the market. Fourth,
the SIB is part of a larger social
impact bond initiative on workforce
development between the MIF and
the Swiss Cooperation – SECO that
includes outcomes co-financing for
up to three social impact bonds as
well as support for market building
and knowledge creation. Fifth, it is
one of only two SIBs launched that
include internally displaced people
and victims of conflict as part of the
target population. Finally, the SIB uses
administrative data from the Ministry
of Health and Social Protection, which
was not involved in the provision of
services or the outcome payment,
as an innovative solution to the
challenge of data availability to verify
results.
Q: WHAT WAS YOUR EXPERIENCE
OF PLANNED TIMELINE VS.
REALITY?
A: The turnaround for this SIB
was very quick: The design
process began in July 2016, and
62 | IMPACT BONDS IN DEVELOPING COUNTRIES
the contract was signed in March
2017. The short time frame was a
result of several years of building
stakeholder awareness; the national
government’s effort to develop
results-based financing instruments;
and exploring the model with all the
stakeholders.
Q: WHAT CHALLENGES WERE
FACED IN THE DESIGN OF THIS
SIB?
A: One of the key challenges
was how to work around the
government’s budgeting process,
which requires that funds be spent
within the year. While the contract
is until 2018, the government of
Colombia will pay only for outcomes
verified within 2017, up to a total
of 1 billion Colombian pesos. Any
achievements after this amount, or
achieved in the second year, will be
paid by the MIF, with SECO funding.
Another significant challenge was
the lack of information regarding
price for the results sought. The
stakeholders had to use a hybrid
method of calculation involving
the price paid by the government
of Colombia for job training for
vulnerable populations and
price quotations from the service
providers.
Q: HOW DO THE OUTCOME
METRICS WORK?
A: For this SIB there are three
outcome metrics: job placement,
three-month job retention, and
six-month job retention. For each
individual who is placed in a job, the
outcome funders will pay 50 percent
of the total per capita payment, with
another 50 percent if an individual
retains the job for three months, for
a maximum of 514 individuals. For
individuals who are still in a job after
six months, the MIF, with funds from
the Swiss Cooperation – SECO, will
pay a bonus of 10 percent in addition
to the per capita outcome payment.
INDIA EDUCATE GIRLS DIB CASE STUDY
The India Educate Girls DIB,
contracted in May 2015, aimed to
boost enrollment for out-of-school
girls and to improve the literacy of
both boys and girls in Rajasthan
state, India. The services financed
by this DIB target children in 166
schools in the Bhilwara district, for
a total of 15,000 children, 9,000
of whom are girls. Educate Girls
trains a team of volunteers to make
door-to-door visits to encourage
enrollment and deliver curriculum
enhancement to public school
classrooms. Due to finish in May
2018, the DIB has completed two
years of interventions and entered
its final year. For more details on the
DIB, see the Deal Book in Annex D.
Q: WHY WAS THE IMPACT BOND
STRUCTURE SELECTED FOR THIS
INTERVENTION?
A: The impact bond structure
unlocked new funding streams
and focused the attention of the
intervention on impact. This was a
way of showcasing how incentives,
service provider flexibility, and
the encouragement of innovation
63 | EARLY LEARNINGS FROM THE FIELD
can pave the way to more resultsfocused development.
Q: WHAT WAS YOUR EXPERIENCE
OF PLANNED TIMELINE VS.
REALITY?
A: There was a reduced
implementation period in the first
year of the impact bond, because
of delays in signing contracts,
getting measurements for the
independent evaluator, and signing
memorandums of understanding
with the government. This meant
that the first year of the learning
intervention, scheduled to begin in
September and finish in March, in
fact started in October and finished
in February, resulting in an effective
implementation of 60 percent for
the learning intervention.
Q: WHAT HAVE THE RESULTS SO
FAR SHOWN?
A: In the second year of the DIB, the
program had reached 88 percent
of the three-year enrollment target
and 50 percent of the three-year
outcome target. Although overall
outcomes will not be calculated
until 2018, from these results UBS
Optimus Foundation, the investor,
will have recouped 72 percent of the
initial investment and 54 percent
of the expected outcome payment
(initial investment plus internal rate
of return).
Q: WHAT WERE SOME OF THE
MAIN CHALLENGES TO SETTING
UP A DIB?
A: The first challenge was a lowquality data environment on the
ground. Both historical performance
data and administrative data were
weak, and there was little evidence
of behavior under incentives. Other
challenges included the need to
build a performance management
system, and the capacity of staff in
terms of integrating performance
insights, and leading an outcomesoriented culture. Finally, the
setup of the DIB was costly,
because of the need to establish
new relationships, integrate new
techniques and mindsets, and face
high levels of public scrutiny.
Q: WHAT LESSONS DID YOU
LEARN FROM THE EXPERIENCE?
A: One lesson was that setting up
the DIB required the stakeholders
to be resourceful; given the poor
reliability of data, identifying the
target population and metrics
required flexibility. Moreover, the
complexity of the process, and the
number of stakeholders, meant that
strong communication was essential.
A new role for the outcome funder
and investor also emerged from
the process: While the funder spent
more on outcomes and less on
managing activities, the investor
used risk management strategies
from its commercial banking branch,
which it had not used for other
grants. Finally, the DIB has changed
the way the service provider
operates. Performance data is now
accessed by frontline workers,
helping them to identify barriers to
outcomes early.
64 | IMPACT BONDS IN DEVELOPING COUNTRIES
PERU SUSTAINABLE COCOA AND COFFEE PRODUCTION DIB
CASE STUDY
The Peru Sustainable Cocoa and
Coffee Production DIB, launched in
January 2015, provided technical
support to agricultural practices
to the Asháninka people of the
Ene River in the Peruvian Amazon.
Closing in December 2015, the
bond targeted 133 families, with
interventions to improve collection
and postharvest techniques for
cocoa, restore coffee plots affected
by yellow leaf rust disease, and
provide marketing support to the
local cooperative, Kemito Ene. For
more details on the DIB, see the Deal
Book in Annex D.
Q: WHO INITIATED THE IMPACT
BOND DISCUSSION?
A: The conversation around the
impact bond was initiated by the
outcome funder, the Common
Fund for Commodities (CFC), and
the process from this point was
straightforward. CFC commissioned
the Rainforest Foundation U.K.
(RFUK) to look into a DIB, and
they presented a proposal to the
investor (a California-based private
foundation) as an impact investment
learning opportunity. The outcomes
were defined collaboratively by
those three parties.
Q: WHAT WAS YOUR EXPERIENCE
WITH PLANNED TIMELINE VS.
REALITY?
A: Despite the straightforward
negotiations, there was a delay
in getting the DIB off the ground,
mainly due to administrative
processes—this was a new process
for all parties. In an agriculture
DIB, timing is especially crucial,
since interventions are likely to be
seasonal, and setbacks may mean
waiting a full year before the project
can move forward to coincide with
the next harvest.
Q: WHAT ARE SOME OF THE MAIN
CHALLENGES IN SETTING UP A
DIB?
A: The challenges in the Peru pilot
all related to the fact that this was
a new instrument. First, it was
challenging to set good, measurable
indicators. For this project, funding
was not an issue; as a pilot, the
resources required were relatively
small. The partners were brought
together by their interest in testing
the DIB concept and a commitment
to putting this into practice.
However, while not an issue for
the initial pilot, one of the key
challenges to scaling up a DIB is
marketing the concept to funders, as
well as getting agreement between
the outcome funder and the
service provider. Outcome funder
organizations are not set up to make
the multistakeholder decisions that
are part of impact bonds: Different
mechanisms need to be found to get
approval, and it takes longer than
a traditional grant agreement. The
principals of private foundations
still need to discover the benefits
of paying for the results instead of
paying for promises, as has been
frequently the case in the past. We
are still looking for effective ways to
65 | EARLY LEARNINGS FROM THE FIELD
present DIB opportunities to such
principal decision makers, and a real
test case goes a long way here.
Q: WHAT LESSONS DID YOU LEARN
FROM THE EXPERIENCE?
A: One of the lessons from this DIB
was the importance of flexibility. The
service provider was able to change
their strategy on how they spent the
resources. The DIB also influenced
an improvement in performance
management and monitoring systems,
and this learning means that in the
next DIB there will be an investment
in monitoring tools. Another key
element was creating an impact
matrix. The outcome evaluator, KIT,
played an important role here by
creating realistic, measurable, and
achievable indicators to capture
results. Each partner learned from
its specific role in the DIB, which
was quite a different experience to
the conventional practice of each
organization.
“While contracted before
publication, due to time
restrictions, it was not possible
to incorporate a case study
for the ICRC Programme for
Humanitarian Impact Investment
(PHII)”
66 | IMPACT BONDS IN DEVELOPING COUNTRIES
ANNEX B:
GLOSSARY OF ACTORS
Actor Impact bond Role
Acrux Partners Argentina Youth Employment SIB Intermediary and technical assistance
AEDES/IRESCO Cameroon Cataract DIB Outcome evaluator
Africa Eye
Foundation
Cameroon Cataract DIB Service provider
AIIM Partners Peru Climate-Smart Agriculture DIB Investor
ApexHi Charitable
Trust
South Africa ECD Impact Bond Innovation
Fund - Social Development
Outcome funder
Aravind Eye Care
System
Cameroon Cataract DIB Technical assistance (technical adviser)
Baker McKenzie Colombia Workforce Development SIB Technical assistance (legal work)
Banamex Fomento
Social
Mexico The Future in My Hands SIB Investor
Bank of Palestine Palestine Type II Diabetes DIB Investor
Bertha Centre
for Social
Innovation and
Entrepreneurship
South Africa Workforce Development SIB Outcome evaluator
British Asian Trust
(BAT)
India Education DIB Outcome Funder
La Caixa
Foundation
ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome funder
CCMX Mexico The Future in My Hands SIB Technical assistance (advisory board)
CEMEX Mexico The Future in My Hands SIB Technical assistance (advisory board)
Center for Global
Development (CGD)
Cameroon Cataract DIB Technical assistance (thought leadership)
67 | EARLY LEARNINGS FROM THE FIELD
Actor Impact bond Role
Children’s
Investment Fund
Foundation
India Educate Girls DIB Outcome funder
Coffee Heritage
Company
Uganda Empowering Women and Youth in
the Coffee Value Chain DIB
Service provider
Common Fund for
Commodities
1. Peru Sustainable Cocoa and Coffee
Production DIB
2. Uganda Empowering Women and Youth
in the Coffee Value Chain DIB
3. Peru Climate-Smart Agriculture DIB
Outcome funder
Investor
Investor
Conrad N. Hilton
Foundation
Cameroon Cataract DIB Outcome funder
Compartamos con
Colombia
Colombia Workforce Development SIB Technical assistance (due diligence of
operators)
Corporativa de
Fundaciones
Mexico The Future in My Hands SIB Technical assistance (advisory board)
CREA Mexico The Future in My Hands SIB Service provider
D. Capital Partners 1. Cameroon Cataract DIB
2. Mozambique Malaria DIB
3. South Africa ECD Impact Bond
Innovation Fund - Health
4. South Africa ECD Impact Bond
Innovation Fund - Social Development
Intermediary
Intermediary
Intermediary (precontracting)
Intermediary (precontracting)
Deloitte Colombia Colombia Workforce Development SIB Outcome evaluator
Discovery Fund South Africa ECD Impact Bond Innovation
Fund - Health
Outcome funder
Duran & Osorio Colombia Workforce Development SIB Technical assistance (legal work)
Educate Girls 1. India Educate Girls DIB
2. India Education DIB
Service provider
Service provider
Foundation for
Community Work
South Africa ECD Impact Bond Innovation
Fund - Social Development
Service provider
Fred Hollows
Foundation
Cameroon Cataract DIB Outcome funder
68 | IMPACT BONDS IN DEVELOPING COUNTRIES
Actor Impact bond Role
Fundación Bolivar
Davivienda
Colombia Workforce Development SIB Investor
Fundación Capital Mexico The Future in My Hands SIB Service provider
Fundación Carvajal Colombia Workforce Development SIB Service provider
Fundación Corona Colombia Workforce Development SIB Intermediary and investor
Fundación Mario
Santo Domingo
Colombia Workforce Development SIB Investor
Fundación ProBono Colombia Workforce Development SIB Technical assistance (legal work)
Gente Estratégica Colombia Workforce Development SIB Service provider
Global
Development
Incubator
Kenya and Uganda Graduation Model DIB Intermediary (trustee, holds outcome fund)
Global Innovation
Fund
Mexico The Future in My Hands SIB Outcome funder and outcome evaluator
(design)
Goodbye Malaria
(underwritten by
Nandos and other
corporations)
Mozambique Malaria DIB Outcome funder
Government of
Belgium
ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome funder
Government of
Buenos Aires
Argentina Youth Employment SIB Outcome funder
Government of
Cameroon (Ministry
of Public Health)
Cameroon Kangaroo Mother Care DIB Outcome funder
Government of
Colombia
Colombia Workforce Development SIB Outcome funder
Government of Italy ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome funder
Government of
Jalisco
Mexico The Future in My Hands SIB Outcome funder
Government of the
Netherlands
ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome funder
69 | EARLY LEARNINGS FROM THE FIELD
Actor Impact bond Role
Government of
Rajasthan
India (Rajasthan) Maternal and Newborn
Health DIB
Outcome funder (planning to commission
outcomes in Years 4 and 5)
Government of São
Paulo state
Brazil Secondary Education SIB Outcome funder
Government of
Switzerland
SECO
1. ICRC Programme for Humanitarian Impact
Investment (PHII)
2. Colombia Workforce SIB
Outcome funder
Outcome funder
Government of
Tajikistan
Tajikistan WASH SIB Outcome funder
Government of the
United Kingdom
ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome funder
Grand Challenges
Canada
Cameroon Kangaroo Mother Care DIB Outcome funder
Gyan Shala India Education DIB Service provider
Henderson &
Alberro
Mexico The Future in My Hands SIB Technical assistance (feasibility study and
SIB design)
Hindustan Latex
Family Planning
Promotion Trust
India (Rajasthan) Maternal and Newborn
Health DIB
Service provider and investor
IDinsight 1. Cameroon Kangaroo Mother Care DIB
2. India Educate Girls DIB
Technical assistance (baseline study)
Outcome evaluator
Insper Metricis Brazil Secondary Education SIB Technical assistance (design phase
intermediation)
Instiglio 1. India Educate Girls DIB
2. India (Rajasthan) Maternal and Newborn
Health DIB
3. Kenya and Uganda Graduation Model DIB
4. Colombia Workforce Development SIB
Intermediary (project manager, impact
bond designer, performance management
provider)
Technical assistance (performance
management design inputs)
Technical assistance (design consultant and
likely implementation/operations support)
Technical assistance (technical adviser)
Inter-American
Development
Bank/Multilateral
Investment Fund
1. Colombia Workforce Development SIB
2. Peru Climate-Smart Agriculture DIB
3. Mexico The Future in My Hands SIB
4. Brazil Secondary Education SIB
Outcome funder
Outcome funder
Investor and outcome evaluator (design)
Potential investor
70 | IMPACT BONDS IN DEVELOPING COUNTRIES
Actor Impact bond Role
International Coffee
Organization
Uganda Empowering Women and Youth in
the Coffee Value Chain DIB
Outcome evaluator
International
Committee of the
Red Cross
ICRC Programme for Humanitarian Impact
Investment (PHII)
Service provider
Jalisco Social
Development
Ministry
Mexico The Future in My Hands SIB Outcome evaluator (design)
J-PAL (Abdul Latif
Jameel Poverty
Action Lab)
Mexico The Future in My Hands SIB Technical assistance (advisory board)
Juzoor for Health
and Social
Development
Palestine Type II Diabetes DIB Service provider
Kaivalya Education
Foundation
India Education DIB Service provider
Kangaroo
Foundation
Cameroon
Cameroon Kangaroo Mother Care DIB Service provider and technical assistance
KIT, The Royal
Tropical Institute
Peru Sustainable Cocoa and Coffee
Production DIB
Outcome evaluator
Kois Invest 1. Syrian Refugee Employment DIB
2. ICRC Programme for Humanitarian
Impact Investment (PHII)
Intermediary
Intermediary (structuring)
Kyeema Foundation Ethiopia Newcastle Disease Prevention DIB Service provider
Linklaters Cameroon Cataract DIB Technical assistance (legal)
Lubombo Spatial
Development
Initiative
Mozambique Malaria DIB Service provider
MaRS Centre for
Impact Investing
Cameroon Kangaroo Mother Care DIB Intermediary
Medical Research
Council
Mozambique Malaria DIB Technical assistance
Merck for Mothers India (Rajasthan) Maternal and Newborn
Health DIB
Outcome funder
71 | EARLY LEARNINGS FROM THE FIELD
Actor Impact bond Role
International Coffee
Organization
Uganda Empowering Women and Youth in
the Coffee Value Chain DIB
Outcome evaluator
International
Committee of the
Red Cross
ICRC Programme for Humanitarian Impact
Investment (PHII)
Service provider
Jalisco Social
Development
Ministry
Mexico The Future in My Hands SIB Outcome evaluator (design)
J-PAL (Abdul Latif
Jameel Poverty
Action Lab)
Mexico The Future in My Hands SIB Technical assistance (advisory board)
Juzoor for Health
and Social
Development
Palestine Type II Diabetes DIB Service provider
Kaivalya Education
Foundation
India Education DIB Service provider
Kangaroo
Foundation
Cameroon
Cameroon Kangaroo Mother Care DIB Service provider and technical assistance
KIT, The Royal
Tropical Institute
Peru Sustainable Cocoa and Coffee
Production DIB
Outcome evaluator
Kois Invest 1. Syrian Refugee Employment DIB
2. ICRC Programme for Humanitarian
Impact Investment (PHII)
Intermediary
Intermediary (structuring)
Kyeema Foundation Ethiopia Newcastle Disease Prevention DIB Service provider
Linklaters Cameroon Cataract DIB Technical assistance (legal)
Lubombo Spatial
Development
Initiative
Mozambique Malaria DIB Service provider
MaRS Centre for
Impact Investing
Cameroon Kangaroo Mother Care DIB Intermediary
Medical Research
Council
Mozambique Malaria DIB Technical assistance
Merck for Mothers India (Rajasthan) Maternal and Newborn
Health DIB
Outcome funder
Actor Impact bond Role
Michael and Susan
Dell Foundation
India Education DIB Outcome funder
Miller Thomson Cameroon Kangaroo Mother Care DIB Technical assistance (international co-legal
counsel)
Morrison Foerster Cameroon Kangaroo Mother Care DIB Technical assistance (international co-legal
counsel)
mothers2mothers 1. South Africa ECD Impact Bond Innovation
Fund - Health
2. South Africa ECD Impact Bond
Innovation Fund - Social Development
Intermediary (performance management)
Intermediary (performance management)
Mozambique
Ministry of Health
(National Malaria
Control Program)
Mozambique Malaria DIB Technical assistance
New Ventures Mexico The Future in My Hands SIB Technical assistance (advisory board)
Norton Rose
Fulbright
ICRC Programme for Humanitarian Impact
Investment (PHII)
Technical assistance (legal adviser)
Nutrition
International
Cameroon Kangaroo Mother Care DIB Outcome funder
Oxfam Tajikistan WASH SIB Service provider (software components)
Palladium 1. Papua New Guinea Gender-Based
Violence DIB
2. India (Rajasthan) Maternal and Newborn
Health DIB
3. Ethiopia Newcastle Disease Prevention
DIB
Intermediary
Intermediary, investor, and performance
management
Intermediary
Philanthropy
Advisors
ICRC Programme for Humanitarian Impact
Investment (PHII)
Outcome evaluator
Phoenix India (Rajasthan) Maternal and Newborn
Health DIB
Technical assistance (Indian legal counsel)
Policy Lab Mexico The Future in My Hands SIB Outcome evaluator (implementation)
Population Services
International
India (Rajasthan) Maternal and Newborn
Health DIB
Service provider and investor
72 | IMPACT BONDS IN DEVELOPING COUNTRIES
Actor Impact bond Role
Promotora Social
Mexico
Mexico The Future in My Hands SIB Investor
ProSociedad Mexico The Future in My Hands SIB Technical assistance (feasibility study and
SIB design)
Quepa Colombia Workforce Development SIB Service provider
Rabin Martin India (Rajasthan) Maternal and Newborn
Health DIB
Technical assistance (strategic advisory
services to Merck for Mothers)
Rainforest
Foundation U.K.
1. Peru Sustainable Cocoa and Coffee
Production DIB
2. Peru Climate-Smart Agriculture DIB
Service provider
Service provider
Enrique Seira
(professor
at Instituto
Tecnológico
Autónomo de
México (ITAM) and
research affiliate at
J-PAL)
Mexico The Future in My Hands SIB Outcome evaluator (design)
Siembra Capitales Mexico The Future in My Hands SIB Technical assistance (advisory board)
Sightsavers Cameroon Cataract DIB Outcome funder
Skotkonung India (Rajasthan) Maternal and Newborn
Health DIB
Technical assistance (information system
development)
Social Finance 1. South Africa ECD Impact Bond Innovation
Fund - Health
2. South Africa ECD Impact Bond
Innovation Fund - Social Development
3. Argentina Youth Employment SIB
4. Mexico The Future in My Hands SIB
5. Brazil Secondary Education SIB
6. Cameroon Kangaroo Mother Care DIB
7. Fecal Sludge Management Value Chain
8. West Bank and Gaza DIB
9. South Africa HIV Treatment and
Prevention DIB
10. India (Rajasthan) Maternal and Newborn
Health DIB
Technical assistance (development)
Technical assistance (development)
Intermediary and technical assistance
Technical assistance (knowledge transfer
support)
Technical assistance (design phase
intermediation)
Intermediary
Technical assistance
Technical assistance
Technical assistance
Technical assistance (deal advisory and
structuring inputs)
Society for
All Round
Development
India Education DIB Service provider
73 | EARLY LEARNINGS FROM THE FIELD
Actor Impact bond Role
South Africa
Department of
Science and
Technology
South Africa HIV Treatment and Prevention
DIB
Outcome funder
South Africa
Department of
Social Development
South Africa ECD Impact Bond Innovation
Fund - Social Development
Outcome funder
South Africa
Enterprise and
Investment
Department
South Africa Workforce Development SIB Outcome funder
Sundfeld
Advogados
Brazil Secondary Education SIB Technical assistance (legal)
Tecnológico de
Monterrey
Mexico The Future in My Hands SIB Technical assistance (advisory board)
UBS Optimus
Foundation
1. India Educate Girls DIB
2. India (Rajasthan) Maternal and Newborn
Health DIB
3. India Education DIB
Investor
Investor
Investor
UNICEF Cameroon Cameroon Kangaroo Mother Care DIB Technical assistance
University of
Pretoria
Mozambique Malaria DIB Technical assistance
USAID India (Rajasthan) Maternal and Newborn
Health DIB
Outcome funder
Village Enterprise Kenya and Uganda Graduation Model DIB Service provider
Volver a la Gente Colombia Workforce Development SIB Service provider
Western Cape
Provincial
Department of
Health
South Africa ECD Impact Bond Innovation
Fund - Health
Outcome funder
World Bank Group Palestine (West Bank and Gaza)
Employment DIB
Outcome funder
World Bank-led
Global Financing
Facility Trust Fund
Cameroon Kangaroo Mother Care DIB Outcome funder
74 | IMPACT BONDS IN DEVELOPING COUNTRIES
ANNEX C:
POTENTIAL EVALUATION METHODOLOGY
BY OUTCOME FUNDER GOALS
Potential outcome
funder goal
Evaluation
methodology
Impact bond
price setting/
determination of
payments
Pros and cons Additional
considerations
To achieve a set of
outcomes and to pay
only for success (shift
risk)
• Simple independent
validation of
administrative
data (outcome
achievement)
• Or administrative
data compared to
historical baseline
• Individual impact
bond approach
(managed or
intermediated)
• Relatively low cost
• Attribution of
impact not possible
• Potential perverse
incentives, including
cream skimming
To achieve a set of
outcomes at the
lowest possible price
• Simple independent
validation of
administrative
data (outcome
achievement)
• Or above compared
to historical baseline
• Rate card approach • Relatively low cost
• Attribution of
impact not possible
• Potential perverse
incentives, including
cream skimming
To determine
whether a particular
intervention/service
provider delivers a
set of outcomes or is
better than a counter
factual in delivering
those outcomes
• Quasi-experimental
design
• RCT
• Individual impact
bond approach
(managed or
intermediated)
• Attribution is
possible
• Could be beneficial
to a service provider
for getting future
funding but could
also be risky
• Potentially quite
costly
• Comparison group
needed for QuasiExperimental design
• Can limit the
flexibility of the
service provider to
deliver outcomes if
a particular delivery
model is being
tested
• Randomization of
service delivery
could lead to needy
beneficiaries not
receiving services
• May be difficult in
conflict or other
highly volatile
settings
75 | EARLY LEARNINGS FROM THE FIELD
Potential outcome
funder goal
Evaluation
methodology
Impact bond
price setting/
determination of
payments
Pros and cons Additional
considerations
To compare outcomes
among interventions
or service providers
• RCT with multiple
arms
• Individual impact
bond approach
(managed or
intermediated)
• Rate card approach
• Same as above
• Provides learning/
comparison across
service providers/
interventions
• May be difficult in
conflict or other
highly volatile
settings
To determine which of
a set of interventions/
service providers
delivers a set of
outcomes for the
lowest price
• RCT with multiple
arms
• Plus costeffectiveness
analysis
• Individual impact
bond approach
(managed or
intermediated)
• Rate card approach
• Plus costeffectiveness
analysis
• Same as above
• Provides learning/
comparison on
costs across
service providers/
interventions
• May be difficult in
conflict or other
highly volatile
settings
• Beyond outcome
payment prices,
important to get
expenditure data
to ensure that
costs claimed are
actual costs with
no subsidization
across programs by
a provider (which
could negatively
affect beneficiaries
of other programs)
To determine whether
the impact bond
financing structure
delivers better
outcomes than
funding based on
inputs
• Quasi-experimental
design
• RCT
• (comparing identical
interventions
and comparable
populations but
different financing
structures)
• Individual impact
bond approach
(managed or
intermediated)
• Rate card approach
• Likely difficult to do
and requires a very
controlled setting
• The need for a
controlled setting
contradicts the
nature of the
potential benefits
of an impact bond,
namely the ability to
course correct
• Note that World
Bank RBF Health
is conducting such
analysis of resultsbased financing vs.
input based
• Should clearly
define differences
between the two
financing methods
and would be useful
to have a process
evaluation in parallel
To determine whether
the impact bond
financing structure
delivers better
outcomes than
traditional resultsbased financing
• Quasi-experimental
design
• RCT
• (comparing identical
interventions
and comparable
populations but
different financing
structures)
• Individual impact
bond approach
(managed or
intermediated)
• Rate card approach
• Same as above • Should clearly
define differences
between the two
financing methods
(i.e., up-front
capital, investor
engagement in
performance
management) and
would be useful
to have a process
evaluation in
parallel.
76 | IMPACT BONDS IN DEVELOPING COUNTRIES
ANNEX D:
DEAL BOOK
SUSTAINABLE COCOA AND COFFEE PRODUCTION DIB
INDIA EDUCATE GIRLS DIB
COLOMBIA WORKFORCE DEVELOPMENT SIB
ICRC PROGRAMME FOR HUMANITARIAN IMPACT INVESTMENT
(PHII)
BRAZIL SECONDARY EDUCATION SIB
CAMEROON CATARACT DIB
CAMEROON KANGAROO MOTHER CARE DIB
INDIA (RAJASTHAN) MATERNAL AND NEWBORN HEALTH DIB
INDIA EDUCATION DIB
KENYA AND UGANDA GRADUATION MODEL DIB
MEXICO THE FUTURE IN MY HANDS SIB
MOZAMBIQUE MALARIA DIB
PALESTINE TYPE II DIABETES DIB
PALESTINE (WEST BANK AND GAZA) EMPLOYMENT DIB
PERU CLIMATE-SMART AGRICULTURE DIB
SOUTH AFRICA ECD IMPACT BOND INNOVATION FUND - SOCIAL
DEVELOPMENT
SOUTH AFRICA ECD IMPACT BOND INNOVATION FUND - HEALTH
78
80
82
84
86
88
90
92
94
96
98
100
102
104
106
108
110
77 | EARLY LEARNINGS FROM THE FIELD
SOUTH AFRICA HIV PREVENTION AND TREATMENT SIB
SOUTH AFRICA WORKFORCE DEVELOPMENT SIB
UGANDA SLEEPING SICKNESS DIB
ARGENTINA YOUTH EMPLOYMENT SIB
BRAZIL CHRONIC ILLNESS SIB
ETHIOPIA NEWCASTLE DISEASE PREVENTION DIB
SYRIAN REFUGEE EMPLOYMENT DIB
PAPUA NEW GUINEA GENDER-BASED VIOLENCE DIB
TAJIKISTAN WASH SIB
UGANDA EMPOWERING WOMEN AND YOUTH IN THE COFFEE
VALUE CHAIN DIB
FECAL SLUDGE MANAGEMENT DIB
112
114
116
118
120
122
124
126
128
130
132
78 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: CFC, THE RAINFOREST FOUNDATION UK
Technical assistance provided by the Rainforest Foundation UK
and its partner organizations in Peru to improve collection and
postharvest techniques for cocoa, improve marketing and support commercial agreements, control leaf rust disease
and restore growing plots, build nurseries for planting resistant varieties of coffee.
INTERVENTION
PERU SUSTAINABLE
COCOA AND COFFEE
PRODUCTION DIB
TIMELINE
DATE OF START OF
FEASIBILITY STUDY July 2014
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
October 2015
DATE OF CONTRACT SIGNING January 2015
DATE OF START OF
SERVICE PROVISION February 2015
CONTRACT DURATION 10 months
END DATE October 2015
DESCRIPTION: The DIB aims to support sustainable cocoa and coffee production and marketing by funding the
Rainforest Foundation UK and its partner organizations’ support for the Asháninka people of the Ene River in the
Peruvian Amazon to restore their growing plots and improve their collection and postharvest techniques. The relatively
small DIB was piloted to demonstrate a practical application of an impact bond to evaluate its effectiveness, efficiency,
as well as legal, administrative and other operational aspects.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
The Asháninka people of the Ene River live in remote forest
villages in the Peruvian Amazon and rely on agriculture – particularly cocoa and coffee – for monetary income to support
their livelihoods to cover mainly heath and education. However, much of their production is wasted due to post harvest
loss, and leaf rust disease has decimated coffee plots.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 133 Asháninka families (typically 2 adults and 5 children)
Indigenous Asháninka people of the Ene River in the Peruvian
Amazon, specifically members of the Kemito Ene producers association.
TARGET POPULATION
OVERVIEW COUNTRY PERU CITY/STATE PERUVIAN AMAZON
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
This information is subject to change 79 | EARLY LEARNINGS FROM THE FIELD
Complete
Funding was expiring REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Existing intervention financed by grants from
foundations and a Corporate Social Responsibility
programme
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
FINANCING
OUTCOME FUNDS
(USD) $110,000 COSTS COVERED BY
INVESTMENT CAPITAL None
UPFRONT CAPITAL
COMMITMENT (USD) $110,000 ADDITIONAL GRANTS
(USD)
$530,000 grant finance for the
three year project - DIB was set
up in the last year of the project
CAPITAL RECYCLING
Capital covers the cost of the
program for the duration of
the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS
Feasibility, design,
intermediation and performance
management
OTHER COSTS Legal fees and evaluation financed directly by Outcome Funder
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS:
The Rainforest
Foundation UK together
with its partner
organizations in Peru
INTERMEDIARY: N/A
OUTCOME FUNDER:
Common Fund for
Commodities (CFC)
INVESTOR: Californiabased private foundation
TECHNICAL
ASSISTANCE
PROVIDER: None
OUTCOME EVALUATOR:
KIT, the Royal Tropical
Institute
OUTCOME METRICS: 1) Increased supply to Kemito Ene by its members by 20%, 2) Improved cocoa
yield by Kemito Ene members to 600 kg/hectare (ha) or more, 3) Tons of cocoa bought and sold by
Kemito Ene, 4) Producers with 0.5 ha of newly established coffee plots with leaf rust resistant varieties
EVALUATION METHOD: Baseline comparison (outcome metrics 1 and 2, with 31 Dec 2013 as baseline),
project data (outcome metrics 3 and 4)
PAYMENT THRESHOLD: Minimum thresholds (1) min. 20% of members increase supply to Kemito
Ene by 20% (2) min. 20% of members improve yields to over 600 kg/ha or more (3) min. 12 tonnes of
cocoa bought and sold by Kemito Ene (4) minimum 19 producers. Thresholds represent “50% of target
acheived” (see below).
PAYMENT SCHEDULE AND AMOUNTS: Outcome funder pays investor at end of pilot for each
outcome metric: $27,500 payment if 100% of target achieved, $20,625 payment if 75% of target
achieved, $13,750 payment if 50% of target achieved, no payment if target not achieved.
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 100%
MAXIMUM RETURN: Payment for each outcome metric up to $27,500 (25% of project budget of
$110,000)
RESULTS TO DATE: Outcome funder paid investor $75,625 in total (68.75% of initial investment of
$110,000). Results per outcome metric: 1) 75% of target achieved, 2) Target not achieved, 3) 100% of
target achieved, 4) 100% of target achieved
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: The relatively small DIB was piloted to demonstrate a practical application of an impact bond to evaluate its
effectiveness, efficiency, as well as legal, administrative and other operational aspects.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Service Provider
80 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: CHILDREN’S INVESTMENT FUND FOUNDATION, UBS OPTIMUS FOUNDATION,
EDUCATE GIRLS, INSTIGLIO
1) Enrollment: identification of out-of-school girls through door-to-door
surveys, explanation of the value of schooling, multi-channel engagement
with households, multiple interventions to improve attendance and prevent drop-outs; 2) Learning: young volunteers deliver a childcentric curriculum 3 times weekly to boys and girls in grades 3-5, volunteers incentivized with career development opportunities.
INTERVENTION
INDIA EDUCATE GIRLS
DIB
TIMELINE
DATE OF START OF FEASIBILITY
STUDY
June 2014
(We combined feasibility
and design)
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
March 2015
DATE OF CONTRACT SIGNING May 2015
DATE OF START OF
SERVICE PROVISION August 2015
CONTRACT DURATION 3 years
END DATE May 2018
DESCRIPTION: The India Educate Girls DIB aims to enroll out-of-school girls and improve both girls’ and boys’ literacy in English,
Hindi, and math by funding Educate Girls’ intervention in Rajasthan, India. The impact bond structure is used because it unlocks new
funding streams and enables the stakeholders to maintain an unprecedented razor sharp focus on impact. The ultimate aim is for this
DIB to serve as a proof-of-concept of the idea that introducing incentives, giving service providers discretion, and encouraging them to
innovate (among other features) can drive greater impact, opening the door for a new development practice focused on results.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
3.7 million girls are out of school in India. Rajasthan has 9 of the 26
districts with the worst gender indicators and 40% of girls drop out before reaching fifth grade. Only 15% of children in primary
school can read a simple story in Hindi. Uneducated girls in India are 3 times more likely to contract HIV, earn 10% less income, and
marry 3 years earlier than educated ones.
DEVELOPMENT CHALLENGE
Existing interventions in other districts were funded by foundations. FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
TARGET NUMBER OF BENEFICIARIES 15,000 children (9,000 of them girls)
Children in 166 public schools in 140 villages in Bhilwara District TARGET POPULATION
OVERVIEW COUNTRY INDIA
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE MANDALGARH, JAHAJPUR AND BIJOLIYA BLOCKS,
BHILWARA DISTRICT, RAJASTHAN
This information is subject to change 81 | EARLY LEARNINGS FROM THE FIELD
Complete
STAKEHOLDERS METRICS AND PAYMENTS
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor, thus aligning incentives
Other: DIB improves the cost-effectiveness of promising programs and leads them to scale. Educate Girls has a strong track-record
and capacity to engage in a DIB.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Instiglio
SERVICE PROVIDERS:
Educate Girls
INTERMEDIARY:
Instiglio (project
manager, impact bond
designer, performance
management provider)
OUTCOME FUNDER:
The Children’s
Investment Fund
Foundation (CIFF)
INVESTOR: The UBS
Optimus Foundation
(UBSOF)
TECHNICAL
ASSISTANCE
PROVIDER:
None
OUTCOME
EVALUATOR:
IDinsight
OUTCOME METRICS: 1) Enrollment outcomes (20% of outcome payment): number of girls on school
rosters in grades 2-8 in the treatment group over 3 years; 2) Learning outcomes (80% of outcome
payment): Annual Status of Education Report (ASER) measures basic literacy in Hindi, basic literacy in
English, and basic numeracy.
EVALUATION METHOD: 1) Enrollment: A baseline of out-of-school girls was created through household
surveys before the implementation of the program; IDinsight independently verifies the accuracy of the
enrollment list by sampling a portion of the lists and conducting school and household visits to measure the
percentage of out-of-school girls who are enrolled in school rosters after three years. 2) Learning: IDinsight
evaluates learning outcomes through a clustered randomized control trial. The students’ learning progress
was measured using the ASER assessment. A baseline test was administered at the start of the trial 3 period
to students in Grades 1-5 (the students that will receive the learning intervention in any given year during
the life time of the project) randomly sampled from schools receiving the intervention and control schools.
It measured students’ starting grades on a scale of A to E for English and Math, and A+ to E for Hindi. The
students are tested again at the end of every school year for three years. The evaluator will then calculate
the aggregate learning gains in terms of the number of levels gained on the ASER scale by children in
schools receiving Educate Girls’ intervention as compared to children in control schools.
PAYMENT THRESHOLD: This design does not use thresholds. Instead it links outcome payments to each
additional unit of outcome that Educate Girls achieves. The proposed payment formula does not include a
level of outcomes that should be observed before payment begins. This simplifies the payment formula.
PAYMENT SCHEDULE AND AMOUNTS: UBSOF disburses 50% of investment principal to Educate Girls in
2015 and 50% in 2016; CIFF will disburse one outcome payment of $0–$412,000 to UBSOF in 2018
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 100%
MAXIMUM RETURN: Target IRR = 10%, max IRR = 15%; UBSOF pays incentive to Educate Girls equal to 32%
of its payment above principal
RESULTS TO DATE: After two-thirds of the full DIB term has elapsed, results show the program has
enrolled 69% of all out-of-school girls identified in year 1 and 2, and has achieved 50% of the total target for
learning progress. Based on this progress, UBSOF would have already recouped approximately 72% of the
initial investment in year 2, a promising performance despite challenges in launching the intervention on
time. Final results results will be available in June 2018.
FINANCING
OUTCOME FUNDS (USD) $422,000 (max internal rate of return (IRR) of 15%),
$367,000 (targeted IRR of 10%)
COSTS COVERED BY
INVESTMENT CAPITAL None
UPFRONT CAPITAL
COMMITMENT (USD) $277,915 ADDITIONAL GRANTS
(USD) N/A
CAPITAL RECYCLING Capital covers the cost of the program for the duration of
the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS Structuring, legal fees, performance management, outcome evaluation, process evaluation
Funding did not allow sufficient flexibility and did not focus
on deepening impact as much. Moreover, Educate Girls wanted to explore other funding mechanisms to scale up their intervention
while increasing its impact.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
82 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: INTER-AMERICAN DEVELOPMENT BANK’S MULTILATERAL INVESTMENT FUND (MIF), SWISS
STATE SECRETARIAT FOR ECONOMIC AFFAIRS (SWISS COOPERATION-SECO), GOVERNMENT OF COLOMBIA
COLOMBIA WORKFORCE
DEVELOPMENT SIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY N/A
DATE OF CONTRACT SIGNING March 2017
DATE OF START OF SERVICE PROVISION May 2017
CONTRACT DURATION 16 months
END DATE July 2018
DESCRIPTION: The SIB program in Colombia consists of an estimated 3 SIBs to be implemented over 5 years, as well as two
additional components: market-building and dissemination of learnings. The first SIB aims to achieve greater cost-effectiveness
in workforce development projects for difficult-to-place populations (while also serving as a learning and knowledge
development tool), by funding interventions which aim to ensure long-term employment outcomes for vulnerable populations.
The impact bond structure is used because it is an innovative way of changing procurement practices from paying for activities
to paying for results, maximizing the impact of social programs. The ultimate aim is to develop a market for investments in
social programs which will be able to scale up the government’s work and take on the risks associated with innovation.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
Colombia is at a turning point in the history of its economic
development. Since the recession of 1999-2000, Colombia’s employment rate and economy have been growing steadily,
positioning the country as an upper middle income country. Expanding job opportunities and creating access to formal and
decent jobs for vulnerable populations in urban areas is a priority for the government. Many of these vulnerable groups,
such as young people living in extreme poverty and victims of the armed conflict, are excluded from the formal economy.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 514
The SIB will target unemployed vulnerable individuals who meet
the following criteria used by Prosperidad Social (the sponsoring government entity):
• Have a SISBEN score (poverty measure) of 0 to 41.74,
are registered in Red Unidos (ultra-vulnerable group) or
are victims of displacement due to the armed conflict;
• Are between 18 and 40 years old;
• Are high-school graduates;
• Have not participated in Prosperidad Social’s
employment programs in the last two years.
TARGET POPULATION
OVERVIEW COUNTRY COLOMBIA
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE BOGOTÁ, CALI, PEREIRA
This information is subject to change 83 | EARLY LEARNINGS FROM THE FIELD
Complete
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: To generate interest among other social impact investors in the country
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Government of Colombia, MIF, Swiss
Cooperation-SECO, Fundación Corona, Instiglio
The intervention as such is new necessitating flexibility
for the intermediary to innovate and to coordinate multiple service providers.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
The intervention will deliver “complementary training”,
including some of the following components in accordance with the participants’ needs: training for specific and
social-emotional skills, psychosocial support, orientation and intermediation services to ensure job placement and retention.
INTERVENTION
The intervention as such is new. Some of its components
were previously funded by the government or donors.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
STAKEHOLDERS METRICS AND PAYMENTS
OUTCOME METRICS: Placement (50%); 3 month retention (50%).
10% bonus for 6 month retention.
EVALUATION METHOD: Validated administrative data from Ministry
of Health.
PAYMENT THRESHOLD: No threshold/minimum results.
PAYMENT SCHEDULE AND AMOUNTS: Government of Colombia
will only pay for outcomes validated in 2017, up to a total of 1 billion
Colombian pesos. After this point the donor outcome funds will kick
in.
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS:
TBD
MAXIMUM RETURN: 8%
RESULTS TO DATE: TBD
SERVICE PROVIDERS: Quepa, Volver a la Gente, Gente
Estratégica, Fundación Carvajal
INTERMEDIARY: Fundación Corona
OUTCOME FUNDER: Government of Colombia [around
$340,000, equivalent to 1 billion Colombian pesos] and Swiss
Cooperation-SECO though the IDB/MIF [around $410,000,
equivalent to 1.2 billion Colombian pesos]
INVESTOR: Fundación Corona, Fundación Bolivar Davivienda,
and Fundación Mario Santo Domingo
TECHNICAL ASSISTANCE PROVIDER: Instiglio (SIB technical
adviser), Fundación ProBono and the firms Baker McKenzie and
Duran & Osorio (legal work), Compartamos con Colombia (due
diligence of operators)
OUTCOME EVALUATOR: Deloitte Colombia
FINANCING
OUTCOME FUNDS
(USD)
Around $750,000
[2.2 billion Colombian pesos]
COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) N/A ADDITIONAL GRANTS
(USD) ~$2,000,000
CAPITAL RECYCLING Capital covers the cost of the program
for the duration of the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS
Market-building and
dissemination of learnings
OTHER COSTS N/A
84 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: INTERNATIONAL COMMITTEE OF THE RED CROSS (ICRC)
ICRC PROGRAMME FOR
HUMANITARIAN IMPACT
INVESTMENT (PHII)
~ 90 million people in the developing world suffer from a physical
disability, which is a barrier to access education or employment, leading to social exclusion and long-term poverty. Delivery
of mobility devices and physical therapy, combined with social inclusion services, shows potential in reducing social
exclusion through regained access to education and employment, Yet, only 5% to 15% of the needs are met due to the lack
of infrastructure and local physical rehabilitation human resource capacity available in developing countries.
DEVELOPMENT CHALLENGE
~ 3,600+ over the two years of operations in the PHII and more
beyond the PHII TARGET NUMBER OF BENEFICIARIES
Individuals with physical disabilities in developing countries,
who are victims of war, natural disasters, congenital impairments or disabling diseases such as polio.
TARGET POPULATION
OVERVIEW COUNTRY MALI, NIGERIA, DEMOCRATIC
REPUBLIC OF CONGO
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
DESCRIPTION: The ICRC Programme for Humanitarian Impact Investment (PHII) is a CHF 26.1 million impact bond that
aims to deliver comprehensive physical rehabilitation services in conflict and post-conflict countries on the African
continent. The impact bond structure is used in order to increase efficiency and quality of physical rehabilitation services
delivered through the implementation of innovative initiatives in physical rehabilitation centres. The ultimate aim is
to increase the number of people with disabilities who receive comprehensive physical rehabilitation services across
centers supported by the ICRC.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE MOPTI, MAIDUGURI, KINSHASA
TIMELINE
DATE OF START OF
FEASIBILITY STUDY October 2014
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
N/A
DATE OF CONTRACT SIGNING July 2017
DATE OF START OF
SERVICE PROVISION July 2017
CONTRACT DURATION 5 years
END DATE June 2022
This information is subject to change 85 | EARLY LEARNINGS FROM THE FIELD
Existing finance is not inadequate. The PHII enables
the expansion of the funding base of the physical rehabilitation program via the multi-year funding it brings to support
capacity/IT expansion.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Finance new physical rehabilitation centers with
innovative operational blueprints, as well as local capacity building: i) build new centers in areas where needs are widely
unmet, train local rehabilitation professionals and center managers to build national capacity, ii) design, test and implement
new management methods, innovative IT tools (e.g., digital tablet records, SMS follow-ups and feedback questionnaires)
and outreach techniques (SMS, m-banking) in existing centers supported by ICRC, iii) ramp-up operations in new centers
opened by the PHII, while implementing new management methods, innovative IT tools and outreach techniques.
INTERVENTION
Creation of new capacity (building centres, training
and IT tools) therefore not financed before. Existing
centres already part of the ICRC physical rehabilitation program are financed on ICRC’s regular budget.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor, thus aligning incentives
Other: To increase staff efficiency by rolling-out efficiency initiatives in physical rehabilitation centers and bring comprehensive
rehabilitation services to more people with disabilities in conflict and post conflict countries.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
Complete
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: ICRC
INTERMEDIARY: KOIS Invest (structuring)
OUTCOME FUNDER: Government of Belgium,
Government of Switzerland, Government of
the United Kingdom, Government of Italy, and
la Caixa Foundation
INVESTOR: European Institutional Investors
and High Net Worth Individuals
TECHNICAL ASSISTANCE PROVIDER:
Norton Rose Fulbright (legal advisor)
OUTCOME EVALUATOR: Philanthropy
Advisors
OUTCOME METRICS: Outcome-based Staff Efficiency Ratio i.e. the number of
beneficiaries having (re)gained mobility per local rehabilitation professional at the
end of the intervention.
EVALUATION METHOD: Success will be measured by comparing the Staff
Efficiency Ratio of centers newly built thanks to the PHII to the average historical
Staff Efficiency Ratio of a sample of comparable existing centers (or ‘benchmark’).
PAYMENT THRESHOLD: The average historical Staff Efficiency Ratio of benchmark
centers.
PAYMENT SCHEDULE AND AMOUNTS: N/D
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/D
MAXIMUM RETURN: N/D
RESULTS TO DATE: N/A
FINANCING
OUTCOME FUNDS
(USD) CHF 26.1 million ($27.6 million) COSTS COVERED BY
INVESTMENT CAPITAL
Building, training and operations of 3
physical rehabilitation centres in Africa
UPFRONT CAPITAL
COMMITMENT (USD) N/D ADDITIONAL GRANTS (USD) N/D
CAPITAL
RECYCLING
Capital covers the cost of the program
for the duration of the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS
Government of Netherlands provided
upfront grant to finance the design of the
HIB. This includes the ICRC staff costs
and advisory support for design and
structuring of the PHII
OTHER COSTS N/A
86 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: INTER-AMERICAN DEVELOPMENT BANK (IDB)/MULTILATERAL INVESTMENT FUND (MIF),
INTERNATIONAL FINANCE CORPORATION AND THE STATE GOVERNMENT OF SÃO PAOLO
BRAZIL SECONDARY
EDUCATION SIB
TIMELINE
DATE OF START OF
FEASIBILITY STUDY May 2016
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
November/
December 2017
DATE OF CONTRACT SIGNING N/A
DATE OF START OF
SERVICE PROVISION N/A
CONTRACT DURATION
4 years for the first
cohort, with possibility to extend for a
second cohort
END DATE N/A
DESCRIPTION: This impact bond aims to develop an understanding of the interventions that can improve secondary
school completion rates, reduce drop-outs and increase learning by funding school-based interventions that support
families and individual children in schools situated in areas of medium-high vulnerability in districts of São Paolo. The
impact bond structure is used because of its focus on innovation towards outcomes, the accountability framework it brings
around delivery, and the importance of capturing and using data. The ultimate aim is to develop an understanding of what
works, in order to inform the scale up of successful interventions.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
OVERVIEW COUNTRY BRAZIL
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE SÃO PAOLO
Investment in education is crucial for economic and social
development. In Brazil, despite the recent progress in education indicators, access, completion, and learning rates still
need to be improved. In the State of São Paulo, unsatisfactory indicators at secondary education include 87.2% of young
people aged 15 to 17 years enrolled in school, but only 75.8% at the correct grade for their age. Failure rates are also
significantly higher than state targets. Studies indicate that the main group that drop out of school and those with an
age-grade gap are in situations of vulnerability and from that part of the population with the lowest income. Failure to
complete high school means that young people face greater challenges in entering the labor market and, when they
access it, they enter lower-paid positions.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES Approximately 10,000-12,000
Secondary-school students at schools in disadvantaged
metropolitan areas of São Paolo who suffer from medium-high levels of vulnerability. Emphasis on school, family and
individual support.
TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 87 | EARLY LEARNINGS FROM THE FIELD
STAKEHOLDERS METRICS AND PAYMENTS
Complete
Does not allow full scale-up of interventions. Does not
allow for innovation around integrating several programmes working on different axes for the same individuals.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Under development, but will include specific familyfocused and individually-focused supports, as well as strengthing of existing school-level interventions.
INTERVENTION
Ad hoc and provided by the service providers
themselves, most of whom are foundations working
on particular programmes.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: The rationale for using an impact bond is the accountability framework an impact bond brings around
delivering to outcomes and the importance of capturing and using data. There is an urgent need to develop a better
understanding of what interventions are effective to improve completion rates and reduce drop out and delay.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Local government (Department of Education) is keen
to meet challenging federal education targets. Certain foundations active in the field of education want to push for more
integrated solutions and uncover “what works”.
FINANCING
OUTCOME FUNDS (USD) TBD COSTS COVERED BY INVESTMENT CAPITAL TBD
UPFRONT CAPITAL COMMITMENT (USD) TBD ADDITIONAL GRANTS (USD) TBD
CAPITAL RECYCLING TBD COSTS COVERED BY ADDITIONAL GRANTS TBD
OTHER COSTS TBD
SERVICE PROVIDERS: TBD
INTERMEDIARY: TBD
OUTCOME FUNDER: São Paolo State
Government, alone or with additional outcome
funders
INVESTOR: Likely IDB/MIF, possibly IFC and
some local investors.
TECHNICAL ASSISTANCE PROVIDER:
Social Finance and Insper Metricis (design phase
intermediation); Sundfeld Advogados (Legal)
OUTCOME EVALUATOR: TBD
OUTCOME METRICS: Successful graduation within 3 years of
entering secondary school with predetermined levels of learning
(final outcome). Intermediate outcomes to track the likelihood of
achieving the final outcome.
EVALUATION METHOD: Experimental design
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR
INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: N/A
88 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: THE FRED HOLLOWS FOUNDATION, CONRAD N. HILTON FOUNDATION, SIGHTSAVERS
CAMEROON CATARACT
DIB
TIMELINE
DATE OF START OF
FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
N/A
DATE OF CONTRACT SIGNING Q2 2017
(anticipated)
DATE OF START OF
SERVICE PROVISION
Q3 2017
(anticipated)
CONTRACT DURATION 5 years
END DATE 2022
OVERVIEW COUNTRY CAMEROON
DESCRIPTION: The Cameroon Cataract DIB aims to reduce avoidable cataract blindness prevalence by funding a start-up
non-profit eye hospital in Cameroon. The impact bond structure is used because cataract interventions are well suited for
a performance based mechanism and there is a need for a risk sharing mechanism to crowd in private funders into the eye
care space. The ultimate aim of the Cataract Bond is to create an impact investment opportunity for early stage eye care
interventions in emerging markets.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE YAOUNDE
Avoidable blindness from cataract DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 18,000 surgeries
Cataract patients, with a focus on those who cannot afford eye care TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
Launch and operation of the cataract interventions of a greenfield
eye hospital; the hospital will provide free and discounted
surgeries to the poorest patients through a cross-subsidization model similar to the Aravind model.
INTERVENTION
This information is subject to change 89 | EARLY LEARNINGS FROM THE FIELD
Complete
N/A REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Grants FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
Feasibility: i) Cataract interventions are proven and standardized interventions with measurable and attributable
outputs/outcomes, ii) Strong operational partnership model and proven operational track record of the key sponsor
of the project
Value: i) Risk sharing mechanism to crowd in private funders in eye care sector, ii) Operational flexibility for the
hospital to achieve pre-agreed outputs / outcomes through its startup phase
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS (USD) $2.5 million COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL COMMITMENT (USD) $2 million ADDITIONAL GRANTS (USD) N/A
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: Africa Eye
Foundation
INTERMEDIARY: D. Capital Partners
OUTCOME FUNDER: Conrad
N. Hilton Foundation (90%),
Fred Hollows Foundation (5%),
Sightsavers (5%)
INVESTOR: Fundraising in progress
TECHNICAL ASSISTANCE
PROVIDER:
Linklaters (legal), CGD (thought
leadership), Aravind Eye Care System
(technical advisor)
OUTCOME EVALUATOR: AEDES/
IRESCO
OUTCOME METRICS: Volume of cataract surgeries, quality of cataract
surgeries, operational financial sustainability of the hospital, access to the
most vulnerable patients
EVALUATION METHOD: Bi-annual audit and spot verifications of patient
samples
PAYMENT THRESHOLD:
• # of surgeries (by Y3, 7000 cumulative and Y5 18,000 cumulative)
• Quality measured by visual acuity day after surgery (output)
• EBITDA financial sustainability by Y5
PAYMENT SCHEDULE AND AMOUNTS:
Year 3: 3/5 of principal + accrued interest (Y1-Y3)
Year 5: 2/5 of principal + accrued Interest (Y4-Y5)
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 25%
(converted into ~4% loan to be repaid by the hospital over subsequent 5
years)
MAXIMUM RETURN: 8%
RESULTS TO DATE: N/A
90 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: GRAND CHALLENGES CANADA, NUTRITION INTERNATIONAL, CAMEROON MINISTRY OF PUBLIC
HEALTH (FUNDED BY WORLD BANK LED GLOBAL FINANCING FACILITY TRUST FUND)
CAMEROON KANGAROO
MOTHER CARE DIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY Late 2015
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY
September 2017
(target)
DATE OF CONTRACT SIGNING N/A
DATE OF START OF
SERVICE PROVISION N/A
CONTRACT DURATION 4 years
END DATE Late 2021
OVERVIEW COUNTRY CAMEROON
DESCRIPTION: The Cameroon Kangaroo Mother Care (KMC) DIB aims to achieve significant and measureable
improvements in key health outcomes for low birth weight (LBW) and preterm infants, by funding the scale-up of
quality KMC practices in target hospitals across Cameroon. The impact bond structure is used because it provides strong
incentives to test and optimize an innovative train-the-trainer KMC scaling model. It also leverages outcome funder
commitments to bring in private investors’ risk capital and scrutiny. The ultimate aim is for quality KMC to be integrated
into Cameroon’s healthcare system to ensure long-term sustainability, and be a model for scaling quality KMC in other
countries.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE LITTORAL, CENTRE, NORTH, ADAMAOUA,
AND SOUTHWEST REGIONS
LBW/preterm birth is the leading cause of under-five child deaths
worldwide, and is also associated with longer term neurodevelopmental
disabilities and cardiovascular disease later in life. KMC is backed by strong evidence in improving LBW/preterm infant health outcomes.
A target in the Every Newborn Action Plan is to increase the reach of KMC to at least 50% of LBW/preterm infants globally by 2020. KMC
coverage currently remains low in many countries where infant mortality and morbidity is high, including Cameroon.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES Approximately 10,000 LBW and preterm infants
LBW and preterm infants in target hospitals across Cameroon. TARGET POPULATION
KMC involves administering continuous skin-to-skin contact, appropriate
feeding between caregivers and LBW/preterm infants, and early hospital
discharge. DIB will expand investment in infrastructure, equipment, and the train-the-trainer model required for quality KMC delivery.
The service provider will provide training to select facilities, which in turn will provide KMC training to other facilities and lower-tier
hospitals. Follow-up support to the trained facilities to ensure sustained implementation of quality KMC will be provided.
INTERVENTION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 91 | EARLY LEARNINGS FROM THE FIELD
Complete
DIB funding mechanism to allow scale-up and sustainability of
quality KMC in 10-12 hospitals across Cameroon.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Grand Challenges Canada previously funded the Kangaroo
Foundation to implement quality KMC in a select number of
pilot hospitals in 2015-2016.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: Scaling up and institutionalizing KMC across Cameroon requires up-front investment in infrastructure, equipment, training,
quality monitoring, and dedicated health practitioners. Cameroon lack the resources, technical expertise and contextualized training
to adopt KMC at scale without external funding and support; DIB offers innovative model to fill funding gap.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: All stakeholders involved in the KMC DIB project.
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: Kangaroo Foundation (KF) Cameroon
INTERMEDIARY: MaRS Centre for Impact Investing, Social
Finance UK (intermediaries co-leading DIB design)
OUTCOME FUNDER: Commitment by Cameroon Ministry of
Public Health (funded by World Bank led GFF Trust Fund) ($2
million), GCC ($800,000), Nutrition International ($800,000)
INVESTOR: To be determined (pending due diligence and
negotiations)
TECHNICAL ASSISTANCE PROVIDER:
KF Colombia (leading KMC trainer with over 20 years
experience); UNICEF Cameroon; IDinsight (conducted initial
baseline data study); Morrison Foerster and Miller Thomson
(international co-legal counsel); Cameroon-based legal
counsel; in-country public health consultant; data systems
provider.
OUTCOME EVALUATOR: Pending request for proposal
process
OUTCOME METRICS: To be finalized and subject to ongoing
negotiations. Likely to include: a) number of hospitals attaining
quality KMC prerequisites; b) number of infants receiving
quality KMC services; c) number or % of infants achieving target
nutritional status/weight at 40 weeks gestational age and/or at
follow-up.
EVALUATION METHOD: To be finalized and subject to ongoing
negotiations.
PAYMENT THRESHOLD: To be finalized and subject to ongoing
negotiations.
PAYMENT SCHEDULE AND AMOUNTS: To be finalized and
subject to ongoing negotiations.
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR
INVESTORS: To be finalized and subject to ongoing negotiations.
MAXIMUM RETURN: To be finalized and subject to ongoing
negotiations.
RESULTS TO DATE: N/A
FINANCING
OUTCOME FUNDS (USD) $3.6 million COSTS COVERED BY
INVESTMENT CAPITAL
Performance management
and possibly some pre-launch
mobilization activities
UPFRONT CAPITAL
COMMITMENT (USD) $3.0 million (pre-capital recycling) ADDITIONAL GRANTS
(USD) $1 million
CAPITAL RECYCLING Capital is recycled as outcome
payments are received
COSTS COVERED BY
ADDITIONAL GRANTS
Feasibility study, baseline data
study, DIB design and structuring,
data systems design, legal advice
OTHER COSTS N/A
92 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: PALLADIUM
INDIA (RAJASTHAN)
MATERNAL AND
NEWBORN HEALTH DIB
TIMELINE
DATE OF START OF FEASIBILITY
STUDY September 2015
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
September 2017
DATE OF CONTRACT SIGNING September 2017
DATE OF START OF SERVICE
PROVISION October 2017
CONTRACT DURATION
3 years with 3 months
mobilization and 3
months close-out
END DATE December 2020
DESCRIPTION: The India (Rajasthan) Maternal and Newborn Health DIB aims to improve the quality of maternal and newborn health
services provided through private facilities throughout Rajasthan. The impact bond structure is used in order to drive efficiencies and
harness the novel commercial perspective of investors to improve performance in service delivery. The ultimate aim is to reach a tipping
point so that all private facilities across Rajasthan will be incentivized to increase quality of service delivery. Improved service delivery in
private facilities, in tandem with the new Matritva certification process, will enable government to confidently contract out services to the
private sector, and facilitate demand-side financing initiatives, leading to an increase in maternal and early newborn survival.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
OVERVIEW
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
Rajasthan has one of the highest maternal and neo-natal mortality rates
in India and, as the largest state, one of the highest numbers in absolute terms.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES At least 300,000
Mothers and newborns across the state of Rajasthan. TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
The National Accreditation Board for Hospitals & Healthcare Providers
(NABH) of India is a nationally recognized accreditation body and has
recently developed an “Entry Level” certification to support smaller private facilities to provide quality services and move towards
full accreditation. NABH, in partnership with the Federation of Obstetrics and Gynaecological Societies of India (FOGSI), developed
a certification that allows NABH to explicitly recognize quality maternal care (“Joint Quality Standard”) which combines quality and
safety standards for maternity care into a comprehensive quality standard. The Service Providers will work with at least 485 private
facilities across Rajasthan to support them to improve and sustain their quality and processes and become ready for the JQS.
INTERVENTION
COUNTRY INDIA CITY/STATE RAJASTHAN
This information is subject to change 93 | EARLY LEARNINGS FROM THE FIELD
Complete
Despite increase in facility-based deliveries the maternal mortality
ratio, neonatal mortality rate and the infant mortality rate have not reduced as expected. Quality in the private sector where 30% of deliveries
take place is deemed a critical intervention by the Government of Rajasthan but has not been resourced to this point.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Nil FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor, thus aligning incentives
Other: Allows flexibility for each service provider to adopt and adapt their own approaches. Model also allows service providers
and implementation manager (Palladium) to become co-investors, sharing the exposure to risk as well as the financial reward if
the interventions are successful. The high efficiency dividend expected from the mechanism will be used to compare the modality
with other private facility quality improvement initiatives in other states of India. Palladium will be working with the Government of
Rajasthan during the initial three years of work, using the work as a basis to strengthen the government’s capacity to procure by
outcomes to enable this type of mechanism to be scaled in Rajasthan as well as other states in India.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: Hindustan Latex Family Planning
Promotion Trust (HLFPPT), Population Services
International (PSI)
INTERMEDIARY: Palladium (Intermediary, design agency,
performance manager)
OUTCOME FUNDER: USAID, Merck for Mothers,
Government of Rajasthan planning to commission outcomes
in Year 4 and 5
INVESTOR: 80% UBS Optimus Foundation with 20%
of the total investment capital being provided by the
Implementation Partnership of Palladium, PSI and HLFPPT
TECHNICAL ASSISTANCE PROVIDER: Instiglio
(Performance Management System design inputs),
Skotkonung (Information System Development), Social
Finance (Deal Advisory and Structuring inputs), Reed
Smith (International Legal Counsel), Phoenix (Indian Legal
Counsel), Rabin Martin (Strategic Advisory Services to
Merck for Mothers).
OUTCOME EVALUATOR: RFP for independent verification
agency currently being evaluated
OUTCOME METRICS: Full payment is readiness for JQS - >=50% of the total
points available in each NABH chapter (10 in total) AND 100% of at least 70%
(11) of the applicable FOGSI standards (16 in total). Progressive metric (25%
of full outcome payment ie $4,500) is >=30% of the total points available in
each NABH chapter (10 in total) AND 100% of at least 40% (6) of any of the
applicable FOGSI standars (16 in total)
EVALUATION METHOD: Independent audit
PAYMENT THRESHOLD: $18,000 per facility that reaches agreed JQS level
PAYMENT SCHEDULE AND AMOUNTS: Six-monthly with $4,500 for each
facility at progressive stage and remainder $13,500 for facilities that reach
JQS during that period
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: No
guarantee – payments are per facility ready for accreditation hence full loss
not possible but anything other than reaching the minimum target of 360
facilities at JQS level according to agreed forecast during the three-year
duration will result in losses for the investors.
MAXIMUM RETURN: 8% annualized for UBSOF component with 15% return
possible for the implementation partnership investment piece
RESULTS TO DATE: Nil
FINANCING
OUTCOME FUNDS
(USD) $8 million COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) ~$4 million ADDITIONAL GRANTS
(USD) $1.7 million
CAPITAL
RECYCLING
Capital is recycled as outcome
payments are received
COSTS COVERED BY
ADDITIONAL GRANTS
Design, rapid assessment, structuring, coordination
($700,000 from Convergence), results verification,
evaluation ($1 million from Merck for Mothers and USAID)
OTHER COSTS In-kind resign inputs from USAID, MfM, UBSOF, Palladium, PSI, HLFPPT. Pro bono legal counsel from Reed
Smith $300,000.
94 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: BRITISH ASIAN TRUST, UBS OPTIMUS FOUNDATION, MICHAEL AND SUSAN DELL FOUNDATION
INDIA EDUCATION DIB
TIMELINE
DATE OF START OF FEASIBILITY
STUDY June 2016
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
TBC
DATE OF CONTRACT SIGNING TBC in late 2017
DATE OF START OF
SERVICE PROVISION April 2018 (TBC)
CONTRACT DURATION Four years
END DATE May 2022
DESCRIPTION: Given low levels of learning in public primary schools in India, and not enough scalable models to deliver
good quality of learning, this DIB seeks to impact 200,000 marginalized children from 3 states in India. The DIB will
finance the implementation of 4 different models in the field: (a) whole school management (b) remedial teaching for
children who are behind their grade level of learning (c) teacher training and (d) school leadership or principal training.
Each of these has a different level of impact on student learning at a different cost per beneficiary. The end goals
are broadly threefold: to improve the learning levels of these 200,000 children, to identify models which work in the
field, learn lessons and promote their scale up, and finally, look to bring private sector and philanthropic money into
development programs which focus on outcomes.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
OVERVIEW COUNTRY INDIA
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE GUJARAT, RAJASTHAN, DELHI (TBC)
Range of operational models including principal and teacher
training, direct school management, and supplementary
programs such as remedial teaching.
INTERVENTION
Low quality of learning in public schools - less than 50% of
children in grade 5 can read at grade 2 level Hindi text.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 200,000
Primary school students. TARGET POPULATION
SECTOR:
Agriculture Employment
Health Social Welfare
Education
DEVELOPMENT CHALLENGE
This information is subject to change 95 | EARLY LEARNINGS FROM THE FIELD
Complete
Current financing insufficiently linked to outcomes
(more focused on outputs and inputs)
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Government budgets, local donors FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
FINANCING
OUTCOME FUNDS
(USD) Approx. $10 million COSTS COVERED BY
INVESTMENT CAPITAL
Service provider
costs
UPFRONT CAPITAL
COMMITMENT (USD) $2.4 million (max. $3 million) ADDITIONAL GRANTS
(USD) N/A
CAPITAL RECYCLING Capital is recycled as outcome payments are received COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS:
Kaivalya Education Foundation;
Educate Girls; Gyan Shala; Society
for All Round Development
(subject to final due diligence)
INTERMEDIARY: TBC
OUTCOME FUNDER: British
Asian Trust, Michael and Susan
Dell Foundation
INVESTOR: UBS Optimus
Foundation
TECHNICAL ASSISTANCE
PROVIDER: TBC
OUTCOME EVALUATOR: TBC
OUTCOME METRICS: Improvement in literacy and numeracy outcomes over four
years. • Enable primary school students to catch up between [1-2.5] grades over
the four years to allow sustained learning outcomes at their grade-appropriate
learning level. • Set based operational models and global benchmarking targets
on effective education initiatives.
EVALUATION METHOD: Validated administrative data
PAYMENT THRESHOLD: TBC
PAYMENT SCHEDULE AND AMOUNTS: Approx. 8% per annum on investment
amount not to exceed $740,000 if outcome targets are met. Performance reviewed
annually. Investors deploy an estimated $1.8 million in year 0, $400,000 in year
1 and $200,000 in year 2, for a total of $2.4 million over 4 years (capped at $3
million) if 100% outcome targets are achieved every year.
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: Subject to
Capital Protection sought by UBS Optimus Foundation
MAXIMUM RETURN: Returns capped at $740,000 (7% IRR)
RESULTS TO DATE: NA
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: British Asian Trust, Michael and Susan Dell
Foundation - outcome funders; UBS Optimus Foundation - convenor of investors and fund manager going forward.
96 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: INSTIGLIO INC, USAID DIV, TWO ADDITIONAL ANONYMOUS OUTCOME PAYERS,
VILLAGE ENTERPRISE
KENYA AND UGANDA
GRADUATION MODEL
DIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY September 2016
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY September 2017
DATE OF CONTRACT SIGNING September 2017
DATE OF START OF
SERVICE PROVISION November 2017
CONTRACT DURATION 4 years
END DATE First quarter 2022
DESCRIPTION: Village Enterprise and Instiglio are exploring the opportunity of a Development Impact Bond on Village Enterprise’s
Graduation model in Kenya and Uganda. During this four-year program, Village Enterprise aims to deliver quality at scale and significantly
improve the life of the members of more than 18,000 households across multiple villages in rural Kenya and Uganda, and to compare
DIB results to results under traditional financing to better understand the effect of flexibility and incentives in the project’s impact thus
contributing to the discussion of how to cost-effectively scale-up graduation.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
Recent evidence suggests that ultra-poor graduation programs can
have substantial impacts on poverty reduction. However, inconsistent performance has been observed across different programs, service
providers and countries, which points to the importance of contextual factors in the achievements of outcomes. The project proposal is
that, by disbursing funds with conditionality on evidence of success, providers will have flexibility and incentives to adapt the program to
deliver greater impact while donors only pay in case of success.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES Approx. 18,000 households
Village Enterprise offers a 1-year graduation model to help the ultrapoor in rural Africa to escape from extreme poverty. The program is
targeted at households living on less than $1.90 per day and has the following components:
- Targeting: Individuals living in extreme poverty, that have no prior business experience, and are unable to provide for family’s basic
needs are identified and selected
INTERVENTION
Ultra-poor households living in rural Kenya and Uganda. Beneficiary
households will be selected through a targeting exercise which is based on the Progress Out Of Poverty Index. Each beneficiary household
will select one family member to participate in the graduation program
TARGET POPULATION
OVERVIEW COUNTRY KENYA AND UGANDA
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE RURAL AREAS
SECTOR:
Employment
Health
Agriculture Education
Social Welfare
(Including homelessness, child welfare, etc.)
DEVELOPMENT CHALLENGE
This information is subject to change 97 | EARLY LEARNINGS FROM THE FIELD
Complete
Prior to investigating a DIB, Village Enterprise’s intervention
was funded through traditional financing methods largely paid for by foundations and individual donors.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
Results-based financing offers the chance to demonstrate that
the specific approach to graduation is sustainable and costeffective thus attracting more funding and enabling the program to scale up and reach more beneficiaries. Increased levels of flexibility to
adapt the intervention to best suit the needs of the beneficiaries is also seen as a decisive factor to engage in this new form of financing. A
results-based financing program will allow donors to invest in a program with the certainty to only pay for agreed-upon outcomes.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor, thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS (USD) $4.4 million COSTS COVERED BY
INVESTMENT CAPITAL
Intermediation, legal fees,
performance management
UPFRONT CAPITAL
COMMITMENT (USD) TBD ADDITIONAL GRANTS
(USD) $825,000
CAPITAL RECYCLING Capital is recycled as outcome
payments are received
COSTS COVERED BY
ADDITIONAL GRANTS
DIB design, process evaluation, RCT,
project management, reporting and
disseminating, trustee expenses
OTHER COSTS N/A
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS:
Village Enterprise
INTERMEDIARY: Global
Development Incubator
(trustee, hold outcomes fund)
OUTCOME FUNDER: USAID
DIV and another bilateral
agency (not yet public
information); anonymous
donor
INVESTOR: TBD
TECHNICAL ASSISTANCE
PROVIDER: Instiglio Inc. (DIB
design consultant and likely
implementation/operations
support)
OUTCOME EVALUATOR:
TBD
OUTCOME METRICS: Increase in consumption and assets are defined as follows:
• Consumption: The sum of household food and beverage consumption, household recurring consumption,
and household infrequent consumption. Consumption will be measured based on the widely-utilized
Consumption and Expenditure (C&E) survey.
• Assets: The net household assets (i.e. household savings and tangible household assets, net of household
liabilities) plus net business assets (i.e. business and VE BSG savings and tangible business assets, net of
business liabilities), accounting for business ownership by the household. No distinction between productive
and non-productive assets is made.
EVALUATION METHOD: RCT
PAYMENT THRESHOLD: No
PAYMENT SCHEDULE AND AMOUNTS: 3 payments for each cohort:
- 2 as reinbursements for seed funding transfer made
- 1 for consumption and assets impact one year after the intervention ends
Amount depends on the size of each cohort (about between 1,800 and 3,000 households, approximately).
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 100%
MAXIMUM RETURN: TBD
RESULTS TO DATE: N/A
- Training: Local mentors deliver a 9-month training
program on business and financial skills to prepare for the
management of small enterprises
- Seed funding: $156 seed capital is granted to start businesses of 3 participants
- Mentoring: Mentors guide the selection of the enterprises and provide ongoing advise throughout the intervention cycle of 1 year
- Business savings group: Creation of a self-managed form of microfinance providing members protection against financial shocks
and access to growth capital
INTERVENTION
98 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: GOVERNMENT OF STATE OF JALISCO, MÉXICO AND THE MULTILATERAL INVESTMENT FUND
OF THE INTER-AMERICAN DEVELOPMENT BANK GROUP
MEXICO THE FUTURE IN
MY HANDS SIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY August 2015
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY
Estimated for
April 2017
DATE OF CONTRACT SIGNING August 2017
DATE OF START OF
SERVICE PROVISION
Estimated for
September 2017
CONTRACT DURATION 38 months
END DATE N/A
DESCRIPTION: The SIB aims to improve the resilience and economic wellbeing of poor and low-income female heads of households in
the city of Guadalajara, Mexico by financing an intensive, holistic service model lasting up to 18 months. The structure will shift the risk
of performance of a relatively new and innovative intervention to socially motivated investors, seeking to increase the wellbeing of the
beneficiaries and potentially create savings for the government. The ultimate aim is to validate an intervention that should scale as a
public policy, as well to understand how a SIB could work in Mexico so the structure can be replicated in Jalisco and other states.
Female heads of households (“jefas”) are a vulnerable group in Mexico
and throughout Latin America and the Caribbean: they are more likely to be unemployed and have lower levels of income than
their male counterparts. In 2015, nearly 29% of all Mexican households were headed by jefas, and this number has been growing
steadily. In the State of Jalisco, one in every three jefas lives in poverty. Many are “trapped in poverty” by low education, limited work
experience, gender inequality in the workplace, lack of support networks and time constraints due to childcare.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 1,325
The intervention is based on the fusion of two models that have
demonstrated rigorous evidence of their effectiveness in other contexts:
the BRAC/CGAP/FORD “Graduation” program implemented by Fundación Capital and a model for economic empowerment of low
income women through entrepreneurship implemented by Crea in Mexico. The program will be implemented in three rounds that
would facilitate learning and a continuous improvement scheme. Basic financial literacy training using the LISTA program of Fundacion
Capital, savings promotion, one-on-one mentoring, training in soft skills, child care, technical business trainings, a lump sum monetary
transfer to purchase a productive asset, and tailored support to connecting to markets and servicing other needs.
INTERVENTION
Female heads of household, unemployed or self-employed, with income
of less than 2.5 of the Mexican minimum wage (less than $10), with minor children, beneficiaries of the cash transfer program of the
Government of Jalisco and residents in the metropolitan area of Guadalajara.
TARGET POPULATION
OVERVIEW COUNTRY MEXICO
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE METROPOLITAN AREA OF GUADALAJARA, JALISCO
DEVELOPMENT CHALLENGE SECTOR:
Agriculture
Health Social Welfare
Education Employment
This information is subject to change 99 | EARLY LEARNINGS FROM THE FIELD
The intervention is based on the fusion of two models that
have demonstrated rigorous evidence of their effectiveness in other contexts. The fusion of the two models has never been implemented.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
The Government of Jalisco would like to improve its cash
transfer program, so that women can achieve higher and
more sustainable levels of income, thereby breaking the intergenerational cycle of poverty. A SIB will allow Jalisco to trial innovations
to tackle this persistent social issue, with the risk of intervention failure largely covered by external investors. Given the pay-for-success
structure, a well-designed SIB should incentivize innovation by using continuous data feedback loops to adjust the service and improve
performance. Moreover, by putting in place a rigorous measurement framework, a SIB should provide actionable evidence and cost
data on the model prior to its possible expansion and replication in other areas in Mexico and the region.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS
(USD) MXN 65,000,000.00 COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) N/A ADDITIONAL GRANTS
(USD) Impact Evaluation and Learning Evaluation
CAPITAL RECYCLING N/A COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: implement a evidence-based intervention; to allow government to transfer performance risk of relatively new
and innovative intervention to investors.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Jalisco, IDB/MIF
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: Fundación Capital and CREA
INTERMEDIARY: N/A
OUTCOME FUNDER: Government of State of Jalisco,
México and the Global Innovation Fund (GIF)
INVESTOR: Multilateral Investment Fund of IDB Group,
Promotora Social Mexico (PSM), and Banamex Fomento
Social
TECHNICAL ASSISTANCE PROVIDER: Henderson &
Alberro and ProSociedad developed feasibility study
and SIB design with knowledge transfer support and TA
from Social Finance UK. An advisory board including
J-PAL, Tecnológico de Monterrey, Siembra Capitales,
New Ventures, CEMEX, Corporativa de Fundaciones and
CCMX provided feedback.
OUTCOME EVALUATOR: Evaluation design: Enrique
Seira, professor at ITAM and research affiliate at J-PAL,
IDB, GIF and Jalisco Social Developmet Ministry;
Evaluation implementation: Policy Lab.
OUTCOME METRICS: Long-term impact metrics are:
(1) Consumption measured through an RCT and (2) Assets measured
through an RCT representing illiquid assets and liquid savings. Shortterm operational metrics include: (3) Participation/Attendence, (4)
Purchase and use of a productive asset with the monetary transfer, and
(5) Learning - knowledge of basic skills from trainings.
EVALUATION METHOD: A hybrid evaluation methodology will include
a non-experimental direct measurement for shorter-term operational
metrics, and a randomized controlled trial for longer-term impact
metrics.
PAYMENT THRESHOLD: None
PAYMENT SCHEDULE AND AMOUNTS: Operational metrics will
represent 40% of total payments and longer-term impact metrics
represent 60% of total payments.
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: No
capital protection
MAXIMUM RETURN: N/A
RESULTS TO DATE: N/A
100 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: SOHNOS SOCIAL CAPITAL, TRADING AS GOODBYE MALARIA
MOZAMBIQUE MALARIA
DIB
OVERVIEW COUNTRY MOZAMBIQUE CITY/STATE MAPUTO PROVINCE
DESCRIPTION: The Mozambique Malaria DIB forms part of the public-private partnership between the government
of Mozambique, the Global Fund and MOSASWA designed to increase funding for, and the efficiency of, malaria
interventions through a pay-for-performance mechanism.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
TIMELINE
DATE OF START OF FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY N/A
DATE OF CONTRACT SIGNING June 2017
DATE OF START OF SERVICE PROVISION N/A
CONTRACT DURATION 3 years
END DATE N/A
INTERVENTION Indoor Residual Spraying prevention program
Mozambique has the 6th highest malaria burden globally
yet faces a 62% malaria funding deficit.
DEVELOPMENT CHALLENGE
N/A FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
N/A REASON(S) EXISTING FINANCING WAS/IS
INADEQUATE
TARGET NUMBER OF BENEFICIARIES N/A
Maputo Province, Mozambique TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 101 | EARLY LEARNINGS FROM THE FIELD
Complete
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: Funding of the malaria intervention program through an impact bond mechanism enables
i) incentive realignment between funders and implementers, ii) improved program delivery efficiency and/or
productivity, iii) mobilization of new capital sources to an underfunded challenge
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS
(USD) N/A COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) $4 million, first close at $2 million ADDITIONAL GRANTS (USD) None
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS
SERVICE PROVIDERS: Lubombo Spatial Development Initiative (LDSI) II
INTERMEDIARY: D. Capital Partners
OUTCOME FUNDER: Goodbye Malaria, underwritten by Nandos and other corporates
INVESTOR: TBD
TECHNICAL ASSISTANCE PROVIDER: University of Pretoria, Medical Research Council, National Malaria Control
Program – Ministry of Health, Mozambique
OUTCOME EVALUATOR: Independent M&E expert
METRICS AND PAYMENTS
OUTCOME METRICS: Prevalence and incidence rates
EVALUATION METHOD: Number of cases reported by prevalence testing done at sentinel sites in each district
PAYMENT THRESHOLD: 60% reduction from initial year 1 baseline
PAYMENT SCHEDULE AND AMOUNTS: Bullet payment at the end of the 3 year bond term
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 30%
MAXIMUM RETURN: 0.05%
RESULTS TO DATE: N/A
102 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: THE PORTLAND TRUST (TPT)
PALESTINE TYPE II
DIABETES DIB
OVERVIEW COUNTRY PALESTINE CITY/STATE REFUGEE CAMPS IN THE RAMALLAH AND AL-BIREH
GOVERNORATE, WEST BANK (FOR THE PILOT DIB).
DESCRIPTION: The Palestine Type II Diabetes DIB aims to prevent and delay the on-set development of T2DM among prediabetic women in 4 refugee camps in the Ramallah and al-Bireh Governorate, West Bank by funding a lifestyle modification
program consisting of a nutritional component and physical exercise component. The pilot DIB will be designed to reach a
minimum of 100 pre-diabetic women. If successful, the intervention could be scaled up to address the prevalence of T2DM
across Palestine.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
TIMELINE
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
TBD - current aim for Q3
2017
DATE OF CONTRACT SIGNING TBD - current aim for Q3
2017
DATE OF START OF SERVICE
PROVISION TBD - current aim for Q4 2017
CONTRACT DURATION TBD - current aim is 3 years
END DATE TBD
DATE OF
START OF
FEASIBILITY
STUDY
After a period of thorough study and preparatory work, a feasibility pilot targeting 18 pre-diabetic women was
launched in September 2016 to assess the efficacy and impact of the intervention. The pilot achieved a success rate
of 44% (defined as weight reduction of at least 5%), averaging 5.55% reduction among all participants. Attendance
rate averaged 80% and physical activity increased by 89%. Moreover, the pilot learnings contributed to the
completion of the curriculum to be used in the upcoming phase (targeting 100 women across 4 refugee camps).
T2DM is a growing epidemic among Palestinians, especially
women in refugee camps, and estimated to affect over 12.2% of the population (above world average of 8.5%) according
to the World Health Organization. Prevalence of established risk factors is growing within the population – Palestine
is recognized as one of the countries experiencing some of the largest increases in obesity globally. T2DM is a leading
cause of cardiovascular disease, kidney failure and other serious medical conditions and can reduce life expectancy by
8-10 years. The disease also has significant economic consequences. These include the reduction in number of working
years for those affected by the disease and the increasing financial burden on the healthcare system.
DEVELOPMENT CHALLENGE
100 pre-diabetic women within refugee camps in the Ramallah
and al-Bireh Governorate, West Bank. TARGET NUMBER OF BENEFICIARIES
For the pilot DIB, the target population is pre-diabetic women
above 40 years old within 4 refugee camps in the Ramallah and al-Bireh Governorate, West Bank.
TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 103 | EARLY LEARNINGS FROM THE FIELD
Complete
Budget constraints and priorities in a relief context have
shifted focus from prevention to emergency treatment.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
1) Nutritional education: Administration of a 4-month
intensive educational program focused on equipping patients with sound nutritional habits that enable weight loss
and management. Post program, periodic follow-up for a 32-month period will be administered through group
sessions and SMS reminders to ensure commitment; and 2) Physical exercise: Administration of a 4-month educational
program on exercise techniques coupled with 150 minutes of exercise per week to develop exercise habits. Post
program, periodic follow-up for a 32-month period will be administered through group sessions and SMS reminders
to ensure commitment. Both components of the intervention have been reviewed and customized to the Palestinian
context by the Advisory Board and the team at Juzoor.
INTERVENTION
The Portland Trust funded the study, preparatory
work and launch of the feasibility pilot and conducted
performance oversight.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Bank of Palestine, a local Palestinian bank, has
expressed interest in assuming the role of the investor.
FINANCING
OUTCOME FUNDS
(USD) TBD COSTS COVERED BY INVESTMENT CAPITAL TBD
UPFRONT CAPITAL
COMMITMENT (USD)
TBD - currently estimated between
$100,000 and $120,000 ADDITIONAL GRANTS (USD) N/A
CAPITAL RECYCLING TBD COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: Juzoor for Health and Social
Development
INTERMEDIARY: TBD
OUTCOME FUNDER: Currently in discussion with a potential
outcome funder.
INVESTOR: Bank of Palestine
TECHNICAL ASSISTANCE PROVIDER: An advisory board has
been established to provide the technical support needed
OUTCOME EVALUATOR: TBD
OUTCOME METRICS: TBD but will include weight loss.
EVALUATION METHOD: TBD
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT
FOR INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: N/A
104 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: WORLD BANK GROUP AND MINISTRY OF FINANCE & PLANNING OF THE PALESTINIAN AUTHORITY
PALESTINE (WEST
BANK AND GAZA)
EMPLOYMENT DIB
OVERVIEW COUNTRY WEST BANK AND GAZA CITY/STATE N/A
West Bank and Gaza benefits from a young population and large
pool of highly-educated young people with strong technical skills and motivation to find employment. However employers
suffer difficulties in filling job vacancies, and as a result youth unemployment is very high.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 1500-2000 (TBC) 30% women
Unemployed youth (18-29 years) with tertiary education
degree/cetrificate
TARGET POPULATION
TIMELINE
DATE OF START OF
FEASIBILITY STUDY Mid-2015
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
Early 2018
DATE OF CONTRACT SIGNING N/A
DATE OF START OF
SERVICE PROVISION N/A
CONTRACT DURATION 3-4 years
END DATE N/A
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
Enhancing the skills of the Palestinian workforce in a more
market-driven way through training and job matching in order
to foster improved job outcomes.
INTERVENTION
DESCRIPTION: This impact bond aims to enhance the skills of the Palestinian workforce and foster closer collaboration between
the private sector and training and education providers to help ensure that training content is relevant to the private sector’s
current and emerging needs.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
This information is subject to change 105 | EARLY LEARNINGS FROM THE FIELD
Complete
Funding did not incentivize results and was
inadequately linked to the private sector in a demand-driven way
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
Primarily DFI funded FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS
(USD) $5 million COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) N/A ADDITIONAL GRANTS (USD) N/A
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: Likely to be a mixture of training outputs and employment outcomes
EVALUATION METHOD: N/A
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: N/A
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: N/A
RESULTS TO DATE: N/A
SERVICE PROVIDERS: N/A
INTERMEDIARY: N/A
OUTCOME FUNDER: World Bank Group
INVESTOR: N/A
TECHNICAL ASSISTANCE PROVIDER: Social Finance
OUTCOME EVALUATOR: N/A
106 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: MULTILATERAL INVESTMENT FUND - INTER-AMERICAN DEVELOPMENT BANK
TIMELINE
DATE OF START OF FEASIBILITY
STUDY April 2016
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
Early 2018
DATE OF CONTRACT SIGNING N/A
DATE OF START OF
SERVICE PROVISION 2018
CONTRACT DURATION 4 years
END DATE December 2021
DESCRIPTION: This impact bond aims to increase incomes and environmental sustainability of 4,000 Asháninkas living in
22 communities along the Río Ene Basin in the Central Jungle of Peru through the implementation of an innovative funding
mechanism of the Climate Smart Agriculture impact bond. The project will support the implementation of agroforestry systems
and a conservation strategy of Asháninka communities and the creation of its own cooperative to better position their cocoa
and coffee in the market. This project will scale up a pilot DIB undertaken in 2015 (see factsheet on the “Sustainable Cocoa and
Coffee Production DIB” for more details). The model will also test and refine value chain interventions with indigenous people
in the Amazon through continuous data feedback loops, and should provide actionable evidence of the model to be scaled.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
Poverty, deforestation and forest degradation: The Asháninkas are
dependent on forest resources for their subsistence, and rely on agriculture – in particular cocoa and coffee – for monetary income to
support their livelihoods and to cover heath and education costs. They are the weakest part of the value chains, as their communities
are isolated, far from roads, and middle-men usually scam producers due to limited numeracy skills and low bargain power. Productivity
is low and their plots have high presence of diseases. Their lands are threathened by illegal logging and invasions from coca growers.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 500 producers and 22 communities (indirectly 4,000 people)
Asháninka cocoa and coffee producers and Asháninka communities.
The Asháninkas are the largest Amazonian indigenous group in Peru.
TARGET POPULATION
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
PERU CLIMATE-SMART
AGRICULTURE DIB:
Model for productive improvement of agroforestry
products and the conservation of the forest of
Asháninka communities in the Peruvian Amazon.
OVERVIEW COUNTRY PERU CITY/STATE ENE RIVER BASIN, JUNIN REGION
DEVELOPMENT CHALLENGE SECTOR:
Agriculture
Health Social Welfare
Education Employment
This information is subject to change 107 | EARLY LEARNINGS FROM THE FIELD
Complete
Existing intervention financed by grants from foundations,
a CSR programme and a pilot development impact bond through Rainforest Foundation UK (RFUK). Interventions from local
governments and national programmes.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
Funding expired. Govermental interventions focused only
on specific areas of the value chain and lack of holistic
approach- these interventions didn’t address access to market and working capital loans. Quality of intervention was not appropriate.
Funding did not allow enough flexibility.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
The goal of the project is to increase incomes and
environmental sustainability through the (i) increase
in productivity and quality of the cocoa and coffee produced; (ii) consolidation of their commercialization strategy into niche
international markets that recognize the value of quality vis-à-vis the conservation efforts and history of the native communities; (iii)
upgrade Kemito Ene (currently an association) into a cooperative with a clear path for sustainability; (iv) strengthen the community
governance over land use and conservation efforts; and (v) learn from the DIB structure, looking to the ability of the funding to
increase efficiency and to bring new players into the development of high value chains with low income populations.
INTERVENTION
FINANCING
OUTCOME FUNDS
(USD) $3,047,700 COSTS COVERED BY
INVESTMENT CAPITAL
Performance management,
evaluation
UPFRONT CAPITAL
COMMITMENT (USD) $3,047,700 ADDITIONAL GRANTS
(USD) $90,000
CAPITAL RECYCLING Capital covers the cost of the program
for the duration of the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS Design, legal fees
OTHER COSTS Feasibility study covered by outcome payer and service provider
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: RFUK working with
two local partners
INTERMEDIARY: N/A
OUTCOME FUNDER: Multilateral Investment
Fund - Inter-American Development Bank
(43%), others TBD
INVESTOR: Common Fund for Commodities,
and a California based impact investment
fund- subject to due diligence and board
approval
TECHNICAL ASSISTANCE PROVIDER: N/A
OUTCOME EVALUATOR: TBD
OUTCOME METRICS: Economic impact of cocoa improvement (in USD) Economic
impact of coffee improvement (in USD)
Social sustainability - Good governance (qualitative indicator)
Environmental sustainability - Climate Smart Agriculture (number of hectares of
cocoa and coffee agroforestry systems)
Environmental sustainability – Forest Conservation (number of hectares of forest
conserved/no deforestation)
EVALUATION METHOD: Historical comparison
PAYMENT THRESHOLD: TBC
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Service provider
108 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: BERTHA CENTRE FOR SOCIAL INNOVATION AND ENTREPRENEURSHIP
Playgroup models (compare two different models of care
through 1-2 Impact Bonds)
INTERVENTION
SOUTH AFRICA
ECD IMPACT BOND
INNOVATION FUND -
SOCIAL DEVELOPMENT
TIMELINE
DATE OF START OF FEASIBILITY
STUDY January 2015
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
November 2016
DATE OF CONTRACT SIGNING September 2017
DATE OF START OF
SERVICE PROVISION TBD
CONTRACT DURATION 3 years
END DATE TBD
60% of 3-5 year old children in the Western Cape cannot
access government subsidy for ECD because they cannot access registered ECD centers. As a result children are not
ready to learn by the time they reach Grade R.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 4,000
Children in the 2 years before school that are likely to attend
Quintile 1-3 schools, which are those found in the poorest communities.
TARGET POPULATION
OVERVIEW COUNTRY SOUTH AFRICA
DESCRIPTION: The Department of Social Development sponsored early childhood development (ECD) impact bond
innovation fund aims to improve developmental outcomes in 3-5 year old children in low-income communities by funding
non-center based early learning interventions in Western Cape in South Africa. The impact bond structure is used because
of the rigorous performance management and mechanism with which to align public and private sector outcomes funding.
The ultimate aim is to identify and strengthen effective playgroup models that can be scaled.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE WESTERN CAPE
SECTOR:
Agriculture Employment
Health Social Welfare
Education
DEVELOPMENT CHALLENGE
This information is subject to change 109 | EARLY LEARNINGS FROM THE FIELD
Insufficient political will to fund non center-based
programmes
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS (USD) $2.2 million COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD)
$1.1 million across 2 impact bonds the
total potential outcome payment of
which could reach $3.6 million
ADDITIONAL GRANTS
(USD) $111,000
CAPITAL RECYCLING N/A COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
Complete
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: The impact bond structure will shift the risk of performance of relatively new and innovative interventions to
socially motivated investors. The fund structure enables private donors to fund outcomes alongside the
department in a transparent and accountable manner.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: DSD, service providers, investors
METRICS AND PAYMENTS
OUTCOME METRICS: Recruitment and retention, attendance,
development assessment score
EVALUATION METHOD: Early learning outcomes measure (ELOM)
PAYMENT THRESHOLD: Per beneficiary payment: recruitment and
retention, per beneficiary payment: attendance >50%, per cohort
payment: greater than 0.2 effect size as compared to standardized
norm
PAYMENT SCHEDULE AND AMOUNTS: Recruitment and retention:
every 6 months.
Attendance and development assessment: once a year
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS:
N/A
MAXIMUM RETURN: IRR capped at 16%
RESULTS TO DATE: N/A
STAKEHOLDERS
SERVICE PROVIDERS: Foundation for
Community Work
INTERMEDIARY: D. Capital
Partners (pre-contracting) and
mothers2mothers (performance
management)
OUTCOME FUNDER: Department of
Social Development ($1.1 million) and
ApexHi Charitable Trust ($1.1 million)
INVESTOR: Syndicate of foundation,
Institutional investor, Philanthropist
TECHNICAL ASSISTANCE PROVIDER:
Social Finance (development)
OUTCOME EVALUATOR: TBD
Department of Social Development and ApexHi
Charitable Trust
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
110 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: BERTHA CENTRE FOR SOCIAL INNOVATION AND ENTREPRENEURSHIP
SOUTH AFRICA
ECD IMPACT BOND
INNOVATION FUND -
HEALTH
TIMELINE
DATE OF START OF FEASIBILITY
STUDY January 2015
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
November 2016
DATE OF CONTRACT SIGNING September 2017
DATE OF START OF
SERVICE PROVISION TBD
CONTRACT DURATION 3.5 years
END DATE TBD
OVERVIEW COUNTRY SOUTH AFRICA
DESCRIPTION: The Department of Health sponsored early childhood development (ECD) impact bond innovation fund
aims to improve health, nutrition and developmental outcomes of pregnant women and children from 0-2 years by funding
home and community based interventions in the Western Cape in South Africa. The impact bond structure is used because
of the rigorous performance management and mechanism with which to align public and private sector outcomes funding.
The ultimate aim is to identify and strengthen effective home and community based models that can be scaled using
outcome payments and by providing technical assistance.
CITY/STATE WESTERN CAPE
INTERVENTION Home and community-based interventions
High levels of stunting (25%), high levels of maternal HIV (30%),
high levels of TB, low levels of immunization contributing to poor health, nutrition and developmental outcomes in the
first 1,000 days. Facility based care not adequately equipped to deal with preventative health and child development.
DEVELOPMENT CHALLENGE
Department of Health and Discovery Trust FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
TARGET NUMBER OF BENEFICIARIES 2,300 pregnant women and 2,000 children
Pregnant women and children from 0-2 years living in the most
deprived communities in the Cape Town Metropolitan Area.
TARGET POPULATION
SECTOR:
Agriculture Employment
Health Social Welfare
Education
DEVELOPMENT CHALLENGE
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
This information is subject to change 111 | EARLY LEARNINGS FROM THE FIELD
Insufficient funding and lack of flexible funding REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS
(USD) $1.38 million COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD)
$1.1 million across 2 impact bonds the total potential
outcome payment of which could reach $3.6 million
ADDITIONAL GRANTS
(USD) $110,000
CAPITAL RECYCLING N/A COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: The impact bond structure will shift the risk of performance of relatively new and innovative interventions to
socially motivated investors. The fund structure enables private donors to fund outcomes alongside the Department of
Health in a transparent and accountable manner.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Government, service providers and investors
METRICS AND PAYMENTS
OUTCOME METRICS: Recruitment; mother child unit: antenatal care (ANC)
access, reduction in maternal alcohol consumption (RMAC), prevention of mother
to child transmission of HIV, birth-weight (BW); 0-1 years: exclusive breast feeding
(EBF), weight for age, prevention of HIV transmission, prevention and treatment
of TB; 1-2 years: height for age, immunization, prevention and treatment of TB,
primary caregiver assessment.
EVALUATION METHOD: Parental assessment: Interview and Observation
(PICCOLO)
PAYMENT THRESHOLD: ANC: 10% improvement, RMAC: 100% tested (output),
PMTCT: <2%, BW: 1-5% improvement, EBF: 30%, weight for age: cohort
dependent, prevention HIV: <4%, TB: 90% identification and 60% adherence
to treatment, immunization: 90%, height for age: cohort dependent, primary
caregiver assessment: 10% improvement as compared to control
PAYMENT SCHEDULE AND AMOUNTS: Recruitment every 6 months; outcomes
once a year
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: IRR capped at 16%
RESULTS TO DATE: N/A
STAKEHOLDERS
SERVICE PROVIDERS:
Confidential
INTERMEDIARY: D. Capital
Partners (pre-contracting)
and mothers2mothers
(performance management)
OUTCOME FUNDER: Provincial
Department of Health (USD
0.69M) and Discovery Fund
(USD 0.69M)
INVESTOR: Syndicate of
foundation, Institutional
investor, Philanthropist
TECHNICAL ASSISTANCE
PROVIDER: Social Finance
(development)
OUTCOME EVALUATOR: TBD
Complete
112 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: GLOBAL FUND, SOUTH AFRICAN NATIONAL AIDS COUNCIL (SANAC)
SOUTH AFRICA HIV
PREVENTION AND
TREATMENT SIB
OVERVIEW COUNTRY SOUTH AFRICA CITY/STATE GAUTENG PROVINCE
DESCRIPTION: Sex workers in South Africa have an estimated HIV prevalence of 60%, a rate substantially higher than
the 12% prevalence in the general population. Sex workers are simultaneously at heightened risk for HIV infection and
exposed to stigma, discrimination and criminalization because of biological, behavioral and structural vulnerabilities
that prevent them from accessing and staying in health services. Despite these vulnerabilities, evidence shows that
antiretroviral treatment (ART) can be equally effective among sex workers as other populations when these are addressed
with culturally-competent care. SANAC is leading the design of an HIV Prevention and Treatment SIB that would seek to
improve uptake and adherence rates of ART and preventive measures among sex worker populations in Gauteng Province.
Supportive of the initiative, the Global Fund has allocated $3 million in Catalytic Funding to support the SIB’s launch.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
TIMELINE
DATE OF START OF FEASIBILITY STUDY Mid-2016
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY TBD
DATE OF CONTRACT SIGNING TBD
DATE OF START OF SERVICE PROVISION TBD
CONTRACT DURATION 3-4 years
END DATE TBD
SANAC-approved National Sex Worker Programme’s core
package of activities (peer education, health care, psychosocial
support, human rights, social capital and economic empowerment) will be implemented with flexibility to adapt and
modify services offered, in line with the needs of the local sex worker population.
INTERVENTION
Sex worker populations DEVELOPMENT CHALLENGE
N/A FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
TARGET NUMBER OF BENEFICIARIES 4,000-6,000
Sex worker populations in Gauteng Province TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 113 | EARLY LEARNINGS FROM THE FIELD
Complete
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS (USD) $5-$6 million COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) $1.5-$2.5 million ADDITIONAL GRANTS
(USD)
$3 million (Catalytic Funding
from Global Fund)
CAPITAL RECYCLING N/A COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: Focus on preventing ongoing transmission of HIV and enabling people living with HIV to know
their status, receive sustained ART treatment and be virally supressed. Expected to include outputs (e.g. enrollment) and
outcomes (e.g. adherence on ART/Pre-exposure prophylaxis regimens and viral suppression).
EVALUATION METHOD: TBD
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: TBD
SERVICE PROVIDERS: TBD
INTERMEDIARY: TBD
OUTCOME FUNDER: Department of Science and Technology
INVESTOR: TBD
TECHNICAL ASSISTANCE PROVIDER: Social Finance
OUTCOME EVALUATOR: TBD
N/A REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
114 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: BERTHA CENTRE FOR SOCIAL INNOVATION AND ENTREPRENEURSHIP
SOUTH AFRICA
WORKFORCE
DEVELOPMENT SIB
OVERVIEW COUNTRY SOUTH AFRICA CITY/STATE CITY OF CAPE TOWN
DESCRIPTION: The city has been working with the Bertha Centre for the last year to understand the potential for using
outcomes-based contracting mechanism to improve service delivery. They hope to increase the number of unemployed
residents placed into education, training and employment opportunities by addressing the mismatch between skills and
placements.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
TIMELINE
DATE OF START OF FEASIBILITY
STUDY July 2016
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
October 2017
DATE OF CONTRACT SIGNING September 2017
(Intended)
DATE OF START OF SERVICE
PROVISION October 2017
CONTRACT DURATION 3 years
END DATE October 2020
Assessment, work readiness programme and placement into
education, training or employment. INTERVENTION
Chronically low employment levels, especially in youthful population. DEVELOPMENT CHALLENGE
TBD FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
N/A REASON(S) EXISTING FINANCING WAS/IS
INADEQUATE
TARGET NUMBER OF BENEFICIARIES TBD
Unemployed residents living in the Cape Town metropolitan area. TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 115 | EARLY LEARNINGS FROM THE FIELD
Complete FINANCING
OUTCOME FUNDS (USD) $1.26 million COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) N/A ADDITIONAL GRANTS
(USD) N/A
CAPITAL RECYCLING N/A COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: Outputs: Assessment and work readiness programme
Outcomes: Learnership and employment placement
EVALUATION METHOD: Identification documents, job contracts, student registration and completion
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: Payments made every quarter, size of payment based in individual tariff
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: N/A
SERVICE PROVIDERS: (confidential until contract signed)
INTERMEDIARY: None
OUTCOME FUNDER: Enterprise and Investment Department
INVESTOR: TBD
TECHNICAL ASSISTANCE PROVIDER: N/A
OUTCOME EVALUATOR: Bertha Centre for Social Innovation and Entrepreneurship
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Government departments that are trying to address
unemployment.
116 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: GOVERNMENT OF UGANDA, SOCIAL FINANCE, UNIVERSITY OF EDINBURGH,
H2O VENTURE PARTNERS
UGANDA SLEEPING
SICKNESS DIB
OVERVIEW COUNTRY UGANDA CITY/STATE AREAS OF UGANDA WHERE TRYPANOSOMA
RHODESIENSE IS ENDEMIC
TIMELINE
DATE OF START OF
FEASIBILITY STUDY
April 2012 original
scoping study, 2014-2015
piloting of the model
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
TBD
DATE OF CONTRACT SIGNING TBD
DATE OF START OF SERVICE
PROVISION TBD
CONTRACT DURATION TBD
END DATE TBD
DESCRIPTION: A consortium of partners have explored ways to prevent two deadly strains of Sleeping Sickness from
overlapping in Northern Uganda. A successful pilot was implemented in 2014/15, in which 20,000 cattle were treated for
Sleeping Sickness. The intervention model also includes a behavior change component to ensure that farmers spray their
cattle effectively to prevent the spread of Sleeping Sickness and improve cattle health. Feasibility work for this project was
completed in 2015, but further development and capital raise has been paused pending availability of outcome funding.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
The DIB is designed to achieve both mass treatment of cattle
with a trypanocidal drug, and ongoing delivery of an effective
insecticide treatment. The major challenge in the past has been to consistently deploy treatment and sustain spraying,
and the DIB thus introduces a results approach that relies on data-driven performance management to incentivize
flexible and adaptive delivery.
INTERVENTION
A key constraint to controlling sleeping sickness is poor and sporadic
deployment of proven interventions. Epidemiological models predict that if initial mass treatment of cattle is combined with
ongoing affordable access to insecticide spraying, the risk to humans from cattle parasites becomes insignificant.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES N/A
Cattle and humans infected by Trypanosoma Rhodesiense TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 117 | EARLY LEARNINGS FROM THE FIELD
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
FINANCING
OUTCOME FUNDS (USD) N/A COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL COMMITMENT (USD) N/A ADDITIONAL GRANTS (USD) N/A
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS N/A
Complete
N/A REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
N/A FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: Audited delivery of the mass treatment intervention and statistically significant reductions in the
T. brucei s.l. parasite among the cattle population in target areas.
EVALUATION METHOD: Validated administrative data (audited mass treatment) + historical comparison (statistically
significant reductions in the T. brucei s.l. parasite compared to a baseline cluster-randomised survey)
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: N/A
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: N/A
RESULTS TO DATE: N/A
SERVICE PROVIDERS: N/A
INTERMEDIARY: N/A
OUTCOME FUNDER: N/A
INVESTOR: N/A
TECHNICAL ASSISTANCE PROVIDER: N/A
OUTCOME EVALUATOR: N/A
118 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: SOCIAL FINANCE
ARGENTINA YOUTH
EMPLOYMENT SIB
TIMELINE
DATE OF START OF
FEASIBILITY STUDY January 2017
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING
FEASIBILITY STUDY
N/A
DATE OF CONTRACT SIGNING Unknown
DATE OF START OF
SERVICE PROVISION 2018
CONTRACT DURATION 3 years
END DATE 2020-21
DESCRIPTION: The SIB aims to increase labor market insertion of vulnerable young individuals by scaling programs from
NGOs and social enterprises focused on youth employability in the city of Buenos Aires, Argentina. The impact bond
structure is used because it allows the government to de-risk and pursue employment programs which may take years to
yield results and which represent a significant amount of potential savings and income. The ultimate aim is to align public
sector funding with youth employment outcomes and develop the internal capacity for future pay-for-success programs.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
OVERVIEW COUNTRY ARGENTINA CITY/STATE BUENOS AIRES
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
Programs and services focused on employability from nonprofits and social enterprises working with vulnerable youth,
which work in vulnerable neighborhoods in southern Buenos Aires.
INTERVENTION
The development challenge faced by the bond is youth
unemployment among vulnerable youth.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES TBD
Vulnerable young individuals age 17-24, living in the southern
neighborhoods of the City of Buenos Aires
TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 119 | EARLY LEARNINGS FROM THE FIELD
Complete
TBD REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
TBD FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: The impact bond will fund the growth of programs and social enterprises that develop the soft and hard skills
that vulnerable youth need to meet the current labor demand.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: TBD
FINANCING
OUTCOME FUNDS (USD) TBD COSTS COVERED BY INVESTMENT CAPITAL TBD
UPFRONT CAPITAL COMMITMENT (USD) TBD ADDITIONAL GRANTS (USD) TBD
CAPITAL RECYCLING TBD COSTS COVERED BY ADDITIONAL GRANTS TBD
OTHER COSTS TBD
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: TBD
EVALUATION METHOD: TBD
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: TBD
MAXIMUM RETURN: TBD
RESULTS TO DATE: TBD
SERVICE PROVIDERS: TBD (non-profits and social enterprises)
INTERMEDIARY: Acrux Partners and Social Finance Ltd.
OUTCOME FUNDER: Government of the City of Buenos Aires
INVESTOR: TBD (local banks, family offices, corporates)
TECHNICAL ASSISTANCE PROVIDER: Acrux Partners and Social Finance Ltd., legal advisors
OUTCOME EVALUATOR: TBD (think tank or international accounting company)
120 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: SITAWI
BRAZIL CHRONIC
ILLNESS SIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY June 2016
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY June 2017
DATE OF CONTRACT SIGNING February 2018
DATE OF START OF
SERVICE PROVISION March 2018
CONTRACT DURATION 5 years
END DATE February 2023
DESCRIPTION: The proposed SIB aims to funding the prescription and delivery of cost effective community-based and multi-professional
services to (i) improve health and wellbeing of socially vulnerable long term chronic patients, their carers and other family members and
to (ii) avoid unnecessary hospitalizations, generating savings for the government. The anticipated size of the potential contract is ~BRL
28 million ($9.1 million). Proceeds will be used to service around 2,000 patients, their carers and families over the course of 5 years, likely
integrating two complementary care service delivery modalities: (i) home care service; (ii) community care service center.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
Patients with chronic conditions are often hospitalized for long periods
in the public health system, increasing the risk of infections, and putting pressure on the supply of costly hospital beds. Today, only 3%
of patients in the state of Ceará occupy over 25% of hospital bed days. With the rapid aging of population in the next 15 years, a surge in
demand for hospital beds is expected. Additionally, long term hospitalization often creates adverse conditions for rehabilitation, autonomy
and impairs life quality of patients and their families. The project aims to address inequalities in care access and promote more healthy lives
and wellbeing for a growing aging population in Brazil.
DEVELOPMENT CHALLENGE
Direct Beneficiaries: over 2,000 patients, their carers and families
over 5 years. Indirect Beneficiaries: 43,000 over 5 years (shorter term
patients occupying beds previously occupied by long term patients treated by the program)
TARGET NUMBER OF BENEFICIARIES
Target populations are socially vulnerable chronic patients hospitalized
for long periods, their carers and families. The target population defined by the Government of Ceará is around 2,000 beds (in five years
representing over 20,000 patients), which are all users of public health system with chronic diseases and vulnerable social condition.
Today only around 700 beds are serviced by Government (35% of target population). This means there is a deficit of over 1,300 beds and
13,000 patients over five years. The proposed contract will not solve the whole public problem but aims at creating a successful case.
TARGET POPULATION
OVERVIEW
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
COUNTRY BRAZIL CITY/STATE STATE OF CEARÁ
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
This information is subject to change 121 | EARLY LEARNINGS FROM THE FIELD
Complete
Public hospital budgets are restricted for expanding or even
maintaining community based services and implementing innovations to improve patients’ health and wellbeing in out-of-hospital settings.
Lack of rigorous evaluation and proper monitoring of patients, carers and families makes the goal of delivering effective community based
alternatives for long term patients difficult to manage. The proposed pay by results contract will create an independent out-of-hospital
service experiment, large enough to contain all necessary elements for a more systemic approach but still too small to allowing for testing
and adapting different delivery strategies. Impact targets will incentivize operators to seek most appropriate solutions for each beneficiary
treated by the program.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
The SIB aims to finance the prescription and delivery of
services at home or at a community care center for patients, their carers and families, which may include the following (i) management of
multi professional staff, logistics and materials; (ii) development of customized service delivery plan; (iii) family carer training, continued
monitoring and interaction with multi professional staff; (iv) remote monitoring of health and wellbeing conditions of patients, carers and
family members; (v) discovery of user needs, archetypes and tailored service design; (vi) commissioning of life support equipment and
home improvement for service delivery; (vii) call center for user assistance; (viii) emergency assistance at home or transferring to hospital;
(ix) occupation therapies, such as assistive technologies and community integration; (x) mobilizing community connectors and volunteers;
(xi) psychological support; (xii) improving families income generation to allow for sustained service delivery.
INTERVENTION
Domiciliary Care in the public system in the state today is
financed and operated by public hospitals (managed by the
government or not-for-profit organizations). There is no systemic approach to service chronic patients at home or community care
centers.
FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
FINANCING
OUTCOME FUNDS (USD) $9.1 million COSTS COVERED BY INVESTMENT CAPITAL Not defined
UPFRONT CAPITAL COMMITMENT (USD) $1.0 million ADDITIONAL GRANTS (USD) Not defined
CAPITAL RECYCLING $1.6 million COSTS COVERED BY ADDITIONAL GRANTS Not defined
OTHER COSTS Pre-structuring costs are expected to reach $300,000
STAKEHOLDERS METRICS AND PAYMENTS
OUTCOME METRICS: (i) Bed days occupied in hospitals and (ii) health and
wellbeing of patients, carers and families
EVALUATION METHOD: Not defined
PAYMENT THRESHOLD: Not defined
PAYMENT SCHEDULE AND AMOUNTS: Not defined
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: Not defined
MAXIMUM RETURN: Not defined
RESULTS TO DATE: Not defined
SERVICE PROVIDERS: Not defined
INTERMEDIARY: Not defined
OUTCOME FUNDER: Not defined
INVESTOR: Not defined
TECHNICAL ASSISTANCE PROVIDER:
Not defined
OUTCOME EVALUATOR: Not defined
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: SITAWI
122 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: PALLADIUM
TIMELINE
DATE OF START OF FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY N/A
DATE OF CONTRACT SIGNING TBD
DATE OF START OF
SERVICE PROVISION N/A
CONTRACT DURATION 3-5 years
END DATE N/A
DESCRIPTION: The goal of the Ethiopia Newcastle Disease Prevention DIB is to improve livelihoods of the rural poor in Ethiopia by setting
up a sustainable vaccine supply chain against Newcastle disease (ND) that will reach small-scale poultry farmers.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
The Ethiopian government’s 2015 Livestock Master Plan highlights the
investment needed in commercial and village-level poultry improvement to erase the meat deficit (42% in 2028 based based on current
projections). Of ~50 million poultry nation-wide, village poultry accounts for ~98%. Newcastle disease (ND) is a highly contagious and
destructive illness of chickens. Outbreaks peak in the dry season, killing 50-100%. ND is the main cause of economic loss in poultry
production and a barrier to food security for farmers.
DEVELOPMENT CHALLENGE
Ad hoc government programs and poorly developed private
supply chains.
FINANCING OF INTERVENTION
PRIOR TO IMPACT BOND
TARGET NUMBER OF BENEFICIARIES N/A
ND vaccination in other countries is proven, where distribution is through
government extension. In Ethiopia, this approach isn’t sustainable in
absence of cost-recovery systems. DIB will create a cost-recovery model by 1) creating demand through awareness-raising and legislation
to support non-veterinarians providing ND vaccines, 2) incentivizing private sector to ensure supply.
INTERVENTION
Women-headed households in rural Ethiopia TARGET POPULATION
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
ETHIOPIA NEWCASTLE
DISEASE PREVENTION
DIB
OVERVIEW COUNTRY ETHIOPIA CITY/STATE NATIONWIDE
SECTOR:
Agriculture
Health Social Welfare
Education Employment
DEVELOPMENT CHALLENGE
This information is subject to change 123 | EARLY LEARNINGS FROM THE FIELD
Complete
The core financing challenge consists in funding the
up-front costs to create a commercially sustainable market for smallholder farmers. These up-front costs include incentives for the
private sector and funding to assist the government with demand creation. However, once sufficient demand is generated, the system
will be self-sustaining.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS
(USD) $15 million (TBC) COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) $5 million (TBC) ADDITIONAL GRANTS
(USD) TBD
CAPITAL RECYCLING Capital is recycled as outcome
payments are received
COSTS COVERED BY
ADDITIONAL GRANTS
TA, results verification,
impact evaluation
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: i) Ability/flexibility to test multiple approaches to value-chain development and localize solutions for needs
of each region. ii) Private investors complement KYEEMA’s market-based approach to value-chain development to
provide a sustainable and commercially viable solution. iii) Long-term financing for a challenge that requires a long-term
approach to value-chain development. Impact bond length could be rolled-over after its completion. Capital costs could
be kept low by recycling capital from outcome payments to further scale the DIB.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE:
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS:
KYEEMA Foundation
INTERMEDIARY:
Palladium
OUTCOME FUNDER:
TBD
INVESTOR: TBD
TECHNICAL
ASSISTANCE
PROVIDER: TBD
OUTCOME
EVALUATOR: TBD
OUTCOME METRICS: The number of doses of ND vaccines sold is likely to be the
principal payment metric (easy to measure and credibly linked to longer term outcomes
such as household income and resilience). Proxy indicators such as number of vials
of vaccine sold can be used to determine total number of chickens vaccinated, which
will provide an estimate of the number of households vaccinated. Survey data from
selected trial villages can be used to determine average net annual additional income.
Data on vaccine sold can be collected from National Veterinary Institute, which will allow
verification of sales figures provided by private distributors. Combined data could be
used to estimate project contribution to increased household income.
EVALUATION METHOD: Impact evaluation in addition to results verification through
audit of vaccine doses sold
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: N/A
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: TBC
RESULTS TO DATE: N/A
124 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: KOIS INVEST
TIMELINE
DATE OF START OF FEASIBILITY
STUDY September 2016
INTENDED DATE OF CONTRACT
SIGNING FOLLOWING FEASIBILITY
STUDY
H1 2018
DATE OF CONTRACT SIGNING TBC
DATE OF START OF
SERVICE PROVISION TBC
CONTRACT DURATION 2-4 years
END DATE TBC
DESCRIPTION: The multi-country DIB intends to improve the welfare of Syrian refugees and vulnerable host populations by funding
job market integration and access to livelihoods interventions in the Middle East. The impact bond structure is being explored as a
way to bring multi-year, outcomes-focused funding to a highly underfunded area that is in need of longer term, effective funding. By
improving access to sustainable livelihoods, the DIB aims to improve the welfare of Syrian refugees and vulnerable host populations,
reduce the burden on host countries, and free up valuable aid resources.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
As a result of the Syrian migration crisis, neighboring countries struggle
to meet refugees’ basic needs and offer a decent living. 22.2 million people are in need of assistance in the Middle East, with host
countries facing increased pressures on their job markets, infrastructure and education systems. 88% of displaced Syrians are poor or
at risk of being poor in the near future. There is a need to extend the focus from emergency aid to longer term, development aid to
support displaced individuals in building a more sustainable living in their host countries. However, there is significant funding gap,
particularly to meet the long-term needs of refugees. Job market integration is a key aspect in creating sustainable living conditions
for displaced individuals.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES TBC
Shortlisted service providers deliver two kinds of programs: employment
and entrepreneurship interventions. Employment programs include
transferrable and technical skills training and job placement, while entrepreneurship interventions include business training, mentorship/
coaching and access to capital for start-ups and existing small and medium-size enterprises (both formal and informal)
INTERVENTION
Syrian refugees and vulnerable local population TARGET POPULATION
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
SYRIAN REFUGEE
EMPLOYMENT
DIB
OVERVIEW COUNTRY JORDAN, LEBANON, TURKEY CITY/STATE N/A
SECTOR:
Agriculture
Health Social Welfare
Education Employment
DEVELOPMENT CHALLENGE
This information is subject to change 125 | EARLY LEARNINGS FROM THE FIELD
Complete
Mainly donor-funded FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
Funding required for continuing operations and scale-up that
has not been funded before. REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS (USD) $10-30 million
(anticipated) COSTS COVERED BY INVESTMENT CAPITAL TBC
UPFRONT CAPITAL COMMITMENT
(USD) TBC ADDITIONAL GRANTS
(USD) TBC
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS TBC
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: Impact bond structure can match the need for longer-term, outcome-focused funding and allows service
providers to adjust the implementation of programs in a way best suited for realities on the ground to achieve the
outcomes, which is especially relevant in the Middle East. If successful, the structure can be replicated in other regions
facing similar challenges. Finally the structure provides increased transparency on impact / ‘value-for-money’.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Kois Invest - Intermediary
SERVICE PROVIDERS: 2 shortlisted service providers and 4 potential service providers identified following detailed due diligence
INTERMEDIARY: Kois Invest
OUTCOME FUNDER: TBC
INVESTOR: TBC
TECHNICAL ASSISTANCE PROVIDER: TBC
OUTCOME EVALUATOR: TBC
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: TBC
EVALUATION METHOD: TBC
PAYMENT THRESHOLD: TBC
PAYMENT SCHEDULE AND AMOUNTS: TBC
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: TBC
MAXIMUM RETURN: TBC
RESULTS TO DATE: N/A
126 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: PALLADIUM
PAPUA NEW GUINEA
GENDER-BASED
VIOLENCE DIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY N/A
DATE OF CONTRACT SIGNING TBD
DATE OF START OF
SERVICE PROVISION N/A
CONTRACT DURATION TBD
END DATE N/A
DESCRIPTION: The goal of the impact bond is to reduce the incidence of gender-based violence (GBV).
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
Approximately two thirds of women in PNG have been sexually
or physically abused. With increased international awareness and pressure from women’s groups within the country,
the PNG government instituted measures to criminalize GBV. Whilst government has created a legal framework to
protect women from violence, a variety of institutional factors have produced little change in reality. International
and national programs are largely reactive. There are few programs that work specifically with men or provide malespecific counselling and in most cases, the programs are poorly monitored.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES N/A
Vulnerable women TARGET POPULATION
OVERVIEW COUNTRY PAPUA NEW GUINEA (PNG) CITY/STATE NCD, CENTRAL PROVINCE,
MOROBE
SECTOR:
Employment
Health
Agriculture Education
Social Welfare
(Including homelessness, child welfare, etc.)
DEVELOPMENT CHALLENGE
This information is subject to change 127 | EARLY LEARNINGS FROM THE FIELD
Complete
A systematic and evidence-based approach that will
develop best practice to reduce this insidious pattern
of violence against women is sorely needed. Bringing a rigorous, transparent and accountable approach to this work
will enable the successful activities to be scaled up effectively across the country with confidence in the measures
ensuring sufficient resources are available for them.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
The PNG GBV impact bond plans to work with
service providers to implement a community
mobilization program that scales up four distinct phases: during the first phase violence against women and HIV/
AIDS are introduced as interconnected issues and community members begin to foster power within themselves
to address these issues. In the second phase community members experience a growing awareness about how
men’s use of power over women fuels the dual pandemics of violence against women and HIV. Throughout the third
phase community members learn to support the women, men and activists directly affected by or involved in these
interconnected issues. In the fourth and final phase community members contextualise different ways to take action.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
FINANCING
OUTCOME FUNDS (USD) TBD COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL COMMITMENT (USD) TBD ADDITIONAL GRANTS (USD) TBD
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS N/A
OTHER COSTS TBD
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: Cutting edge work by Raising Voices in Uganda has resulted in the development of SASAI, a a groundbreaking
community mobilization approach for preventing violence against women and HIV. A DFAT-funded grant to develop
an evidence base of the efficacy of the program in a PNG context is currently being run by PSI and 8 local partners. A
results-based financing mechanism will be built from this evidence base.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
CSOs and grant funding FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
STAKEHOLDERS METRICS AND PAYMENTS
SERVICE PROVIDERS: TBD
INTERMEDIARY: Palladium
OUTCOME FUNDER: TBD
INVESTOR: TBD
TECHNICAL ASSISTANCE
PROVIDER: N/A
OUTCOME EVALUATOR: N/A
OUTCOME METRICS: TBD (services provided to women)
EVALUATION METHOD: N/A
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: N/A
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: N/A
RESULTS TO DATE: N/A
128 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: OXFAM
TAJIKISTAN WASH SIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY May 2017
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY TBD
DATE OF CONTRACT SIGNING TBD
DATE OF START OF
SERVICE PROVISION TBD
CONTRACT DURATION 5 years
END DATE N/A
DESCRIPTION: The Tajikistan WASH SIB aims to improve access to safe drinking water by providing individual water
connections to 50,000 households in towns and villages in Tajikistan. The impact bond structure is used because of
Tajikistan’s poor access to traditional grant funding, the strength of Oxfam’s relationship with relevant local stakeholders
and the part-repayment of the bond through the collection of water tariffs. The ultimate aim is to take the success of
Oxfam’s pilot WASH programme in Tajikistan to scale.
DEVELOPMENT STAGE: Early-stage design Implementation Complete
OVERVIEW COUNTRY TAJIKISTAN
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE N/A
Half the population in Tajikistan has access to safe drinking
water; the country remains one of the poorest in Central Asia. Despite being water-rich, water scarcity in some areas
means that some women can spend up to 4 hours per day collecting water. Only 20% have access to centralized water
supply in rural areas, and only 3% have access to proper sewerage. Tajikistan has some of highest diarrhea incidence rate
and highest diarrhea mortality rate among young children (over 30% of deaths in children attributable to diarrhea). The
water sector is not financially sustainable without external support: $2 billion is required in the next 15 years to deliver
sufficient water and ODA has reduced to $30 million per year.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 50,000
N/A TARGET POPULATION
SECTOR:
Agriculture
Health Social Welfare
Education Employment
DEVELOPMENT CHALLENGE
This information is subject to change 129 | EARLY LEARNINGS FROM THE FIELD
Complete
Insufficient funding available for scale REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
INTERVENTION
Grant funding FINANCING OF INTERVENTION PRIOR TO IMPACT BOND
FINANCING
OUTCOME FUNDS (USD) N/A COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD)
$7.5
million
ADDITIONAL GRANTS
(USD) $250,000
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS Feasibility study and proof
of concept
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor, thus aligning incentives
Other: Impact bond identified due to Tajikistan’s reduced access to aid funding, the success of Oxfam’s WASH programme in
Tajikistan and the potential for modest water tariffs to cover part of the bond repayment ($1 per household per month). Oxfam has
run a successful pilot of a WASH programme in Tajikistan, testing the intervention in a range of contexts; from 40 small
household projects in rural locations to 400 households in semi-urban environments. Oxfam has vast experience in the sector, and
strong relationship with key stakeholders (e.g, government and private sector).
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
SERVICE PROVIDERS: Hardware components from
private sector providers, software components from
Oxfam
INTERMEDIARY: TBD
OUTCOME FUNDER: Bilateral donors 70%; Tajikistan
state government 30% (through water tariff collection)
INVESTOR: TBD
TECHNICAL ASSISTANCE PROVIDER: TBD
OUTCOME EVALUATOR: TBD
STAKEHOLDERS
OUTCOME METRICS: TBD
EVALUATION METHOD: TBD
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: TBD
MAXIMUM POTENTIAL LOSS OF INVESTMENT
FOR INVESTORS: TBD
MAXIMUM RETURN: 10% estimated
RESULTS TO DATE: TBD
METRICS AND PAYMENTS
The intervention comprises a hardware and a
software component. The hardware component will
be delivered by the private sector, and covers actual infrastructure supplies, construction of civil works, pumping
stations, pipe net-works and valves for water scheme, along with individual household connections, and work required
for installation. The software component will compliment the hardware component, and be delivered by Oxfam
including: 1) Preparatory works (selection of villages, feasibility studies, designs, baselines), 2) Capacity building
of owners, operators, regulators, 3) Project supervision, including monitoring of construction works, approval of
payments, 4) Monitoring, evaluation, accountability and learning.
130 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: COMMON FUND FOR COMMODITIES
UGANDA EMPOWERING
WOMEN AND YOUTH
IN THE COFFEE VALUE
CHAIN DIB
OVERVIEW COUNTRY UGANDA CITY/STATE SELECT COFFEE-GROWING AREAS (MT ELGON, MT RWENZORI,
BUNYARUGURU ESCARPMENT, MT MUHABURA AND MGAHINGA)
DESCRIPTION: The DIB aims to connect smallholder coffee producers to high value consumers in Uganda, including coffee
shops, hotels and lodges.
DEVELOPMENT STAGE: Early-stage design Implementation Complete Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
Integrate coffee production and processing with tourism by
linking coffee farmers to the 14 lodges in proximity to the
farms. The coffee farms will be part of the tour safari; quality control and roasting will be arranged and local youth will
be trained to work as baristas at the lodges to ensure appropriate service and quality level in the premium segment.
INTERVENTION
Smallholder coffee grown in the region faces high marketing
costs and loss of quality due to poor marketing channels. The DIB will leverage the local tourism industry to create a
local niche market for quality coffee supplied direct by smallholders to hotels and lodges.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES N/A
10 farmer groups in the target regions with up to 2,500
members.
TARGET POPULATION
DEVELOPMENT CHALLENGE Agriculture Employment
Health
Education
Social Welfare
SECTOR:
TIMELINE
DATE OF START OF FEASIBILITY STUDY N/A
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY N/A
DATE OF CONTRACT SIGNING TBD
DATE OF START OF SERVICE PROVISION N/A
CONTRACT DURATION 3 years
END DATE N/A
Heritage coffee finances its regular operations with bank
financing.
FINANCING OF INTERVENTION PRIOR TO
IMPACT BOND
This information is subject to change 131 | EARLY LEARNINGS FROM THE FIELD
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other: Households are expected to triple their income from the same volume of coffee production.
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: Common Fund for Commodities and International
Coffee Organization
FINANCING
OUTCOME FUNDS (USD) $110,000 COSTS COVERED BY INVESTMENT CAPITAL N/A
UPFRONT CAPITAL COMMITMENT (USD) $110,000 ADDITIONAL GRANTS (USD) $10,000
CAPITAL RECYCLING N/A COSTS COVERED BY ADDITIONAL GRANTS Evaluation of
outcomes
OTHER COSTS N/A
Complete
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: i) Creation of new jobs in local premium coffee sector (roasters and baristas), ii) Volume of coffee
sold through local premium channels, iii) Income increase for participating smallholder farmers, iv) Percentage of women
participating.
EVALUATION METHOD: Reports by selected hotels and coffee lodges plus surveys of income in the target communities.
PAYMENT THRESHOLD: TBD
PAYMENT SCHEDULE AND AMOUNTS: Full settlement upon verification of results at completion
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: 100%
MAXIMUM RETURN: $110,000
RESULTS TO DATE: Identification of second bond partner to act as outcome sponsor or investor is still ongoing
SERVICE PROVIDERS: Coffee Heritage Company
INTERMEDIARY: N/A
OUTCOME FUNDER: TBD
INVESTOR: Common Fund for Commodities (CFC)
TECHNICAL ASSISTANCE PROVIDER: N/A
OUTCOME EVALUATOR: International Coffee Organization/others
Due to high training and quality control costs, the
operation at this stage is not financially viable, but is
expected to reach viability after the first stage.
REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
132 | IMPACT BONDS IN DEVELOPING COUNTRIES
LEAD SPONSORS: USAID & SOCIAL FINANCE UK
(1) OmniProcessor treatment plant which produces
revenues from distilled water, ash etc. and (2) subsidy model
to fund collection from those who are unable to pay.
INTERVENTION
FECAL SLUDGE
MANAGEMENT DIB
TIMELINE
DATE OF START OF FEASIBILITY STUDY TBC
INTENDED DATE OF CONTRACT SIGNING
FOLLOWING FEASIBILITY STUDY TBC
DATE OF CONTRACT SIGNING TBC
DATE OF START OF
SERVICE PROVISION TBC
CONTRACT DURATION TBC
END DATE TBC
DESCRIPTION: Development impact bond in fecal sludge management, focusing on the Omni-Processor model. The DIB
would allow two streams of funding to come together: (1) commercial funding to provide capital for the capex of the
plant and the first year’s opex and (2) social investment focused on outcomes which would allow for subisidy payments
to ensure fecal sludge is collected from the poorest households who would not traditionally be able to pay for fecal
sludge collection. The outcome payment would be based on tonnes of fecal sludge collected.
Implementation Complete
Safe collection and treatment of fecal sludge i.e. stopping pit
dumping and ensuring that toilets are safely emptied and the sludge safely treated.
DEVELOPMENT CHALLENGE
TARGET NUMBER OF BENEFICIARIES 100,000 households (TBC)
Households who have pits that need collection and safe
treatment
TARGET POPULATION
OVERVIEW COUNTRY TBC
Late-stage design
(higher specificity e.g., investors,
outcome funders, USD values)
CITY/STATE TBC
DEVELOPMENT STAGE: Early-stage design
SECTOR:
Agriculture Employment
Health Social Welfare
Education
DEVELOPMENT CHALLENGE
N/A FINANCING OF INTERVENTION PRIOR
TO IMPACT BOND
This information is subject to change 133 | EARLY LEARNINGS FROM THE FIELD
Complete
FINANCING
OUTCOME FUNDS
(USD) N/A COSTS COVERED BY
INVESTMENT CAPITAL N/A
UPFRONT CAPITAL
COMMITMENT (USD) N/A ADDITIONAL GRANTS
(USD) N/A
CAPITAL RECYCLING Capital covers the cost of the program for
the duration of the impact bond
COSTS COVERED BY
ADDITIONAL GRANTS N/A
OTHER COSTS N/A
To improve quality by allowing the service provider flexibility in implementation
To improve quality by establishing performance management systems
To improve efficiency (maintain quality while increasing output or decreasing costs)
To build service provider's capacity to operate in a Payment by Results model
To build the aforementioned systems to facilitate operation at scale
To cover a capital gap between the intervention and value to society
To benefit from the involvement of investors (apart from capital)
To share the risk of service performance between the government, service provider, and investor,
thus aligning incentives
Other:
ACTOR(S) THAT RESPONDED TO IMPACT BOND RATIONALE: N/A
SERVICE PROVIDERS: N/A
INTERMEDIARY: N/A
OUTCOME FUNDER: N/A
INVESTOR: N/A
TECHNICAL ASSISTANCE PROVIDER: Social Finance
OUTCOME EVALUATOR: N/A
STAKEHOLDERS
METRICS AND PAYMENTS
OUTCOME METRICS: Tonnes of fecal sludge collected from households that otherwise were not having pits collected
EVALUATION METHOD: N/A
PAYMENT THRESHOLD: N/A
PAYMENT SCHEDULE AND AMOUNTS: N/A
MAXIMUM POTENTIAL LOSS OF INVESTMENT FOR INVESTORS: N/A
MAXIMUM RETURN: N/A
RESULTS TO DATE: N/A
N/A REASON(S) EXISTING FINANCING WAS/IS INADEQUATE
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