The humanitarian impact bond aims to expand and improve the efficiency of physical rehabilitation services to people that have a physical disability and require a mobility device.
Individuals with physical disabilities in living in Mali, Nigeria, and the Democratic Republic of Congo, who are victims of war, natural disasters, congenital impairments or disabling diseases such as polio.
Organisations such as the International Committee of the Red Cross (ICRC) support provision of such services, yet funding challenges are significant and operations are stretched across dozens of countries. This makes innovating and scaling new management approaches difficult.
The solution
The ICRC sought to expand and improve efficiency of physical rehabilitation services. With national government agencies and a major foundation from an international bank – La Caixa Foundation taking on the role of commissioners of support services they had a starting point.
After two years of planning, the humanitarian impact bond (HIB) launched in September 2017. This would become known as the Programme for Humanitarian Impact Investment (PHII) and it is based on the development impact bond (DIB) model. PHII secured 5 years of funding from private investors.
Using an impact bond allows the International Committee of the Red Cross to innovate and improve efficient delivery of rehabilitation services, while still ensuring high quality and well-targeted services are provided. It does this through implementing the Physical Rehabilitation Program (PRP). The primary outcome of the PHII is to increase the efficiency of these new centres compared to the historic average of comparable centres, and support at least 3,600 people to regain their mobility over two years of operations, between 2020 and 2022.
There will be three new Physical Rehabilitation Program centres in Mali (Mopti), Nigeria (Maiduguri) and the Democratic Republic of Congo (Kinshasa). Each centre is owned and operated by a local partner with the ICRC providing support. Each centre will support communities with limited social safety nets, where people with physical disabilities risk of receiving insufficient or inadequate treatment.
These centres will also be the location of development for a new “Digital Centre Management System”, an ICT tool that allows the management of most aspects of a Physical Rehabilitation Center. It's been developed within the framework of the PHII and is part of the measures to improving efficiency across all 107 Physical Rehabilitation Program centres. The aim here is to enable more people to receive support and rehabilitation with the same resources.
The impact
Over 3,000 persons with disability have benefited from physical rehabilitation services in the Democratic Republic of Congo (DRC), Mali and Nigeria,.
The outcome payments for PHII are based on the construction of the new facility and improved mobility achieved by disabled persons receiving support. Note – the construction of the new facility is actually an output rather than an outcome, but we will use their terminology for this case study.
In July 2020, La Caixa Foundation is expected to pay CHF1.07 million (US$1.8 million) to investors following the construction and operationalisation of the three new rehabilitation centres in Mali, Nigeria and the Democratic Republic of Congo. La Caixa Foundation is only involved financially in this part of the outcomes framework.
In July 2022, the rest of the project commissioners are expected to pay up to CHF25 million (US$26.5 million) to investors. Repayment will be based on the number of people (re)gaining mobility per rehabilitation professional at the centre (staff efficiency ratio). Investors only receive a positive return on investment if the new rehabilitation centres' staff efficiency ratio exceeds the baseline average of comparable centres.
Up to 40% of investor capital is at risk, implying that investors lose 40% of their upfront investments if no outcomes are achieved. If no outcomes are achieved this means that the new rehabilitation centres not delivering services at all, i.e. the staff efficiency ratio is reaches 0% of the baseline average. Outcome payments will increase in line with the improvements in the staff efficiency ratio relative to the baseline average. Interest payments are capped at 7% internal rate of return. Each commissioner (outcome funder) is liable for a different portion of repayments to investors, summarised in the below table.
Outcome data will be self-reported by the International Committee of the Red Cross across the three new rehabilitation centres and will be verified by an independent auditor (Philanthropy Associates). The auditor will visit a 5% sample to confirm (re)gained mobility of disabled persons who received support from the new rehabilitation centres. The International Committee of the Red Cross plan to continue to monitor patient outcomes using participant exit surveys and video recording of mobility tests. Feedback using SMS technology is also being considered.
The table below summarises the project’s outcomes metrics.
Timeline
2015-2017
Conceptualisation of impact bond, engagement with stakeholders, design of contract
July 2017
Structuring completed. Intervention period begins.
September 2017
Public announcement.
July 2020
Interim results announcement and outcome payment (scheduled).
July 2022
Intervention period ends (scheduled).
September 2022
Final outcomes payment delivered (scheduled).
Project insights
A four point rationale
This humanitarian impact bond is led by the providers – the International Committee of the Red Cross, even though there are several commissioners involved.
The ICRC's rational for implementing a DIB is four-fold, aiming to:
1) Mobilise additional resources to increase access to physical rehabilitation.
2) Test and deploy the new Digital Centre Management Tool to improve the operational efficiency of over 100 physical rehabilitation centres worldwide.
3) Expand the traditional funding base of the International Committee of the Red Cross, using a multi-year partnership involving public and private capital support.
4) Build practical knowledge about developing and implementing innovative financing structures.
The humanitarian impact bond was the third development impact bond to publicly launch and is the first to attempt to achieve outcomes in multiple countries. The two previous DIB projects have reached completion, including the Asháninka Impact Bond in Peru and the Educate Girls DIB in India.
At US$27.6 million in outcome funds, the humanitarian impact bond has more than three times the potential value of the next largest development impact bond by outcome funding – the Utkrisht Impact Bond (US$7million).
Overseas development organisations and philanthropic funders have been hesitant to use the impact bond model. However, substantial scaling of current outcome funding levels may occur through proposed outcome funds for education and elsewhere. International NGOs such as Save the Children and UNICEF are also actively exploring use of the DIB structure.
Incentives and innovation may play interesting roles in achieving outcomes in the humanitarian impact bond. The ICRC has a financial incentive to achieve at least equal staff efficiency ratios in new rehabilitation centres. It has liability for repaying investors 10% of the upfront investment below achieving the baseline average staff efficiency ratio. This may heighten importance of the calculation used and centres selected for the initial baseline ratio.
Secondly, the humanitarian impact bond allows the International Committee of the Red Cross to pilot a new digital “Centre Management System”. The System could improve efficiency while maintaining quality of outcomes, in theory generating learning that will help the International Committee of the Red Cross to improve access to physical rehabilitation support across the other 100 physical rehabilitation centres that the Red Cross has in place. The system may be critical to achieving improvements in baseline outcomes for the three centres, and these improvements could create significant positive and far-reaching spillovers from the project.