This chapter sets out what development impact bonds are, the
key stakeholders involved and how they have developed over time.
A development impact bond (DIB) is an outcomes-based funding structure
for the delivery of public services in low- and middle-income countries. DIBs
leverage government aid agency or philanthropic funding, non-profit service provision, and
private capital. DIBs are an adaptation of the social impact bond, pay for
success, and social benefit bond models used in high income countries such as
the UK, US, and Australia.
This section outlines DIBs’ workings, history, applications,
and organisations involved.
Who is involved?
A development impact bond is a project-specific financing
structure. Each DIB involves three key partners: private investor(s), service
provider(s), and outcome funder(s). Additional actors support project
Provide flexible financial support for the
duration of project implementation.
Provide an intervention, or set of
interventions, for a target population.
Provide repayment to investors, based on achievement of specified social outcomes due to intervention by service provider.
Intermediaries – Provide hands-on technical
assistance during contracting processes. This can include undertaking feasibility
studies and identifying DIB implementation opportunities.
Independent Evaluators – Provide auditing and analysis to ratify project
outcomes and trigger outcome payments.
Technical Support – Provide specific advice on
legal and implementation issues, including additional strategy support.
In principle, the DIB contracting process is initiated by outcome
funders. These organisations can identify projects which fit their funding
criteria and select the development impact bond model to fund them. This is not
always the case. The International Committee of the Red Cross’ Humanitarian Impact Bond was a service provider led initiative. The contracting process for DIBs can also take up to two years. Key actors can change during this period, which was the case in the Cameroon Cataract Bond.
Government agencies, non-governmental organisations and philanthropic institutions are involved in funding development impact bonds. In 2017, researchers at the Brooking Institute mapped actors involved in DIBs and social impact bonds (SIBs) in low- and middle-income countries. The research identified 115 entities that were key actors, or providing additional support, in the planning and implementation of impact bonds in low- and middle-income countries.
How have DIBs developed?
Development impact bonds adapt the SIB model.
The first SIB launched in the UK in 2010. A Government Outcomes Lab introduction to
SIBs is available here. The Center for Global
Development (CGD), in partnership with Social Finance, formed a working group in
2012 to explore the feasibility of Development Impact Bonds (DIBs). Their work shifted the
potential pool of investors and outcome funders from domestic institutions to
In 2013, the CGD/Social
Finance working group reported on challenges and benefits of the DIB model. The
final report included six case studies to describe potential application
scenarios. One of these case studies was the template for the “Educate
Girls DIB” launched in India in September 2015. In Peru, a few months earlier, the Asháninka Impact
Bond launched in February 2015 as the first development impact bond. These are
the only DIBs to reach completion to date.
Note: Sources vary on defining an exact date of project launch, between contract signing, start of service provision, and public announcement. The above timeline reflects consensus where possible.
This chapter sets out evidence available to date from completed projects funded by DIBs.
There is a small and increasing evidence based on DIBs. Several
reports have mapped and analysed this innovative financing structure. Qualitative
analyses focus on interviews to examine the structuring processes (examples here and here). However, no central database
exists for tracking DIB implementation globally. As result, figures and mapping are often up for debate. Currently available studies
suffer from a common problem – a lack of (quantifiable) evidence about
As of November 2018, no report has synthesised evidence on completed
projects funded by DIBs. This is due, in part, to a small sample size of two completed projects. The Asháninka Impact Bond project ended in late 2015 and Educate
Girls released results on their DIB funded efforts in July 2018. No further evidence will be available until
2020, with the (planned) completion of the Utkrisht Impact Bond and Village Enterprise DIB.
The structure and results from the Asháninka Impact Bond and Educate Girls DIB are
Asháninka Impact Bond
The Asháninka Impact Bond supported agricultural improvements for Asháninka people of Peru. The Asháninka people are an indigenous community living in the Peruvian Amazon. The project involved supporting their cooperative the Kemito Ena Association (KEA). The KEA aimed to establish environmentally sound production and marketing systems for coffee and cocoa. The DIB funded additional support during the final year of a three year capacity development project.
This inaugural DIB involved the Common Fund for Commodities, Schmidt Family Foundation, Rainforest Foundation UK, and the Royal Tropical Institute. In some ways it diverged from the ideal DIB model. For instance, upfront capital investment and maximum outcome payments were capped $110,000. This removed financial incentive for the investor to gain interest payments on their investment.
Not all outcome indicators were met (Table 1), but the bond was deemed a success by stakeholders. The investor, a California based private foundation, received $75,625 return of their investment (68.75%).
Table 1 – Outcome summary for the Asháninka Impact Bond
The Educate Girls Development Impact Bond
funded improved enrolment and quality scores for education in Rajasthan, India. Girls in rural Rajasthan are
twice twice as likely as boys to out of school versus and only 50% of women can
read or write. Educate Girls aimed to use
the funding to implement and innovate existing approaches. The DIB built on
existing services provided by Educate Girls, but itself funded a standalone project. A Government
Outcomes Lab case study on the Educate Girls DIB is available here.
consortium included Educate Girls, Children’s Investment Fund Foundation
(CIFF), ID-Insight, Instiglio, and UBS Optimus Foundation. The Educate Girls project
showed key DIB principles in action. This included investor capital accelerating the planned implementation of a
project management system. This enabled Educate Girls to do more advanced collection and analysis of project data. The project was successful
on both outcome metrics (Table 2).
UBS Optimus Foundation
invested US$270,000 in the project. In 2018 the Children’s Investment Fund
Foundation paid out US$144,085, giving investors an internal rate of return of
15% on their upfront investment. However, this money will not be returned to UBS clients and will be
reinvested in future UBS Optimus Foundation grants, including to Educate Girls.
Table 2 – Outcome summary for the Educate Girls Development Impact Bond