Impact Bonds and Outcome Funds

for Development

Dr. Emily Gustafsson-Wright

February 2019

October 2013CGD/Social

Finance DIB report

IMPACT BONDS TIMELINE

September 2014Brookings impact

bond event

March 2010Peterborough SIB

Spring 2015First DIBs in Peru

and India

July 2015Brookings First

Five Years report

March 2017 First SIB in developing

country (Colombia)

September 2017Brookings/Convergence Early Learnings report

May 2018First meeting of

IBWG

GLOBAL LANDSCAPE

137 IMPACT BONDS CONTRACTED GLOBALLY

Source: Brookings Global Impact Bond Database, Feb 2019

0-5

6-10

11+

SECTORS: IMPACT BONDS CONTRACTED GLOBALLYHEALTH

SOCIAL WELFARE

EMPLOYMENT

EDUCATION

CRIMINAL JUSTICE

ENVIRONMENT &

AGRICULTURE

Source: Brookings Global Impact Bond Database, Feb 2019

IMPACT BONDS IN DEVELOPING COUNTRIES

Impact Bond Name Country Sector BeneficiariesUpfront Capital (USD million)

Sustainable Cocoa and Coffee Production DIB Peru Agriculture 931 $0.11

Educate Girls DIB India Education 7300 $0.28

Workforce Development SIB Colombia Employment 766 $0.33 ICRC Programme for Humanitarian Impact Investment ('PHII') Mali, Nigeria, DRC Health 3600 $19.42

Graduation Model DIB Kenya and Uganda Social Welfare 18000 $3.50

Utkrisht DIB for Maternal and Newborn Health India Health 600000 $4.00

Cataract DIB Cameroon Health 18000 $2.00 Inclusive Youth Employment Pay-for-Performance platform South Africa Employment 600 $2.89

Education Bond (Dept of Social Development) South Africa Education 2000 $0.65

Quality Education India DIB India Education 300000 $3.00

Type II Diabetes Mellitus (T2DM) DIB Palestine Health 150 $0.15

Cali Employability SIB Colombia Employment 856 $0.86

• 10-20 % of pr

IMPACT BONDS IN DESIGN:

DEVELOPING COUNTRIES

1

2

MULTILATERALS

Multilateral SIB/DIB name Role

Inter-American Development Bank

Brazil Secondary Education SIBColombia Workforce SIBMexico The Future in My Hands SIBPeru Climate-Smart Agriculture DIBCali Employability SIB

InvestorConduit of fundsInvestor Outcome FunderConduit of funds

World Bank Group Cameroon Kangaroo Mother Care DIBWest Bank and Gaza Employment DIBUzbekistan ECD SIB

Outcome FunderOutcome FunderInvestor

Common Fund for Commodities

Peru Sustainable Cocoa and Coffee Production DIBUganda Empowering Women and Youth DIBPeru Climate-Smart Agriculture DIB

Outcome FunderInvestorInvestor

BILATERALS/FOREIGN GOVERNMENTS

Bilateral SIB/DIB name Role

DFID ICRC Programme for Humanitarian Investment (PHII)

Kenya and Uganda Graduation Model DIB

Quality Education India

Outcome Funder

Outcome Funder

Grant funding

USAID Kenya and Uganda Graduation Model DIB

Utkrisht Maternal and Newborn Health DIB

Outcome Funder

Outcome Funder

SECO (Swiss Secretariat of Economic Affairs)

Colombia Workforce SIBCali Employability

Outcome FunderOutcome Funder

SDC (Swiss Development Cooperation)

ICRC Programme for Humanitarian Investment (PHII) Outcome Funder

OPIC Cameroon Cataract DIB Investor

Government of Belgium ICRC Programme for Humanitarian Investment (PHII) Outcome Funder

Government of Italy ICRC Programme for Humanitarian Investment (PHII) Outcome Funder

POTENTIAL AND LIMITATIONS

CRITICAL CONSIDERATIONS

CHOOSING A FINANCING MECHANISM

Paying for outcomes more

likely to get you outcomes than paying for

inputs

YES

NOInput-based

Service providers need upfront (risk) capital and/or

capacity building

YES

NO

Impact bonds/

Outcomes funds

Traditional PBR

1. Is there a demand for impact bonds/outcome based contracting?

2. Are impact bonds reaching the populations in need?

3. Are the contracts achieving outcomes?

4. Are impact bonds achieving something besides outcomes?

5. Are the deals efficient (ie cost-benefit analysis)?

MEASURING SUCCESS:

FIVE KEY QUESTIONS

CHALLENGES AND

LOOKING FORWARD

Credit: Mark Wallace

Looking Forward

• How are impact bonds performing across the five dimensions of

success?

• How to resolve current challenges associated with impact bonds?

• How is data being used in impact bonds and outcome based financing

to improve service delivery and measure impact?

• How can technology be harnessed to collect and analyze data for

improved decision-making in this space?

Credit: RFUKCredit: Educate Girls

For more information on Brookings impact bonds research:

www.brookings.edu/product/impact-bonds/

Contact: egustafssonwright@brookings.edu

@EGWBrookings

IMPACT BOND EXAMPLES

EXAMPLE: INDIA EDUCATE GIRLS DIB

EXAMPLE: COLOMBIA WORKFORCE SIB

Investors

Outcome Funders

Service Providers

Provides upfront capital

Delivers services. Results verified by independent evaluator.

Pays for results