Social impact bonds have caught the attention of at least a dozen governments in high-income countries such as the UK, the US, Australia, and Canada. Yet discussions around the use of this innovative performance contract for international development in emerging economies have started relatively recently. My own social enterprise, Instiglio, which I founded with my partners Avnish and Michael, has been making some progress in this space. There have recently been three major developments in this space that are worth reviewing:
1. The creation of the Development Impact Bond Working Group. Social Finance UK, which structured the world’s first social impact bond over in England, and the Center for Global Development, which had been the intellectual champion behind the Cash on Delivery model, created a working group that is comprised of top officials from leading development agencies and is tasked with exploring the application of social impact bonds in emerging economies. This group has released information about two meetings (here and here) and created web pages to track its progress (here and here).
2. International development agencies have formally and informally expressed interest in social impact bonds. First, the Canadian International Development Agency has released a proposal to study the application of SIBs to access to finance. Second, DFID and Social Finance UK conducted a scoping study of a SIB for family planning. Third, the Inter-American Development Bank, the Asian Development Bank, several other development finance agencies have started internal discussions around the social impact bond model.
3. DFID, UK’s development agency, has included a request for social impact bond approaches in its requests for proposals through the Girls’ Education Challenge Innovation Window. This is the first public request for social impact bond programs in international development of which I am aware. Here is language from the The Girls’ Education Challenge: Guidance to applicants submitting a Full Application for the Innovation Window:
DFID is therefore committed to funding a small number of projects that use PbR (which implies grant payments in arrears following independent verification of pre-agreed results, or may also involve the ‘development impact bond’ approach) and will be looking out for suitable projects during the assessment of Full Applications. These projects will undertake additional evaluation and research on the efficacy of the PbR mechanism, as well as that of the intervention.
And here is language from the Frequently Asked Questions for the Girls’ Education Challenge Innovation Window:
We are interested in funding some projects through the Girls Education Challenge Innovation Window which will be wholly delivered through Payment by Results (PbR). This is a relatively new approach to delivering overseas aid, whereby payment is only made when pre-agreed results have been achieved. The Innovation Window of the GEC is an opportunity to demonstrate and evaluate the use of PbR, within a sample of pilot projects, to increase Value for Money (VfM) and achieve better learning outcomes for girls. Proposals looking to use or trial a PbR mechanism are encouraged, though we appreciate that PbR will not be appropriate for all projects.
Michael Belinsky 