Via YouTube

In their search for innovative ways to finance development, some in the aid community are looking to development impact bonds, a tool with the potential to draw in significant private investor capital.

DIBs work by getting an investor to pay up front for the costs of an intervention that is then measured by clear, predetermined metrics. If the intervention succeeds in achieving the goals, the outcome payor — typically a donor agency, foundation or perhaps a company — will pay the investor back based on the performance.

The attraction of DIBs is their potential to leverage private capital to new situations, for example to battle sleeping sickness in Uganda or reduce malaria in Mozambique. Still, these are fairly complex financial instruments that work best under particular circumstances, and can take years to get off the ground.

To learn more about what DIBs are, how they work and when they should be used, watch the video above, and see more related topics:

Have development impact bonds moved beyond the hype?

A look inside the Educate Girls development impact bond and the first-year results

While a handful DIBs are active today, attempts to get others off the ground have dragged on. Experience so far indicates the enormous challenge of finding the right partners, buy-in and terms.

That doesn’t mean it can’t be done, however. The United Kingdom’s Department for International Development, for example, funded a pilot to examine creating a DIB in Uganda to address sleeping sickness by treating cattle and tsetse flies which carry it. The pilot took longer than expected, but outlined the structure of a potential DIB, and determined that one could be used for this intervention according to a project completion review published earlier this year.

Over 10 weeks Devex and our partners will take an in-depth look at the innovative financing mechanisms driving forward the 2030 sustainable development agenda. We’ll explore how the funding gap can be filled, ask how cross-sector collaboration can lead to improved global health care, and look at what it takes to build successful partnerships for change. Join us as we examine the innovative financing powering the Global Goals by tagging #Going4Goals and @devex.

About the author

  • Adva Saldinger

    Adva Saldinger is a Senior Reporter at Devex, where she covers the intersection of business and international development, as well as U.S. foreign aid policy. From partnerships to trade and social entrepreneurship to impact investing, Adva explores the role the private sector and private capital play in development. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.