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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.
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.