Piloting a pilot: using financial mechanisms to deliver results in development

News

On June 16 KIT and the Common Fund For Commodities (CFC) organised and facilitated a meeting on Development Impact Bonds. These bonds might be an effective and innovative financial tool to make private investors and the corporate sector part of development goals. But how to make them work?

Cross sectoral wish to innovate

Both the development sector and the financial sector are looking to innovate. External pressure as well as changing contexts ask for new financial mechanisms to deliver results which society values. Trade not aid: joint public and corporate investment schemes are seen as a way forward. Can Development Impact Bonds foster development and tackle global issues such as food security? CFC and KIT decided to invite all actors currently interested in exploring the use of these Development Impact Bonds. We welcomed representatives of the government, banks, philanthropic organisations and development organisations, such as ABN-AMRO Bank, Annona Investment Fund, Anthos, Berbers Consulting, Cordaid, DOB, Financial Access, FMO, ICCO Investments, Ministry of Foreign Affairs of the Netherlands, SNV, Spring Associates. We invited Peter Nicholas from Social Finance UK as an expert speaker on Development Impact Bonds.

Enthusiasm and questions

Maryse Hazelzet, advisor at KIT Sustainable Economic Development: “There was a lot of interest in our consultation; there is really an urge to innovate development aid and impact bonds could be among the new instruments. We reflected on the pros and cons of DIBs and realized many questions are still unanswered, partly because there are so few practical examples.”

Outcomes

All parties present have expressed their interests in a follow-up meeting. In the next meeting this autumn we will continue to explore the promise of more impact through Development Impact Bonds.

Definition DIBs

Development Impact Bonds (DIBs) bring together private investors, non-profit and private sector service delivery organisations, governments and donors to deliver results which society values. They are a family of outcomes-based contracts in which private investors pay in advance for interventions needed to achieve agreed results, and work with delivery organisations to ensure that the results are achieved; donors and/or governments make payments to investors if the interventions succeed, with returns linked to progress achieved. If the interventions fail, investors lose some or all of their investment.

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Interested to learn more about impact investment and DIB’s?