Social and Development Impact Bonds

The objective of this TA was to assess the potential of social and development impact bonds (IBs) in delivering social and environmental outcomes in order to inform the GROBA future involvement in this space. This would be achieved through research of existing IB schemes in developing countries, gathering and disseminating knowledge, and partnership building activities targeting WBG staff, governments, donors, and development partners. The TA will support the implementation of the GROBA strategic direction approved by the donors. 

Two analytical papers been prepared under this activity, and the budget was increased from the original 175,0000. Approaching Investment Returns and Pricing of Outcomes paper discusses pricing and risk sharing. For pricing, it describes methods that rely on prior information about cost such as “market determined,” “historical cost of outcome” and “cost plus” as well as methods that assess future benefits of the achieved results such as “net savings” and “quantified public value.” For risks, it acknowledges the role of philanthropic investors who, by accepting higher risk/lower return, allow the capital structuring that crowds in the conventional investors.  Impact Bonds and Maximizing Finance for Development paper discusses the impact bond potential as an RBF instrument to particularly foster innovation and entrepreneurship, resolving challenges with public service provision. In turn, market discipline and competition can encourage a larger scale. The paper illustrates this using the impact bond cases in West Bank and Gaza targeting youth employment and in Cameroon targeting mother-baby healthcare. These papers will be disseminated in the next reporting period as a background for the inaugural RBF Forum.