Development Impact Bonds have been used as funding tools for development since 2015

SIBs and DIBs are tripartite financing mechanisms. Social Investors take the risk of funding a development programme upfront knowing that repayment and interest will depend on the level of success of the Delivery Partner in generating pre-agreed social outcome targets. These “outcome payments” are made by Outcome Funders.

In SIBs, Outcome Funders are mainly public agencies of the country of implementation. In DIBs, they tend to be foreign public or private donors. The quality of the model rests on a robust evaluation of the outcomes by an independent third party.

214

impact bonds in 35 countries worldwide

Source

$437.3 M

total upfront capital

Source

52 months

average capital duration

Source

19

12 DIBs and seven SIBs in low and middle income countries

Source

$3.4 M

average upfront capital investment

Source

34 months

average contract duration

Source

The Refugee Impact Bond at a glance

$ 9,825,000

upfront investment

4 years

duration in Jordan

5.1%

max. annualised rate of return

20%

maximum capital loss

The Refugee Impact Bond leverages the complementary resources of private and public actors

Lenders

DFC and Ferd, the project’s lenders, have committed $9.8m to prefinance programme implementation. Their commitments are purely outcome-based and unconditional on the programme’s intermediary results.

Repayment will be made in one bullet payment, four years after inception. The maximum 22% total return (5.1% annualised) will depend on the programme’s success in achieving two payment metrics: business survival after ten months, and improvement in household spending on basic needs after 24 months.

The targets for these metrics have been set higher than past results of the programme and of similar benchmark programmes. The programme design has been strengthened to increase the likelihood of achieving these targets.

DELIVERY PARTNER

Near East Foundation’s women-focused micro-enterprise training and grants programme was selected following a rigorous screening process by KOIS. In addition to the promising results of the programme’s first few years, NEF has 100+ year history of addressing vulnerability and building resilience in fragile contexts. KOIS also concluded that NEF had the ability to withstand intense investor scrutiny.
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The program will be implemented by Near East Foundation UK, an entity of the Near East Foundation. NEF UK and its local partners have the flexibility to adapt programming to changing circumstances on the ground within the boundaries of some core programme components and with the sole aim of meeting the pre-agreed payment and non-payment outcome objectives.

DIB COORDINATOR

KOIS has been retained by the Outcome Funders to monitor the programme’s progress, facilitate relationships between the parties and support the relationship with the evaluator with respect to the DIB during its lifetime.

FUNDERS

Total funder commitments are $13.8m, including a buffer for foreign exchange and other risks.

The DIB’s Outcome Funders are IKEA Foundation and Novo Nordisk Foundation. They have committed to repay 52% of programme costs and to make outcome payments to NEF depending on the level of success of the DIB’s two payment metrics. They are also funding the DIB’s evaluation and stakeholder coordination costs.

Thanks to its commitment to repay 28% of programme costs, Norad has limited investor downside risk to 20% and improved the project’s risk profile for the Outcome Funders.

EVALUATOR

Mathematica, a U.S. independent evaluating firm, will be the DIB’s evaluator. It will assess business survival rates in relation to past success rates of the programme. The level of success of the household consumption metric will be measured through a quasi-experimental control group method.

At the same time, it will assess the impact of other outcome goals which are essential to the programme’s theory of change, along with key modules of the programme results chain. This will support learning and adaptation for NEF.

The high-level evaluation framework and payment metrics were designed during the structuring phase of the DIB.

All the DIB parties have agreed to share the final evaluation report and learnings to serve the wider community of humanitarian, livelihood, and Blended Finance funders and practitioners.

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