How do DIBs work and why it's worth investing in them

1. DEVELOPMENT IMPACT
BONDS:
THE RIGHT ANSWER TO THE NEW FUNDING CHALLENGES FOR DEVELOPMENT?

2. DIB =
Do Innovative Business
Development Impact Bond

3. Is ODA on the verge of collapsing?

4. ODA has been steady in the last 5
years, while non-ODA and remittances
are on the rise. Where should the
future investment look at?

5. OECD – Better policies for better lives
https://www.youtube.com/watch?v=cs
WQBsJhmVI

6. Here is the answer:
DEVELOPMENT IMPACT BONDS
Development Impact Bonds (DIBs) are a performance-based investment instrument
intended to finance development programmes in low resource countries.
DIBs create a contract between private investors and donors or governments who have
agreed upon a shared development goal. Investors advance fund development
programmes with financial returns linked to verified development goals.
DIBs is one of the «Under Payment by Outcome (PBO)» models, where a social sector
organization is only paid for delivering a social service, once agreed social outcomes
have been met.
When a service provider agrees to take on a PBO structure, it agrees to a level of risk-
sharing with the contractor.

7. Organisations may require working capital to cover the costs of
the given program. The service provider may look to impact
investors for debt/equity capital, repayable once outcomes are
achieved.
Depending on the performance of the DIB, investors also stand to
receive different levels of interest on their investments. In some
cases, philanthropists and other for-purpose investors may secure
any first losses in capital through various funding structures.

8. DIBs are particularly suited to preventative programs, such as
health care, early child care, homelessness, and criminal justice.
They require rigorous data and measurement to assess what is
working, and why, as payments are only made to service
providers with empirically proven results.
Most DIBs are structured around the cost savings delivered by an
intervention, to one or more government departments.

9. How do DIBs work?

10. WIN-WIN?
- Society: wins by achieving better social outcomes
- Investors: win by getting high rates of financial return on investment (7-10%)
while fulfilling their social commitment
- Social providers: win by delivering efficiently and effectively by receiving
upfront funding with regular cash flow and a reasonable time span (at least 5
years) to tailor their intervention to the local context and implement the program
- Donors: if a Government, win by paying only for success and getting relevant
savings by not allocating resources to run a specific service, but just
underwriting the investment and paying interest rates. If a private philanthropist,
win by giving out money under a different arrangement from the traditional
grant and ensuring that there is a leverage effect on the funding, with high
return on investment.

11. THE CHALLENGE IN DEVELOPING COUNTRIES
- Very few governments in developing countries (especially in the LDC) are ready to allocate
resources to underwrite a private investment. They would be the perfect donors of DIB since the
savings goes to their benefit.
- Some bilateral donors such as DFID have already have ventured into this space, though, and
are in the frontline to push the agenda:
“Sleeping sickness is a parasitic, vector-borne disease, carried by the tsetse fly and prevalent in
Uganda. There are 9 million Ugandans at risk of infection with sleeping sickness, most of whom
are of prime working age. As a result, this disease is a key risk to the economic future of the
country. A DIB, sponsored by DfID, immunises the 8 million cattle in Uganda who, untreated,
allow the disease to spread. Pilots have been carried out and have proven to be effective and
create cost savings. DfID has committed $2.5 million to fund the feasibility of the project and
design the delivery mechanism to treat Uganda’s cattle with repeated immunisation over several
years in over to eradicate sleeping sickness. The bond will then be issued to raise the capital for
the immunisation program, underwritten by DfID”

12. WANT TO LEARN MORE?
https://www.youtube.com/watch?v=leLZv0I-1nk