Download Social impact bonds an introduction Session 6

Social Impact Bonds
An Introduction
CABRI, November 2015
All Credit for slides
to Social Finance.
Slides presented by
Social Finance for
proposed SIB in
Thailand
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Illustrative social impact bond structure
Impact Bonds are financial mechanisms in which investors pay for services upfront to improve a social outcome that
is of social and/or financial interest to the Outcomes Funder.
Payments back to investors are triggered if and only if outputs and outcomes are successfully verified – returns are
linked to the level of success achieved.
INVESTORS
Investors
oversee
service
provider
results
Pay for
Impact
OUTCOMES FUNDER
Verify
impact
Provide
finance
SERVICE PROVIDERS
Outcomes
Funder
repays
investors
based on
achievement
of verified
outputs and
outcomes
Adjust
delivery in
real-time
BENEFICIARIES
Social Impact Bonds (SIBs) – main outcomes payer is the government
Development Impact Bonds (DIBs) – main outcomes payer is a third party, e.g. a donor agency, foundation or trust
funds.
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Impact Bonds focus on improving impact
Impact bonds incentivise the achievement of impact through linking funding to results
and provide the corresponding implementation flexibility required to achieve impact:
TRADITIONAL AID MODEL
Donor subject to
public accountability,
but program
implemented
by third party
Program may
achieve lower than
expected impact as
cannot adapt to local
circumstances and
real-time data
Donor often focuses
on financing inputs
and processes to
control what and how
impact
is achieved
IMPACT BOND MODEL
Government / Donor
pays for impact
achieved, rather than
controlling inputs
and processes
Impact achieved
improves as
program is adaptive,
client-centred and
evidence-based
Up-front capital from
investors to service
providers and
provision of real-time
performance
management
Impact bonds build on best practice
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Social Impact Bonds for key and vulnerable populations intend to expand on existing proven approaches,
while ensuring that the model upholds human rights of these populations:
This can be achieved through:
•
Clear Boundaries: A programme framework that sets clear boundaries for goals and methods
•
Outcome selection: Careful selection of outputs to avoid incentives for undesirable data collection methods or pressures
•
Intervention analysis: Explicit criteria for what interventions and data collection methods are permissible, and which are
not
•
Selected Investors: Investors restricted to those with a strong commitment to social goals and human rights
Innovative financing mechanisms such as social impact bonds go hand-in-hand with government funding for key
populations, and should supplement their efforts in being more effective.
The ambition is that impact bonds will pave the way for larger-scale – and more cost-effective and sustainable – Government
implementation of proven interventions.
Key characteristics of impact Bonds
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Impact Bonds aim to improve the efficiency and effectiveness of development programmes
through shifting payments - and thus accountability - to outcomes instead of inputs. The focus on
outcomes allows and encourages local adaptation according to the specific and changing needs
of service users.
Incentives for adaptive
implementation
• Linking investor returns to desired outputs and outcomes creates a strong incentive
for adaptive implementation of programmes to achieve better services for
beneficiaries
Enhances transparency
and accountability
• Investors are only compensated when contract outcomes and outputs have been
independently verified
Outcomes funder only
pays for success
Provide access to
upfront funding
• As with other Results-Based Aid, outcomes funders (government / donors) only
pay for if agreed outcomes are met
• Upfront funding provides working capital to service providers and risk is transferred
to private investors
Objectives and roles of key parties
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Principles for a successful Impact Bond
For an Impact Bond to be successful it must:
• Add value: Potential exists to improve outcomes through transfer of risks to investors
• Be feasible: Improvement in outcomes measurable and stakeholder buy-in
Add value
PRINCIPLES
Need for outcomes focus
Promising interventions
Feasibility
Service providers require working
capital
Good potential for attribution of
outcomes
Priority for donors and partner
governments
Viable investment proposition
© Social Finance 2015
RATIONALE
•
Demonstrated need for increased focus on outcomes in target geography and coordination of key stakeholders
to achieve outcomes
•
Focus on expanding intervention with some evidence-base to ensure attractiveness to investors, but also
uncertainties to justify risk transfer
•
Service providers do not have sufficient upfront funding to pay for interventions or cannot bear the
implementation risk alone
•
Target population and outcome metrics can be clearly defined and agreed upon
•
Data for outcome metrics and benchmark can be collected in a reliable and cost-effective way and used to
disaggregate the impact of the interventions
•
Potential donor agency and partner governments have interest in payment-by-results approaches and regard
target outcomes as high priority
•
Issue area / geography a priority for potential investors
•
Reasonable level of evidence around effective intervention approaches
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A rapidly growing market
Over 50 Impact Bonds raising $150m have been launched, with at least as many in development.
Portugal
UK
• One Impact Bond for education of
primary school children
• 30 Impact Bonds for issues ranging from
recidivism, to child services, employing a
range of commissioning models
Canada
Northern Europe
• Impact bonds in the Netherlands (2),
Germany, Belgium and Switzerland, for
migrant and youth unemployment.
Asia and SE Asia
• One Impact Bond for at-risk single
mothers
• Three pilots being
developed in Japan
India
US
• 8 Impact Bonds, including highest
value bond of $27m. Issues range
from high risk youth to recidivism
• Impact Bond being
piloted in Rajasthan,
India, for Girls’ Education
• Harvard Lab providing assistance
to 9 states
Australia
• 2 Impact Bonds on outof-home care
Latin America
N Africa and the Middle East
• Social Finance and IDB exploring
project in Mexico, Brazil and Chile
• Impact Bonds also in development
in Colombia (education) and Peru
(agriculture)
Sub-Saharan Africa
• Impact Bonds for youth training and employment
and diabetes prevention in development in the West
Bank
• Impact Bonds in development for
Sleeping Sickness in Uganda, HIV
Israel
prevention and ECD in South Africa,
• One impact bond for prevention of university drop
and maternal and child health in
outs in Israel
Cameroon
Impact Bonds in development
Impact Bonds launched
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Case study I: East African sleeping sickness in Uganda
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A Development Impact Bond targeting East African sleeping sickness would deliver significant animal and
human health benefits at scale across poor, rural parts of Uganda.
OVERVIEW
Objective
Size
Socioeconomic
benefits
Intervention
Outcomes
Data systems
Sustainability
Impact Bond valueadd
•
Reduce incidence of East African sleeping sickness by treating cattle – the main parasite reservoir – to improve human health and
animal health and productivity
•
An 8 year, c. $50m DIB covering 44 at-risk districts in Uganda – intervention area includes central, northern and south-eastern
districts
•
Minimum 4m cattle to be treated across the affected area
•
>1m cattle keeping households across the affected area
•
Impact of African Animal Trypanosomiasis (AAT) on cattle include reduced tractive power, loss in milk production and lower calving
rates - estimated benefits of $15 per cattle per year free of tryps and $7.50 per cattle protected by insecticide per year
•
Human health benefits include reduction in number of sleeping sickness cases per year and associated healthcare costs – estimated
benefits of 18.8 DALYs / case and $200 healthcare costs per case
•
$150m animal health benefits and $90m human health benefits estimated over 8 years
•
Mass cattle injection programme - delivery of 5.5 million cattle treatments1 over 3 years
•
Establishment of prevalence and vector control strategy over 8 years to increase and improve regular farmer spraying of cattle with
insecticide so animal and human health gains are sustained
•
Successful mass treatment of cattle in years 1-3
•
Reduction in the parasite prevalence from baseline in years 4, 6 and 8
•
Uses tailored app and database to track cattle treatment progress in real time
•
Promotion of ongoing insecticide spraying by farmers to maintain parasite prevalence reduction achieved by the mass treatment
programme and sustained socioeconomic benefits
•
Improves the effectiveness of delivery through real-time data collection and analysis
•
Investment structure encourages strong management and programme adaptation
•
Provides greater accountability and transparency around impact of donor funding
1. Proposed one round of treatment in southern endemic districts, two rounds in northern epidemic districts, resulting in c. 5.5m cattle treatments to be delivered over 3
years
Northern epidemic districts
Southern endemic districts
West African HAT districts
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CASE STUDY II: youth training and jobs IN the west bank
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While a large amount of donor funding has been invested in the skills development sector in the West Bank, there are
significant mismatches between the training programmes provided and needs of the private sector. The real-time data
collection and adaptive management inherent in a DIB model could help bridge these gaps.
HIGH-LEVEL DIB DESIGN
Objective
•
Increased training and better matching of young people with employment opportunities in the West Bank
Target geography
•
West Bank
•
Flexible skills training at both technical and university levels linked to new investments and upcoming employer demand
•
Soft skills training tailored to specific skill requirements identified by employers
•
Training and skills development outputs linked to employer needs
•
Improved employment opportunities for young people
•
Improved work retention for young people
•
DIB will collect real-time data on job placements and retention, with independent verification to trigger output and
outcome payments
•
Strong link between private sector employers and design and roll-out of training programmes
•
Training and skills better aligned to upcoming employer demand
•
Improved tracking of training, work placement and retention
•
Key learnings mainstreamed into government programmes
Intervention
Outputs and outcomes
Measurement
Impact Bond value-add
Impact development involves three main phases
PHASE 1
High level scoping
PHASE II
Detailed design
PHASE III
Capital Raise
SIB IMPLEMENTATION
Phase I: High level scoping and stakeholder engagement (typically: 6-8 weeks)
•
Stakeholder engagement e.g. impact bond approach tested with service beneficiaries and providers, government and other key
stakeholders for suitability to the issue area and country context
•
Feasibility analysis e.g. early exploration of the ability of government / donors to fund outcomes, contracting environment,
capacity of potential partners to implement services via an impact bond and potential to measure and track outcomes
Phase II: Detailed design and securing of funding for outcomes (typically: 6 months)
• Detailed impact bond design work conducted in partnership with key stakeholders – focused around:
•
Outputs and outcomes metrics, measurement and verification
•
Intervention model i.e. service design
•
Outcomes funding, contracting and governance
•
Data collection and performance management
•
Budget, operational and financial modelling
•
Investor soft marketing
Phase III: Formal investor marketing, capital raise and service mobilisation (typically: 3-6 months)
• Once commitment to fund outcomes has been agreed with government / donors, funding is raised from socially motivated
private sector investors to fund interventions under an impact bond structure – if and only if outcomes are successfully verified,
outcomes payments from government / donors are triggered to repay investors their capital plus a return linked to the level of
success and the level of risk taken
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Thanks for listening!!
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