Investing in social outcomes: Development impact bonds

Private financial flows are growing, and developing countries are increasingly financing their own public services with domestic revenues. Finance from abroad is becoming more diverse, with new development partners, development finance institutions, philanthropic organisations and private investors working alongside traditional donor agencies. These new sources of finance and expertise increasingly complement the offerings of traditional development cooperation. This creates opportunities for new forms of partnership which can leverage the best that each has to offer.

Impact investing – that is, investment intended to create a positive social impact as well as a financial return – has already begun to channel private sector capital and expertise into generating social benefit in richer countries. But it is early days for this kind of investment, particularly as a contribution to development finance.

This report explains how development impact bonds (DIBs) can enable more impact investment in development, by providing a shared platform for governments, donors, investors, firms and civil society to work together, achieving more in partnership than any of them could achieve separately. It provides a number of case studies to illustrate how DIBs may be applied to tackle social issues.