$5.3 Million 'Social Impact Bond' Fund For Latin America Launches

Apr 13 2014, 2:26pm CDT | by

$5.3 Million 'Social Impact Bond' Fund For Latin America Launches
Photo Credit: Forbes Business

Social Impact Bonds are coming to Latin America and the Caribbean.

Following the lead of the U.K. , the U.S., and other places, the Inter-American Development Bank (IADB), which provides development financing for Latin America and the Caribbean, recently announced that its Multilateral Investment Fund (MIF) is testing out the new approach with a $5.3 million program.

The IADB provides loans, grants, and technical assistance to the region, while The MIF works with innovative, somewhat riskier projects.

Social Impact Bonds, which I’ve written about before, are a new way for socially minded private investors to work with governments and nongovernmental organizations or other service providers addressing deeply rooted problems among low-income or vulnerable populations. The particular issue that’s targeted depends on the society and culture involved. A recent one in Massachusetts, for example, aims at curbing recidivism among young inmates. Whatever the problem, the outcomes must be measurable.

They’re also known as Pay for Success, because, if the project reaches its goal as determined by a third-party evaluator, the government pays back donors with a small profit. If those objectives aren’t reached, there’s no return. So governments and taxpayers only pay up if a program is successful in addressing a particular problem.

I like this definition from the Center for American Progress:  Social Impact Bonds are “an arrangement between one or more government agencies and an external organization where the government specifies an outcome (or outcomes) and promises to pay the external organization a pre-agreed sum (or sums) if it is able to accomplish the outcome(s).”

According to Zachary Levey and George Neumann, associates with the MIF, the organization is the first development finance institution to support social impact bonds. The program, which is in its early stages, will include $2.3 million in grants to build a social impact bond ecosystem with all the players needed to be successful and $3 million in investment capital to help launch up to three pilots. The goal, says Levey, is to be the “anchor investor”, thereby giving the project the organization’s crucial blessing and making public and private sector participants more confident in the outcome.  The first investment might be made by early next year.

The organization still hasn’t pinpointed the countries or issues. But in any case, the areas need to have experience with public-private partnerships (PPPs) and a solid regulatory framework around PPPs, along with  well developed financial markets, capable service providers, and availability of historic data on social sector issues. Some early candidates include Brazil, Uruguay, Mexico, Colombia, and Chile.  

Social ills to target could include anything from preventive health to violence against women, depending on the country.  For more research  into the question, here‘s a white paper the MIF co-wrote with Instiglio, a nonprofit social impact bond intermediary based in Boston and Medellin, Colombia, called Social Impact Bonds in Education in Latin America and the Caribbean. 

Just to make things more confusing, there’s another financial mechanism called a Development Impact Bond, which is a spinoff of the Social Impact variety, but applied to the development and aid sector. Instead of the government being the payer, a donor agency, such as USAID, plays that role. The MIF’s approach is to focus on the Social Impact Bond model, though  it might consider a hybrid, in which a third party and government provide part of the outcome payment. It’s early days.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Soyuz rocket carrying two Galileo satellites lifts off
Brussels, Aug 22 (IANS) A Soyuz rocket carrying two Galileo satellites, the fifth and sixth of Europe's Galileo global satellite navigation system, lifted off from the spaceport in French Guiana Friday, the European Space Agency (ESA) has announced.
 
 
Fresh cases of Ebola recorded in Nigeria: Official
Abuja, Aug 22 (IANS) Fresh cases of the Ebola virus disease have been recorded in Nigeria, where the highly contagious disease has already claimed five lives, Minister of Health Onyebuchi Chukwu said Friday.
 
 
Fuel cell technology gets a boost
Washington, Aug 22 (IANS) In an impetus for fuel cell technology to build "smart" cars, scientists at Stanford University have developed a low-cost, emissions-free device that uses an ordinary AAA battery to produce hydrogen by water electrolysis.
 
 
3D-printed technology to make drug delivery better
Washington, Aug 22 (IANS) The US researchers have developed an innovative method for using affordable, consumer-grade 3D printers and materials to fabricate custom medical implants that can contain antibacterial and chemotherapeutic compounds for targeted drug delivery.
 
 
 

Latest from the Network

Hamas executes 18 alleged collaborators with Israel
Gaza, Aug 22 (IANS/EFE) Palestinian militias Friday executed 18 people accused of collaborating with Israel, 48 hours after three top military leaders of the Islamic Palestinian movement Hamas were killed in an Israeli...
Read more on Politics Balla
 
27 killed in CAR gold mine collapse
Yaounde, Aug 22 (IANS) At least 27 miners have been killed in a gold mine collapse in the Central African Republic (CAR), authorities said Friday. The Ndassima mine is situated 400 km north of the country's capital...
Read more on Politics Balla
 
Austrian humanitarian aid for 100,000 people in Iraq
Vienna, Aug 22 (IANS/WAM) The Austrian government has approved one million euros ($1.3 million) in emergency aid from the Foreign Disaster Relief Fund (FDRF) to the UN in northern Iraq, the country's foreign ministry...
Read more on Politics Balla
 
Displaced Iraqis in urgent need of shelters: UNHCR
Geneva, Aug 22 (IANS) The Office of the United Nations High Commissioner for Refugees (UNHCR) Friday said Iraq's displaced people were in urgent need of shelters. Adrian Edwards, UNHCR spokesperson, said a loaded ship...
Read more on Politics Balla
 
Spencer Locke loved natural look on Tarzan set
Spencer Locke loved not having to wear make-up on the set of 'Tarzan'. The 22-year-old actress starred as Jane in the action-adventure-animation remake of the Disney film last year and she's confessed it was a...
Read more on Movie Balla
 
Deepsea Challenge 3D indulges James Cameron's passion for diving
James Cameron's new film 'Deepsea Challenge 3D' focuses on one of his biggest passions: deepsea diving. The new flick, which sees the esteemed movie director appear in front of the camera rather than behind it, captures...
Read more on Movie Balla
 
Islamabad protests our constitutional right: PTI, PAT
Islamabad, Aug 22 (IANS) The anti-government protests in Pakistani capital's Constitution Avenue area are peaceful demonstrations, in accordance with the constitutional rights of citizens, Pakistan's PTI and PAT...
Read more on Politics Balla
 
Soyuz rocket carrying two Galileo satellites lifts off
Brussels, Aug 22 (IANS) A Soyuz rocket carrying two Galileo satellites, the fifth and sixth of Europe's Galileo global satellite navigation system, lifted off from the spaceport in French Guiana Friday, the European...
Read more on Apple Balla
 
32 killed in Iraq violence
Baghdad, Aug 22 (IANS) At least 32 people were killed and 12 others wounded Friday in incidents of violence in Iraq's eastern province of Diyala, police sources said. Five people were killed and 12 others injured, all...
Read more on Politics Balla
 
70 IS militants killed in Syria
Cairo, Aug 22 (IANS/EFE) At least 70 members of the Islamic State (IS) Sunni extremist organisation have been killed in two days of clashes with the Syrian Army over al-Tabaqa military airport, the only bastion still...
Read more on Politics Balla