Stage 3: Proof of Concept
The goal of this program is to explore the potential for social impact bonds, also known as pay-for-success contracts, in developing countries. This innovation, which has been piloted in the UK and the U.S., holds promise for improving the cost-effectiveness of social programs by incentivizing providers based on the social outcomes they produce and improve the public's understanding of what programs work by tying service delivery to a rigorous evaluation.
Economic Growth and Trade and Social & Micro Finance
Economic Growth and Trade and Social & Micro FinanceSEE LESS
Uganda, Kenya and Mexico
Uganda, Kenya and MexicoSEE LESS
Countries Implemented In
The first test of this innovation was to establish and evaluate a social program addressing teen pregnancy by incentivizing providers based on the social outcomes they produce. The test was conducted on a social impact bond (SIB)established with the city of Medellin, Colombia. The SIB will establish a program to address teen pregnancy in Medellin, which will be rigorously evaluated by an external agency.
Additionally, Instiglio, in partnership with Village Enterprise (VE), is designing and implementing a Development Impact Bond (DIB) to test VE's evidence-based integrated program designed to "graduate" participating households out of extreme poverty by addressing several dimensions of need simultaneously with a one-time investment. Village Enterprise gets up-front funding in the form of working capital from socially-motivated investors, and flexibility to adapt the program to maximize impact.Through this Development Impact Bond, USAID’s Development Innovation Ventures (DIV), DFID, and other funders are committing to paying for specific outcomes: Village Enterprise gets up-front funding in the form of working capital from socially-motivated investors, and flexibility to adapt the program to maximize impact. USAID and other funders’ repayments to the investors are conditional on Village Enterprise delivering verifiable results such as improved income and consumption. The impact bond, valued at a total of $5.28 million, will allow Village Enterprise to scale its successful program that has already helped 39,000 small businesses get off the ground. Village Enterprise’s approach is to create and sustain microenterprises by providing a small cash grant, business and financial literacy training, mentoring, and access to savings. The bond will help launch a minimum of 4,600 sustainable microenterprises over the next three years, positively impacting 13,800 or more households across rural Kenya and Uganda. By partnering with the private sector and maintaining a focus on results, we can remain good stewards of U.S. taxpayer dollars and advance our efforts to reduce poverty and promote economic growth.
Planned Goals and Milestones
The main expected outcome of this program is a pay-for-success contract signed by the government that obligates government funds for disbursement only if the social program described in this award meets predetermined outcomes.