Giving Compass' Take:

• The next phase of innovating financing will come in the form of leveraging digital tools, requiring significant investment capital to improve current systems.

• What is the draw for investors to fund innovation in development aid projects? What are the challenges?

• Read about innovative financing for global health problems. 

When Alberto Cairo, head of the International Committee of the Red Cross (ICRC) orthopedic program in Afghanistan received the Henri Dunant medal in 2013 for his work in Afghanistan, he expressed one wish: to dramatically expand access to physical rehabilitation services for those in need. The ICRC reports that on average only 10 percent of the 90 million people with physical disabilities who need a mobility device worldwide have access to one today.

Digitization is key to advancing innovative finance solutions. Digital tools enable humanitarian and other social-purpose groups to be more sophisticated about collecting data and tracking their program results. And where results and improvements can be tracked, they can be priced. In the case of the Program for Humanitarian Impact Investment, productivity is measured with a “staff efficiency ratio.”

The thinking is, regardless of how effectively an organization can deliver a good or service, significant productivity gains are almost always possible when lean manufacturing principles are systematically applied. This means clarifying what adds value and reducing all other activities that don’t.

This requires investment and innovation capital that extends beyond the typical duration of government funding cycles constrained by the electoral calendar. Investors are the risk takers investing in innovation and efficiency improvement. They are rewarded for financing the work that enabled these improvements in the first place—provided they work.

Leveraging data to unleash the next phase of innovative financing is not only promising, but necessary.

Read the full article about innovative financing by Maximilian Martin at Stanford Social Innovation Review.