Giving Compass’ Take:
• Stanford Social Innovation Review reports on the rise of development impact bonds (DIBs) as a mechanism for solving social challenges, emphasizing that they must be grounded in sensible approaches to measuring impact.
• Are investors doing enough due diligence when it comes to DIBs? What data gathering practices might prove to be the most effective in this field?
Over the past year, development impact bonds, or DIBs — international development’s newest hot trend — have generated a tremendous amount of buzz from champions and detractors alike, along with some serious money. The latest flurry of activity includes an $11 million education impact bond in India, the first development impact bond in Africa, several ambitious outcomes funds (including two aiming to raise $1 billion each), and a recent global convening full of heavy hitters. While all these efforts aim to advance the idea of tying payments to real improvements in people’s lives, they also exhibit tremendous variation—and perhaps some confusion—on what it actually means to pay for “impact.”
As this nascent field rapidly develops, there is an urgent need to develop a set of shared standards around what impact means, how to measure it, and how to tie it to payments. With billions of dollars poised to flow into these instruments, the consequences of getting it wrong are massive. On one side, we have the potential to incentivize service providers to solve hard problems by ensuring that capital flows toward programs that improve lives. On the other side, we risk wasting considerable time and money on complex financial instruments that could perversely incentivize implementers and donors away from the most impactful activities. As a sector, we need to stay focused on the main prize: putting money behind programs that we are confident improve lives.
Read the full article about measurement for development impact bonds by By Kate Sturla, Buddy Shah and Jeff McManus at Stanford Social Innovation Review.
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