Two DIB Pilots Will Test New Development Partnerships

April 17, 2014

If one thing was clear at the first High Level Meeting of the Global Partnership for Effective Development Cooperation, it’s that the 1500 people in attendance—representing the governments of developing, emerging and rich countries, multilateral institutions, business, philanthropy, and civil society—were not interested in how aid can be delivered more effectively from rich to poor countries but how the wide and growing range of actors who contribute to development can work together more effectively. The meeting this week in Mexico City was the follow-up to the fourth (and final) forum on aid effectiveness in Busan, Korea, in late 2011, where the Global Partnership was born following the recognition that aid is only one small piece of development and achieving more effective development cooperation is necessarily an inclusive process, involving civil society and the private sector as well as governments and international organizations. The downside of more inclusivity and a broader set of challenges to tackle leading up to the meeting was less clarity on what this diverse group of actors can accomplish together and how progress is measured, so, like most people there, I was looking out for concrete actions that the Global Partnership would be taking to move its agenda forward (at the conclusion of the meeting, the group released a summary of such concrete actions and initiatives in the Annex on Voluntary Initiatives to the final communiqué).

It was fitting then in this setting that one of the concrete actions to which the UK government, a co-chair of the Global Partnership, committed was to pilot and support Development Impact Bonds (p.11 of the communiqué). The UK Secretary of State for International Development Justine Greening announced DFID's support of DIBs at a plenary session on Business as a Partner Development (you can read the press release here), where she said that DIBs are one way to work more effectively with business and to leverage not just private finance but private sector skills and expertise. 

DIBs bring private sector investors, developing country governments, aid agencies, and NGO and private service providers to the table, thinking about common development goals and the most effective means to achieve them. Each group does what it's good at doing: the private sector provides flexible financing and real-time performance management; governments and donors articulate social priorities and pay for results; service providers deliver services and adapt them in response to local needs. It's exactly the kind of partnership I've been hearing about in two days of discussions of the Global Partnership for Effective Development Cooperation. 

DFID's support of DIBs means two things: First, it means that DFID is committing to testing this new approach. The UK will launch its first DIB to invest in preventing sleeping sickness, a neglected disease that threatens economic productivity - and the lives of 9 million people - in Uganda. Large sums of financing need to be quickly mobilized for a mass treatment of cattle to stop the spread of the disease, and DFID will raise this money from private investment and pay for results if the program is successful. DFID is now funding a £1.5 million inception project to design the details of the bond structure. (Earlier stage conceptual work on a Sleeping Sickness DIB is included in the case study section of the DIB Working Group's report, Investing in Social Outcomes.) 

Second, it means that DFID is committing to support a broader market for Development Impact Bonds by working with governments and other aid agencies to get more pilots going, and setting up a new online ‘open source’ knowledge platform to share lessons from these pilots. So DFID is taking on some of the "market-building" costs discussed in the DIB Working Group report and recommendations that are inevitable with new ways of doing business. Now that DFID has set the stage, we hope that other donors and foundations who are able to take risks in order to test promising innovations will join them in providing support for the DIB ecosystem.

It wasn't only the UK government talking about DIBs at the High Level Meeting. At a session on the various ways that the private sector can invest in development, Michael Eddy, co-founder of Instiglio said that his organization, a social enterprise that was created to bring the Social Impact Bond model to emerging economies, has been working with partners to develop a DIB pilot for girls education in Rajasthan, India. The UBS Optimus Foundation will invest in a DIB to improve education access and quality for marginalized girls, and the Children's Investment Fund Foundation (CIFF) will pay for successful outcomes. Educate Girls, a Rajasthan-based NGO will be the service provider. Like DFID and the IDB Multilateral Investment Fund which recently launched a SIB fund for Latin America, these first movers on DIBs are committed to testing the concept, and they will be collecting evidence to determine whether, where, and how the DIB can be replicated or adapted to take interventions to scale. The Girls Education DIB partners expect to announce more details about this deal at their official launch this summer. 

The announcements from DFID and Instiglio show that DIBs can be applied to a wide range of issues and at different scales. This makes the work towards developing a knowledge platform extremely timely: experiences from two very different pilots can help to inform the development of future DIBs and grow the market, if the lessons can be shared. The good news is that there has been a lot of focus at the High Level Meeting, as well as in our discussions about DIBs more broadly, on the importance of the transparency and learning agenda for this new approach, and it's now a matter of putting a mechanism in place to ensure that relevant data and implementation experiences and stories are widely shared. Congrats to all the partners involved in moving these inaugural DIBs forward, and stay tuned for more on how they develop! 


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.