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Development Impact Bonds (DIBs) finance development programs with money from private investors who earn a return if the program is successful, paid by a third-party donor. The outcomes to be measured are agreed upon at the outset and independently verified. With greater focus on outcomes instead of inputs, DIBs create space for more innovation, local problem-solving, and adaptation. CGD and Social Finance UK jointly convened the Development Impact Bond Working Group and released a seminal report about the rationale for, and technical design of, Development Impact Bonds and how to create a market for this approach.
In 2013, a CGD working group signaled important benefits of development impact bonds, and worked through some of the “how-to” of design and implementation. Yet five years later, only three development impact bonds have launched. Why is this the case? Why is it so hard to get DIBs off the ground? What can we learn from the structuring and financing of DIBs to date to ease the way for future efforts?
The launch of the Cameroon Cataract Development Impact Loan—a Development Impact Bond (DIB) to provide cataract surgery services via a social enterprise model—marks a key moment in the history of results-based financing. The cataract bond is the first DIB to have a development finance institution (DFI) as an investor, and among the first pay-for-performance projects in eye care to assess the quantity, quality, equity, and financial sustainability of the services provided. Please join us for a discussion on the development of the bond and the experiences of the cataract bond partner organizations, as well as lessons learned from other health-related impact bonds and what it all suggests for the future of pay-for-success for health.
OPIC recently announced it will invest $2 million in a Development Impact Bond (DIB) aimed at improving the availability and quality of cataract surgery services in Cameroon. Specifically, OPIC’s investment will support the Magrabi ICO-Cameroon Eye Institute, a new hospital with an efficiency and financing model based on the acclaimed Aravind Eye Hospitals, over several years. The OPIC news is particularly exciting for four reasons.
After more than a decade of operations, MCC has made the shift from innovative start-up to established donor agency. “MCC NEXT,” the agency’s new, much-anticipated strategic plan, takes a hard look at how the poverty and development landscape has evolved over the past decade and stakes out the position a more mature MCC should take in this new context.
No one said creating development impact bonds (DIB) was going to be easy, but that hasn’t stopped the development community from trying to get them off the ground. The Fred Hollows Foundation, based in Australia, has been hard at work on a DIB to address cataract blindness in Africa. As the Foundation attracts partners to help fund and implement a pilot of the cataract bond, Dr. Lachlan McDonald, the Foundation’s senior health economist, and Alex Rankin, their Global Lead for Policy, Advocacy & Research, shared some lessons learned so far. With Lachlan and Alex’s permission, we’re turning some of those lessons over to you – we hope they’re useful to others seeking to move ahead with their own DIB.
While global development is about much more than aid, US foreign assistance is, and will remain, one of the most visible tools for US development policy in many countries. The US government spends less than 1 percent of its annual budget — about $23 billion — on nonmilitary foreign assistance across the globe. These programs have consistently come under fire for failing to achieve measurable and sustainable results, ignoring local priorities and contexts, perpetuating bureaucratic inefficiencies and inflexibility, and repeating mistakes over time. A paradigm shift within US aid agencies is needed. In this brief, we outline concrete proposals that would address many of the traditional shortcomings of US foreign aid approaches.
When designing and implementing Social Impact Bonds (SIBs), practitioners and policy innovators in the developing world will inevitably face the challenge of understanding and adapting SIBs to each government’s legal jurisdiction.