By Laura Fernandez

The Social Impact Incentives instrument boosts social entrepreneurs’ profitability once the impact performance is achieved: simple, flexible and entrepreneurial

Jan 3, 2017

In 2016 the Social Entrepreneurship Program, managed by the MIF, has approved the first two projects of theLAC-IMPACT facility, in collaboration with the Swiss Development Cooperation. This facility aims to innovate by financing Social Impact Incentives (SIINC). The SIINC consists of a Results-Based Financing mechanism, where the outcome impact payor agrees to make premium payments to the social enterprise based on the social contribution generated by its operations. These payments are paid in parallel to the revenues generated by the company through its activities. This way, impact is incentivized with the social performance of the enterprise being directly linked with its strategy and levels of profitability and thus its attractiveness for investors. With SIINC, social enterprises are incentivized and rewarded for real impact achieved.  Watch the following introductory video to SIINC to experience how it works.

The first two social enterprises to be financed by LAC-IMPACT facility are Clínicas del Azúcar in Mexico, and Village Infrastructure Angels in Honduras. The SIINC instrument will award up to a total USD 475.000 if impact performance is achieved by both enterprises.

Clínicas del Azúcar
, was launched in 2012 and is based in Monterrey, Mexico. It operates a network of low-cost "one-stop-shops" that offer high-quality, patient-centered, and cost-effective healthcare to treat and prevent diabetes. So far have attended 30,000 patients in seven Clinics and plans to expand it network nationally and reach 200 clinics in 2021. The objective of the project “Affordable Diabetes Health Care Services for the Base of the pyramid (BoP)” is to encourage Clínicas del Azúcar to increase its penetration in the BoP while maintaining a standard of quality services of affordable health care. Ultimately, the SIINC will lower the risk of investing and piloting a new BoP-custom clinic and designing tailored campaigns to roll out, which will be done with new investor funds. The SIINC will be awarded if expected impacts are achieved in terms of decreasing sugar levels in BoP patients and increase the number of BoP clients. 

Village Infrastructure Angels
, founded in UK in 2012 has operations in Honduras and other 4 countries. It aims to help the poorest villages in the world gain access to poverty-alleviating essential infrastructure though the stimulation of 3-5 year loans. Since 2014, VIA has been working in a 150 household pilot project focused on lighting and phone charging in Gracias a Dios, in partnership with a local NGO and private investors. By implementing an innovative pay-as-you-go service, VIA has installed 150 solar home systems and trained entrepreneurs in villages to operate the collection and maintenance. Through the SIINC, the project “Private Investment Mechanism for Rural Solar Energy in Honduras” aims to attract and lower investment risk of expanding this experience to 2,700 additional rural households. This project has recently been selected as one of the 4 finalists to be financed by the FiRe Award (Finance for Resilience).

SIINC aims to be simple, flexible and entrepreneurial, key attributes to support social entrepreneurs to boost their profitability once the impact performance is achieved. The temporary payments are expected to have a catalytic effect by accelerating social enterprise’s process of achieving long-term financial viability and offering strong and ongoing social returns to impact investors. In addition, there is no need to set up a special purpose vehicle or complicated structure to fund it. These attributes are working, as in both cases the SIINC instrument has already attracted other private and impact investors.
Laura Fernandez

Laura Fernandez

Laura Fernández Cascán develops impact-investing projects for the Multilateral Investment Fund that promote financial inclusion, sustainable agriculture, and access to basic services in Latin American and the Caribbean.

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