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MIF to test innovative Social Impact Bonds financing model in Latin America and the Caribbean

Mar 19, 2014

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, will launch a $5.3 million program to test a new social sector financing model called Social Impact Bonds in Latin America and the Caribbean. Social Impact Bonds offer opportunities for private investors to participate in developing and delivering services to low-income or vulnerable populations.

A Social Impact Bond is a partnership in which socially-motivated private investors provide capital to nongovernmental organizations (NGOs) or private service providers to implement programs targeted at poor and vulnerable populations. The government commits to repay investors based on the degree to which social outcomes improve, which is verified through a rigorous impact evaluation. If outcomes fail to improve, investors do not recover their full investment, thereby transferring the performance risk of the program away from governments and taxpayers.

The Social Impact Bond model, first developed in 2010, is already being tested and expanded in the U.S., Israel, Australia, and the United Kingdom, and has the potential to become a transformational social innovation for the Latin American and Caribbean region.

The MIF’s Social Impact Bond facility will focus on developing the right conditions to create the ecosystem that is necessary for the Social Impact Bond market to develop and grow. This includes identifying social needs and potential interventions, assessing the legal framework and feasibility for Social Impact Bonds, as well as engaging local partners and investors. The MIF will provide training and advisory support to build the capacity of potential actors interested in the model.

The MIF will be the first development finance institution to support Social Impact Bonds. This program will include $2.3 million in grant resources to build the social impact bond ecosystem and another $3 million in investment capital to facilitate the launch of up to three pilot social impact bonds and establish a proof-of-concept. By supporting this innovation, the MIF seeks to introduce an alternative financing mechanism that addresses the challenges faced by government, private sector and NGOs as they provide vital services to poor and vulnerable populations.

About the MIF

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, is funded by 39 donors and supports private sector-led development benefitting low-income populations and the poor - their businesses, their farms, and their households. The aim is to give them the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology. A core MIF mission is to act as a development laboratory - experimenting, pioneering, and taking risks in order to build and support successful micro and SME business models. More information at www.fomin.org

 

 
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