A consultation will be launched next week on a new form of funding for charity development work.
The ‘development impact bond’ will follow a model similar to that of the social impact bond, according to the social investment consultancy Social Finance and the Center for Global Development, a US think tank focused on reducing global poverty. The two organisations are jointly launching the consultation.
The bond will allow charities to run programmes to tackle problems in developing countries, funded by social investors. Programme funders pay out, and investors profit, if the charities’ model proves successful.
In a joint statement, the two organisations said that a working group was set up last year to study the "application, challenges and benefits" of a development impact bond. It was chaired by Toby Eccles, development director of Social Finance, Owen Barder, director for Europe at the CGD, and Elizabeth Littlefield, president of the Overseas Private Investment Corporation, the US government’s development finance institution.
"The working group concludes that development impact bonds have the potential to improve the effectiveness of traditional development projects by concentrating on implementation quality and the delivery of successful results," the statement said. "Based on the model of social impact bonds spreading in the UK, the US and elsewhere, development impact bonds engage private sector investors who may be better positioned than the public sector to take on the risks associated with innovation."
The consultation will close on 17 July.