4.5.13. Pay for Results: Development Impact Bonds and Social Impact Bonds


Arrangements where private investors provide upfront capital for social services, and then are repaid with a success premium if successful by an outcome funder upon achievement of results by the implementer/service provider. A Social Impact Bond (SIB) involves a government entity as the outcome funder; a Development Impact Bond (DIB) is the application in a developing country context with a third party paying for the outcomes. Desired outcomes to be achieved are jointly agreed on by the parties involved and verified by external agents, triggering success payments to implementers and repayment of principal to investors via outcome sponsors, sometimes with interest.

Typically, there are four key actors involved: investor, outcome sponsor, project implementers, and independent verifiers.


Graphic depicting the structure of a Pay for Results - development impact bonds and social impact bonds contract.


  1. Appropriate capital to meet borrower needs
  2. Production costs associated with target sector/region
  3. Rate of return on lending in target sector/region


Allows an intermediary to seek external up-front investment, with repayment dependent on achieving an outcome, Shifts risk in solving development problems by using funding from outside investors


Complicated to structure, particularly in agreement of payment metrics and timing—cost/benefit still in question. Specific challenges include:

  • Complex, challenging, and expensive to structure; most DIBs initiated years ago are still in the feasibility or structuring stage
  • Emerging enabling environment; actors are structuring DIBs as donors and outcome funders are simultaneously building the architecture to support the operations and contracting of them; work-around solutions in the interim can complicate DIB design
  • Finding service providers that are not just performance-oriented, but with capacity to implement the desired activities
  • Limited capacity in designing, implementing, and evaluating DIBs
  • Require funders and providers to embrace a new way of doing business (e.g., more hands-off, more performance- oriented)


DIB/SIBs are appropriate when evidence exists of appropriate interventions that will achieve the desired outcomes; service providers exist that are capable of delivering the outcomes; procurement and payment mechanisms exist to support a DIB; data are available to appropriately measure outcomes achieved; for longer-term projects and/or where time is not a consideration (DIBs take time to structure).



Educate Girls, an Indian NGO, was instrumental in designing a DIB with the goal to improve education for 18,000 children in 166 schools in Rajasthan.


The investor is the UBS Optimus Foundation, which invested in Educate Girls (service provider) to increase enrollment, literacy, and numeracy among the target population. The Children’s Investment Fund Foundation (CIFF) (outcome funder) will repay the investor its principal plus 15% interest upon achievement of agreed outcomes by Educate Girls. Instiglio plays a performance monitor role for the DIB, and IDinsight is the independent verification agency.


By the end of its second year, Educate Girls had achieved 87.7% of its 3-year enrollment targets and 50.3% of its learning targets.


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