Results-Based Funding via Development Impact Bonds: Stakeholder Perceptions on Benefits and Costs

Abstract

In response to growing social challenges compounded by stretched public and philanthropic resources, the international development sector has become increasingly interested in results-based funding mechanisms such as Development Impact Bonds (DIBs). This study contributes to the growing field of research on DIBs in low- and middle-income counties (LMICs) by exploring stakeholder perceptions on the model's benefits and costs thus far. Drawing on stakeholder interviews from 7 recent DIBs, the study finds that stakeholders wanted to test the effectiveness of DIBs, and that the DIB's provision of outcomes-focused risk capital helped enable a collaborative and adaptive approach to service delivery. This approach then generated evidence of blended returns and increased organizational capacity, as well as spurred cultural shifts towards more sustainable outcomes-based working. Stakeholders also experienced costs and challenges in implementation – especially around garnering institutional buy-in, negotiating contract terms, and managing changing relationships.