Social impact bonds are moving south to Latin America. The innovative financing mechanism, which was first developed in the United Kingdom, allows impact investors – not governments or aid agencies – to provide the working capital to social enterprises serving poor and vulnerable populations. The investors get repaid if social outcomes verifiably improve, as defined through a high-powered results-based contract with the government. (See our FAQ)
Recently, the MIF organized a series of workshops, roundtables, and panels on social impact bonds at the 5th annual Latin American Impact Investment Forum (FLII) in Merida, Mexico. The FLII has become the preeminent event for the region’s social entrepreneurship and impact investment ecosystem.
This is the second year the MIF participated on a social impact bond panel at the FLII. The growth in interest and diversity of actors in just one year amazed me. In a packed-full room, I moderated a discussion with Social Finance UK, the organization that launched the UK’s first social impact bond, and with four Latin American organizations exploring social impact bonds in their respective countries – SITAWI in Brazil, Instiglio in Chile and Colombia, Avina Foundation in Uruguay, and New Ventures in Mexico.
Despite a surge of interest among regional actors, there are no social impact bonds in Latin America, and launching the first will not be an easy task. At the FLII, the MIF organized a lunchtime dialogue on social impact bonds with around 30 organizations working in Latin America, including foundations, academics, social sector organizations, impact investors, industry organizations, government agencies, and development banks.
We posed the question: “What will it take?” to bring social impact bonds to Latin America. The feedback we received included strengthening strategic partnership and collaboration among national and regional actors, increasing efforts to raise awareness and disseminate information to the market, incentivizing first-mover outcome payers, strengthening capacities of social sector organizations and social enterprises in managing performance around social impact, and of course working persistently towards concrete and well-designed deals that create solid proof of concept for the market.
In March 2014, the MIF became the first development finance institution to launch a program on social impact bonds.
Working in Alliances will be a focus of ours this year. We will also be sending out a bi-weekly update in Spanish, called Socios de Impacto, on our efforts in Latin America as well as developments on SIBs around the globe. The pipeline of potential social impact bonds includes economic empowerment of low-income single mothers, reducing recidivism among young short-term offenders, prevention of type 2 diabetes, and improving the employment and educational outcomes of young people.
We’d love to hear more about your questions and ideas. Please contact us anytime through firstname.lastname@example.org.