19.04.2017, 20:56
IDB-MIF supports Colombia as pioneer of social innovation
OREANDA-NEWS. The Colombian government’s Department of Social Prosperity, the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), the Economic Cooperation of Switzerland (SECO) and the Corona Foundation announced today that 514 of the most vulnerable people in the cities of Pereira, Cali, and Bogota will soon have the opportunity to be placed in formal jobs as a result of Colombia’s first social impact bond.
Colombia’s announcement marks the launch of the first Social Impact Bond (SIB) in a developing country; of the 74 social impact bonds launched to date, all have occurred in high income countries.
The $750,000 Social Impact Bond is structured so that its investors, Corona Foundation, Mario Santo Domingo Foundation, and Bolivar Davivienda Foundation, are repaid only if unemployed, vulnerable Colombians including those who have been displaced by the armed conflict, find stable, formal employment.
This is the first of three Social Impact Bonds that the Colombian government will launch in partnership with the MIF and SECO and will support a critical learning process for Colombia and other developing countries on paying for results.
This launch clearly demonstrates the type of social innovation and focus on greater impact that can come about from close collaboration between the public, private, and social sectors to solve Colombia’s most pressing social problems.
Social Impact Bonds are an innovative model to finance social programs under a pay for success approach. This type of funding seeks to increase the effectiveness of social investment, innovation in the public sector, as well as to promote flexibility to solve social problems and to better allocate public resources.
Under this model, the outcome payer – either a government alone or together with other interested parties - agrees to pay for the pre-defined results of the social program, once these are achieved and independently verified by a third party. To this end, (private) impact investors provide initial funds to service providers to implement a social intervention that benefits vulnerable populations. This happens under a Pay for Success contract, encouraging the private sector to participate in social programs by creating investment opportunities that involve a financial return, and combining efforts with the government to achieve greater impact.
Colombia’s announcement marks the launch of the first Social Impact Bond (SIB) in a developing country; of the 74 social impact bonds launched to date, all have occurred in high income countries.
The $750,000 Social Impact Bond is structured so that its investors, Corona Foundation, Mario Santo Domingo Foundation, and Bolivar Davivienda Foundation, are repaid only if unemployed, vulnerable Colombians including those who have been displaced by the armed conflict, find stable, formal employment.
This is the first of three Social Impact Bonds that the Colombian government will launch in partnership with the MIF and SECO and will support a critical learning process for Colombia and other developing countries on paying for results.
This launch clearly demonstrates the type of social innovation and focus on greater impact that can come about from close collaboration between the public, private, and social sectors to solve Colombia’s most pressing social problems.
Social Impact Bonds are an innovative model to finance social programs under a pay for success approach. This type of funding seeks to increase the effectiveness of social investment, innovation in the public sector, as well as to promote flexibility to solve social problems and to better allocate public resources.
Under this model, the outcome payer – either a government alone or together with other interested parties - agrees to pay for the pre-defined results of the social program, once these are achieved and independently verified by a third party. To this end, (private) impact investors provide initial funds to service providers to implement a social intervention that benefits vulnerable populations. This happens under a Pay for Success contract, encouraging the private sector to participate in social programs by creating investment opportunities that involve a financial return, and combining efforts with the government to achieve greater impact.
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