Abstract
The paper aims to enrich the academic debate on social impact investing, through a formalization of Development Impact Bonds (DIBs)’ structure. With this purpose, the research adopts an inductive approach and presents a case study analysis of the world’s first successful DIB in education, Educate Girls Development Impact Bond. The analysis fosters the role of DIBs as tools to provide funds to non-profit organizations operating in developing countries, by reducing agency problems between investors and social services providers, and by mitigating goal displacement effects. Key words: Development impact bonds, social impact investing, outcome-based contracts, payment-by-results, social finance, pay-for-success, agency problems, non-profit organization.
Highlights
In the last decade, since the 2008 to 2009 world economic and financial crisis, governments have been often struggling to make sure social services provision
The results show that Development Impact Bonds (DIBs) stakeholders took part in one DIB at a time
Through a careful literature review and an in-depth case study analysis, our work offers some insights for DIBs implementation based on current best practices
Summary
Since the 2008 to 2009 world economic and financial crisis, governments have been often struggling to make sure social services provision. When budgetary constraints become pressing, nations opt for austerity policies (Vis et al, 2011) even at the expense of the welfare state In such a situation, the nonprofit organizations (NPOs) are the only ones able to substitute governments in delivering social services (Joy and Shields, 2013). It enhances resilience during economic shocks more than state funds and commercial revenues (Hodge and Piccolo, 2005). For their part, private corporations need to enhance their social role and, by sustaining non-profit organizations, may take reputational advantages. In the last years, NPOs and businesses are converging (Weisbrod, 1998; Austin et al, 2007; Backman and Smith, 2000; Frumkin, 2005)
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