Impact bonds effectively allow the risk of implementing social development activities to be shared with private sector investors. Social or development impact bonds replace the upfront financing of charitable activities with a pay-for-success contract. Four actors together agree upon the outcomes and their indicators: outcome sponsor, investor, project implementers, and verifier. Under such a contract, a charitable donor or government (‘outcome sponsor’) takes the obligation to pay the ‘investor’ an amount determined by a set of objective indicators reflecting the outcome desired by the donor. The investor, expecting contract-based future payout, can recruit and pre-finance project implementers (‘service provider’) to achieve the agreed results. The achievements of the outcome indicators are assessed by an independent verifier to conclude the payout from donor to investor according to the contract. The structure allows charitable donors to transfer a significant share of risk to investors and/or financial markets. The Common Fund for Commodities (CFC), the Schmidt Family Foundation (SFF), Rainforest Foundation UK (RFUK), and the Royal Tropical Institute (KIT) were the first to apply the model in the agricultural sector in an emerging economy. The main objective of the impact bond was to increase productivity and market sales of cocoa and coffee produced by the Asháninka people, an indigenous community living in the Peruvian Amazon. This pilot provides valuable lessons learned to contribute to the development of the mechanism.

ABN-AMRO (2015) Opportunities and Challenges in the Netherlands: Social Impact Bonds – October 2015 [pdf], The Netherlands: ABN-AMRO <https://www.abnamro.com/en/images/Documents/040_Sustainable_banking/ABN_AMRO_Rapport_Social_Impact_Bonds.pdf> [accessed 18 March 2017].

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Dear, A., Helbitz, A., Khare, R., Lotan, R., Newman, J., Crosby Sims, G. and Zaroulis, A. (2016) Social Impact Bonds: The Early Years, London: Social Finance UK.

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Gustafsson-Wright, E., Gardiner, S. and Putcha, V. (2015) The Potential and Limitations of Impact Bonds: Lessons from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

KIT (2015) Autonomous and Sustainable Cocoa and Coffee Production by Indigenous Asháninka People of Peru: Field mission for the verification of impact indicators of the Development Impact Bond agreement [pdf], Amsterdam: Royal Tropical Institute <http://common-fund.org/fileadmin/user_upload/Verification_Report.pdf> [accessed 18 March 2017].

Rudd, T., Nicoletti, E., Misner, K. and Bonsu, J. (2013) Financing Promising Evidence-Based Programs: Early Lessons from the New York City Social Impact Bond [pdf], New York: MDRC <www.mdrc.org/sites/default/files/Financing_Promising_evidence-Based_Programs_FR.pdf> [accessed 18 March 2017].

Warner, M.E. (2013) ‘Private finance for public goods: social impact bonds’, Journal of Economic Policy Reform 16: 303–19 <http://dx.doi.org/10.1080/17487870.2013.835727>.

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Center for Global Development and Social Finance (2013) Investing in Social Outcomes: Development Impact Bonds: The Report of the Development Impact Bond Working Group, Washington, DC: CGD; London: Social Finance.

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Dear, A., Helbitz, A., Khare, R., Lotan, R., Newman, J., Crosby Sims, G. and Zaroulis, A. (2016) Social Impact Bonds: The Early Years, London: Social Finance UK.

Drew, R. and Clist, P. (2015) Evaluating Development Impact Bonds: A Study for DFID, London: UKaid/DFID.

Flynn, J. and Young, J. (2016) Annotated Bibliography: Evaluating Impact Investing. Evidence Report No 164, Policy Anticipation, Response and Evaluation, Brighton, UK: Institute of Development Studies.

Gustafsson-Wright, E. and Gardiner, S. (2015) Policy Recommendations for the Applications of Impact Bonds: A Summary of Lessons Learned from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

Gustafsson-Wright, E., Gardiner, S. and Putcha, V. (2015) The Potential and Limitations of Impact Bonds: Lessons from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

KIT (2015) Autonomous and Sustainable Cocoa and Coffee Production by Indigenous Asháninka People of Peru: Field mission for the verification of impact indicators of the Development Impact Bond agreement [pdf], Amsterdam: Royal Tropical Institute <http://common-fund.org/fileadmin/user_upload/Verification_Report.pdf> [accessed 18 March 2017].

Rudd, T., Nicoletti, E., Misner, K. and Bonsu, J. (2013) Financing Promising Evidence-Based Programs: Early Lessons from the New York City Social Impact Bond [pdf], New York: MDRC <www.mdrc.org/sites/default/files/Financing_Promising_evidence-Based_Programs_FR.pdf> [accessed 18 March 2017].

Warner, M.E. (2013) ‘Private finance for public goods: social impact bonds’, Journal of Economic Policy Reform 16: 303–19 <http://dx.doi.org/10.1080/17487870.2013.835727>.

ABN-AMRO (2015) Opportunities and Challenges in the Netherlands: Social Impact Bonds – October 2015 [pdf], The Netherlands: ABN-AMRO <https://www.abnamro.com/en/images/Documents/040_Sustainable_banking/ABN_AMRO_Rapport_Social_Impact_Bonds.pdf> [accessed 18 March 2017].

Center for Global Development and Social Finance (2013) Investing in Social Outcomes: Development Impact Bonds: The Report of the Development Impact Bond Working Group, Washington, DC: CGD; London: Social Finance.

Common Fund for Commodities (CFC) (2014) ‘Autonomous, sustainable cocoa and coffee production by indigenous Asháninka communities’, Common Fund for Commodities Newsletter 4, October 2014, Amsterdam: CFC.

Dear, A., Helbitz, A., Khare, R., Lotan, R., Newman, J., Crosby Sims, G. and Zaroulis, A. (2016) Social Impact Bonds: The Early Years, London: Social Finance UK.

Drew, R. and Clist, P. (2015) Evaluating Development Impact Bonds: A Study for DFID, London: UKaid/DFID.

Flynn, J. and Young, J. (2016) Annotated Bibliography: Evaluating Impact Investing. Evidence Report No 164, Policy Anticipation, Response and Evaluation, Brighton, UK: Institute of Development Studies.

Gustafsson-Wright, E. and Gardiner, S. (2015) Policy Recommendations for the Applications of Impact Bonds: A Summary of Lessons Learned from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

Gustafsson-Wright, E., Gardiner, S. and Putcha, V. (2015) The Potential and Limitations of Impact Bonds: Lessons from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

KIT (2015) Autonomous and Sustainable Cocoa and Coffee Production by Indigenous Asháninka People of Peru: Field mission for the verification of impact indicators of the Development Impact Bond agreement [pdf], Amsterdam: Royal Tropical Institute <http://common-fund.org/fileadmin/user_upload/Verification_Report.pdf> [accessed 18 March 2017].

Rudd, T., Nicoletti, E., Misner, K. and Bonsu, J. (2013) Financing Promising Evidence-Based Programs: Early Lessons from the New York City Social Impact Bond [pdf], New York: MDRC <www.mdrc.org/sites/default/files/Financing_Promising_evidence-Based_Programs_FR.pdf> [accessed 18 March 2017].

Warner, M.E. (2013) ‘Private finance for public goods: social impact bonds’, Journal of Economic Policy Reform 16: 303–19 <http://dx.doi.org/10.1080/17487870.2013.835727>.

ABN-AMRO (2015) Opportunities and Challenges in the Netherlands: Social Impact Bonds – October 2015 [pdf], The Netherlands: ABN-AMRO <https://www.abnamro.com/en/images/Documents/040_Sustainable_banking/ABN_AMRO_Rapport_Social_Impact_Bonds.pdf> [accessed 18 March 2017].

Center for Global Development and Social Finance (2013) Investing in Social Outcomes: Development Impact Bonds: The Report of the Development Impact Bond Working Group, Washington, DC: CGD; London: Social Finance.

Common Fund for Commodities (CFC) (2014) ‘Autonomous, sustainable cocoa and coffee production by indigenous Asháninka communities’, Common Fund for Commodities Newsletter 4, October 2014, Amsterdam: CFC.

Dear, A., Helbitz, A., Khare, R., Lotan, R., Newman, J., Crosby Sims, G. and Zaroulis, A. (2016) Social Impact Bonds: The Early Years, London: Social Finance UK.

Drew, R. and Clist, P. (2015) Evaluating Development Impact Bonds: A Study for DFID, London: UKaid/DFID.

Flynn, J. and Young, J. (2016) Annotated Bibliography: Evaluating Impact Investing. Evidence Report No 164, Policy Anticipation, Response and Evaluation, Brighton, UK: Institute of Development Studies.

Gustafsson-Wright, E. and Gardiner, S. (2015) Policy Recommendations for the Applications of Impact Bonds: A Summary of Lessons Learned from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

Gustafsson-Wright, E., Gardiner, S. and Putcha, V. (2015) The Potential and Limitations of Impact Bonds: Lessons from the First Five Years of Experience Worldwide, Washington, DC: Brookings Institution.

KIT (2015) Autonomous and Sustainable Cocoa and Coffee Production by Indigenous Asháninka People of Peru: Field mission for the verification of impact indicators of the Development Impact Bond agreement [pdf], Amsterdam: Royal Tropical Institute <http://common-fund.org/fileadmin/user_upload/Verification_Report.pdf> [accessed 18 March 2017].

Rudd, T., Nicoletti, E., Misner, K. and Bonsu, J. (2013) Financing Promising Evidence-Based Programs: Early Lessons from the New York City Social Impact Bond [pdf], New York: MDRC <www.mdrc.org/sites/default/files/Financing_Promising_evidence-Based_Programs_FR.pdf> [accessed 18 March 2017].

Warner, M.E. (2013) ‘Private finance for public goods: social impact bonds’, Journal of Economic Policy Reform 16: 303–19 <http://dx.doi.org/10.1080/17487870.2013.835727>.

Policy experimentation with impact financing: a systematic review of research on social impact bonds

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