MICROCAPITAL BRIEF: MIF, Swiss Government Partner to Launch Social Impact Bond Fund to Improve Urban Employment in Colombia, Repayment to Be Contingent on Successful Client Outcomes

The Multilateral Investment Fund (MIF), a member of the US-based Inter-American Development Bank (IDB) Group, is partnering with the Swiss State Secretariat of Economic Affairs (SECO) and the Colombian government’s Department for Social Prosperity (DPS) to launch a social impact bond fund aimed at increasing urban employment in Colombia. Through this “pay-for-success model,” investors will provide capital for organizations, yet to be selected, that provide services to “vulnerable” populations with repayment dependent upon project outcomes, as measured by third-party impact evaluators. According to MIF, “If outcomes fail to improve, investors do not recover their full investment, thereby transferring the performance risk of the program away from governments and taxpayers.” MIF first began developing its social impact bond program for Latin America and the Caribbean in 2014.

Fundación Bolívar Davivienda, the philanthropic arm of Colombian business group Grupo Bolívar, and Fundación Mario Santo Domingo, a nonprofit that provides services to low-income Colombians, will help raise capital for the bonds. Fundación Corona, a nonprofit focused on increasing social mobility for Colombians, will provide capacity-building assistance services to organizations benefitting from the fund. Instiglio, a nonprofit specializing in development program impact evaluation, will provide advisory support to MIF and DPS, and Fundación Pro Bono will provide legal advisory services.

As of December 2015, MIF had a portfolio of approximately USD 612 million financing 435 projects. As of 2015, IDB Group reported total assets of USD 111 billion. It disbursed loans and guarantees worth USD 10 billion in 2015.

By Michelle Dold, Research Associate

About the Multilateral Investment Fund (MIF)

Founded in 1993, the Multilateral Investment Fund (MIF) is a member of the US-based Inter-American Development Bank (IDB) Group that was created to provide funding to micro- and small enterprises (MSEs) in Latin America and the Caribbean. Its donors comprise 39 member countries, which are located in the Americas, Asia and Europe, and its donors committee must approve all projects, with voting share based on monetary contribution. As of December 2015, MIF had a portfolio of approximately USD 612 million financing 435 projects.

About the Inter-American Development Bank Group (IDB)

The Inter-American Development Bank (IDB) Group is composed of three entities: the IDB, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF). IDB, a multilateral development bank, finances economic and social development projects in Latin America and the Caribbean. With 48 member countries, IDB has offices in Washington, DC; Japan; France; and all 26 member countries in Latin America and the Caribbean. IIC funds private-sector and state-owned enterprises in the region through loans, equity investments and guarantees. MIF tests models for private-sector involvement in solving development issues. As of 2015, IDB Group reported total assets of USD 111 billion. It disbursed loans and guarantees worth USD 10 billion in 2015.

About the Swiss State Secretariat of Economic Affairs (SECO)

The State Secretariat for Economic Affairs (SECO) is an agency of the government of Switzerland responsible for the planning and implementation of economic and trade policy measures. SECO focuses on domestic and international issues such as the competitiveness of Swiss exports, trade diversification, infrastructure financing and foreign investment. SECO’s Economic Cooperation and Development Division aims to help integrate developing countries into the global economy while promoting their economic growth. As of 2016, SECO’s Economic Cooperation and Development Division reports an annual budget of CHF 440 million (USD 444 million).

About the Colombian Department for Social Prosperity

Created in 2010, the Department for Social Prosperity is a unit of the government of Colombia that is responsible for overseeing all government policies relating to “compensat[ing] victims of conflict, reduc[ing] poverty and consolidat[ing] peace.” The department consists of the Agency to Overcome Poverty and the Agency for National Consolidation.

Sources and Additional Information:

[1] IDB Press Release: “MIF and Swiss Government partner to launch the first Social Impact Bond fund in Colombia

[2] MicroCapital Brief: “Multilateral Investment Fund (MIF) Allocates $5.3m to Test, Develop Social Impact Bond Market in Latin America, Caribbean

[3] MicroCapital Universe Profile: Multilateral Investment Fund (MIF)

[4] MicroCapital Universe Profile: Inter-American Development Bank Group (IDB)

[5] MicroCapital Universe Profile: Swiss State Secretariat of Economic Affairs (SECO)

[6] MicroCapital Universe Profile: Colombian Department for Social Prosperity (DPS)

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