A Development Impact Bond (DIB) is a financial instrument used to finance development programs in low-resource countries by attracting private investors. It is a sub-type of Social Impact Bonds (SIBs) and was introduced in 2012. Unlike traditional bonds, DIBs do not offer a fixed return. Instead, repayment depends on the success of the funded project.
A DIB typically involves three main stakeholders: RWA investors, who provide upfront capital; ZipOps, the service provider implementing the development project; and NGOs or institutions like UNDP Ukraine or USAID, who act as the outcome founders, repaying investors if the project succeeds.
Unlike traditional bonds, DIBs carry high risk for RWA investors, as repayment is conditional on project success. The key factors determining investor returns include project success (evaluated using predefined metrics), outcome founder commitment, and ZipOps' ability to execute the project effectively.
The process of a DIB follows these steps: NGOs or institutions identify a social challenge and set measurable success criteria. They seek RWA investors who provide funding in exchange for a potential return. ZipOps, as the service provider, receives the capital to execute the project. After a fixed period, an independent evaluator assesses whether the project met its targets. If successful, the outcome founder repays the investors with an agreed return.
Clear, quantifiable metrics are central to the DIB model. These metrics ensure transparency and accountability, guiding the project's implementation and measuring its success. An independent evaluator assesses the project’s success based on these predefined metrics, determining whether the outcome founder will repay investors.
For the PowerToUkraine (P2U) initiative, DIBs enable sustainable funding for community-led energy solutions. Investors provide capital, ZipOps oversees implementation, and organizations like USAID evaluate and reward success. By linking financial returns to measurable development outcomes, DIBs drive efficiency and accountability in funding impactful projects.