InnovatIve FInancIng For Development:

INNOVATIVE FINANCING

FOR DEVELOPMENT:

Scalable Business Models that

Produce Economic, Social, and

Environmental Outcomes

September 2014

Innovative Financing Initiative

An initiative of the Global

Development Incubator

www.globaldevincubator.org

ACKNOWLEDGEMENTS

This study builds on the existing knowledge and research

of many ﬁnancing and development experts from the public

and private sectors. The ﬁndings and analysis in the pages

that follow would not have been possible without the indi-

viduals from more than 50 organizations who shared data,

insights, and perspectives.

The authors would like to acknowledge and thank the

sponsors of this work—the Citi Foundation and the Agence

Française de Développement (AFD)—for their support

and ﬁnancing.

The authors would also like to thank the members of the

project’s advisory committee. Speciﬁcally, we would like to

acknowledge Graham Macmillan and Hui Wen Chan from

Citi Foundation, Agnès Biscaglia from AFD, Andrew Stern

and Alice Gugelev from the Global Development Incubator,

and Henrik Skovby from Dalberg Group. Their generous

contribution of time, direction, and energy has been vital to

the success of this research.

This study was authored by Dr. Serena Guarnaschelli, Sam

Lampert, Ellie Marsh, and Lucy Johnson of Dalberg Global

Development Advisors, in collaboration with Sara Wallace,

who provided editorial expertise.

This is an independently drafted report and so all views ex-

pressed are those of Dalberg Global Development Advisors

and do not necessarily represent the views of the report’s

sponsors. Although the authors have made every effort to

ensure that the information in this report was correct at

time of print, Dalberg Global Development Advisors does

not assume and hereby disclaims any liability for the accu-

racy of the data, or any consequence of its use.

TABLE OF CONTENTS

Executive Summary ............................................................................................................................................................. iii

Introduction: The Unrealized Potential Of Innovative Financing ....................................................................................... v

Chapter 1: What Is Innovative Financing? ........................................................................................................................... 1

Deﬁnition .............................................................................................................................................................................. 1

Market Overview ................................................................................................................................................................. 3

Trends And Evolutions Of Innovative Financing Mechanisms ............................................................................................. 7

Chapter 2: How Does Innovative Financing Create Value? ...............................................................................................10

Outcomes For Consumers And Private Companies ............................................................................................................10

Outcomes For National Governments ............................................................................................................................... 12

Outcomes For International Donors ................................................................................................................................... 18

Chapter 3: What Are The Next Steps For Innovative Financing? ..................................................................................... 20

Opportunities ..................................................................................................................................................................... 20

Constraints ......................................................................................................................................................................... 21

Proposed Solutions And Roles For Different Actors ........................................................................................................... 23

Conclusion ......................................................................................................................................................................... 25

Annex 1: Methodology And Deﬁnitions ............................................................................................................................ 26

Annex 2: Selected References ........................................................................................................................................... 30

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomesii

Figure 1: A successful transition to sustainable development will require substantial resources ......................................... vi

Figure 2: Innovative ﬁnancing is a small component of public assistance............................................................................. vii

Figure 3: Innovative ﬁnancing instruments introduce new products, expand into new markets, and attract

new participants ........................................................................................................................................................ 2

Figure 4: Bonds and guarantees are the largest innovative ﬁnancing mechanisms ................................................................ 4

Figure 5: Innovative ﬁnancing mechanisms have focused on a range of development challenges ......................................... 5

Figure 6: Most innovative ﬁnancing mechanisms support transfers between the public and private sectors ........................ 6

Figure 7: The majority of instruments target risk-adjusted market returns .............................................................................. 6

Figure 8: Innovative ﬁnancing has grown through the introduction of new instruments ........................................................ 7

Figure 9: Innovative ﬁnancing increasingly targets market returns ......................................................................................... 8

Figure 10: Established instruments rely on standards and mobilize more resources .............................................................. 8

Figure 11: Innovative ﬁnancing instruments produce a range of outcomes ...........................................................................11

Figure 12: The market for green bonds is growing ................................................................................................................ 13

Figure 13: Impact investing focuses on social sectors .......................................................................................................... 15

Figure 14: MIGA exposure has shifted to Sub-Saharan Africa ............................................................................................... 16

Figure 15: Political risk is perceived as a barrier to investment and demand for investment insurance is growing ............... 17

Figure 16: Long-term political risk insurance is becoming more widely available .................................................................. 17

Figure 17: Illustrative cash ﬂows of a Development Impact Bond ......................................................................................... 19

Figure 18: The focus of innovative ﬁnancing is changing ....................................................................................................... 21

Figure 19: Innovative ﬁnancing mechanisms are projected to mobilize $24 billion per year by 2020 based

on historical performance ...................................................................................................................................... 22

LIST OF FIGURES

EXECUTIVE SUMMARY iii

Innovative ﬁnancing is the manifestation of two impor-

tant trends in international development: an increased

focus on programs that deliver results and a desire to

support collaboration between the public and private

sector. Innovative ﬁnancing instruments complement

traditional international resource ﬂows—such as aid, foreign

direct investment, and remittances—to mobilize additional

resources for development and address speciﬁc market

failures and institutional barriers. Innovative ﬁnancing is

an essential tool as the development community strives

to eliminate poverty, raise living standards, and protect

the environment.

This report aims to accelerate the growth of innovative

ﬁnance by creating a common language and vision for

leaders in both the public and private sector to use as

they explore innovative ﬁnancing opportunities. Thus

far, a lack of clarity about what innovative ﬁnancing is and

how standards can help compare the performance of dif-

ferent mechanisms has inhibited broader participation in

the sector and increased transaction costs associated with

the creation of new products. We believe that this report

can help by creating a common understanding of innova-

tive ﬁnancing, providing an overview of the market, and

identifying opportunities for public and private sector actors

to make innovative ﬁnancing commitments.

Innovative ﬁnance is not ﬁnancial innovation. It encom-

passes a broad range of ﬁnancial instruments and assets

including securities and derivatives, results-based ﬁnancing,

and voluntary or compulsory contributions—all of which

this report explores in more detail. Established ﬁnancial

instruments, such as guarantees and bonds, constitute

nearly 65% of the innovative ﬁnancing market; while new

products dominate many conversations about innovative

ﬁnancing, most resources mobilized through innovative

ﬁnancing use existing products in new markets, or involve

new investors. Our deﬁnition of the “innovation” aspect of

innovative ﬁnancing includes the introduction of new prod-

ucts, the extension of existing products to new markets,

and the presence of new types of investors.

Within this broad deﬁnition, innovative ﬁnancing

has mobilized nearly $100 billion and grown by ap-

proximately 11% per year between 2001 and 2013. This

growth reﬂects the emergence of results-based ﬁnancing

as an important tool for achieving development outcomes

and the capability of instruments such as bonds and invest-

ment funds to provide risk-adjusted returns for private

EXECUTIVE SUMMARY

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomesiv

investors. Innovative ﬁnancing instruments are emerging in

a variety of additional development areas—a few examples

include low-carbon infrastructure, mechanisms to improve

access to ﬁnance, and tools to reduce the cost of life-sav-

ing commodities.

Successful innovative ﬁnancing instruments address

a speciﬁc market failure, catalyze political momentum

to increase and coordinate the resources of multiple

governments, and offer contractual certainty to inves-

tors. Often, innovative ﬁnancing instruments reallocate

risks from investors to institutions better positioned to

bear the risk and, in the process, enable participation from

mainstream investors. Instruments that have mobilized

signiﬁcant resources beneﬁt from relatively simple ﬁnancial

structures and a proven track record that clearly describes

the ﬁnancial and social returns for investors.

The focus of innovative ﬁnancing is shifting from the

mobilization of resources through innovative fundrais-

ing approaches to the delivery of positive social and

environmental outcomes through market-based instru-

ments. We anticipate three primary drivers of growth in the

innovative ﬁnancing sector:

• Increased use of established ﬁnancial instruments.

Established instruments that investors can evaluate

through existing risk frameworks, such as green bonds,

will attract new participants including pension funds

and institutional investors. Channeling the proceeds of

these instruments to productive development goals will

require new standards that specify how funds can be

used most effectively.

• Expansion into new markets through growth of repli-

cable products. Over the past ten years, the interna-

tional development community has experimented with

new instruments such as performance-based contracts.

These instruments do not yet have the track record

to attract institutional investors, but offer promising

opportunities to improve development outcomes in

new sectors.

• Creation of new innovative ﬁnancing products. Finally,

we have seen the emergence of new products that are

theoretically promising, but have not yet demonstrated

results. While these products will remain a small portion

of the market in the short-term, we encourage donor

governments and other funders to continue experiment-

ing with these products so they can mature into the

next important asset class.

This report is the cornerstone of the Innovative Financing

Initiative, a coordinated effort led by public and private

institutions to facilitate more efﬁcient markets by providing

performance data on past investments, catalyzing invest-

ments through engagement with new actors, and develop-

ing and promoting new products through work with leading

international development organizations. Building on past

efforts to describe innovative ﬁnance schemes, we identify

common characteristics of different initiatives, assess the

market demand for new models, and propose mechanisms

that can unlock the sector’s potential. These proposed

mechanisms include an innovative ﬁnancing exchange to

provide performance data and technical assistance, a mar-

keting facility to expand the reach of established products,

and an incubator to reduce the costs associated with creat-

ing new instruments.

The future we want—a future that meets the needs of

people and the planet—will require an estimated trillions of

dollars in investment over the next ten years. We will need

to harness all possible sources of ﬁnancing to address

global economic, social, and environmental challenges.

We hope to explore existing questions and promote new

solutions with our partners, expert advisors, and other par-

ticipants. If you are interested in joining the conversation,

please contact us at innovativeﬁnance@dalberg.com. We

look forward to talking with you.

INTRODUCTION: The Unrealized Potential Of Innovative Financing v

INTRODUCTION:

The Unrealized Potential of Innovative Financing

The public sector will require trillions of dollars in capi-

tal and signiﬁcant expertise from the private sector to

meet development objectives. The initial investments and

ongoing costs needed to eradicate poverty, provide public

goods (such as health and education), and manage the

natural resource base for economic and social development

will cost an estimated one trillion dollars per year or more.

Mitigating the effects of climate change and adapting to

new climate realities will also require hundreds of billions

of dollars. Resources required to achieve milestones set

out by development agendas, including the Millennium

Development Goals (MDGs) and their post-2015 successor,

the Sustainable Development Goals (SDGs), will be lower

than costs associated with adapting to and mitigating the

effects of climate change, but will still likely exceed $100

billion per year. The public sector does not have the resourc-

es to support all of these needs alone.

Governments, international institutions, and private

actors recognize the magnitude of this challenge. They

have begun to understand the limitations of existing ap-

proaches to international assistance and have made efforts

1 These estimates are based on the literature review found in “Financing

for sustainable development: Review of global investment requirement

estimates”, UNTT Working Group on Sustainable Development

Financing, 2013.

to improve aid effectiveness and engage the private sector

through agreements such as the 2005 Paris Declaration

on Aid Effectiveness, the 2008 Accra Agenda for Action,

and the 2011 Busan Partnership for Effective Development

Cooperation. Likewise, many private sector actors have

made public commitments to promoting sustainability

in their activities. For example, the 1260 signatories of

the United Nations-supported Principles for Responsible

Investment Initiative—including asset owners, investment

managers, and service providers—have $45 trillion dollars

in assets under management.

This commitment and oth-

ers reﬂect a growing recognition by the private sector of

the rewards of promoting economic and social prosperity

and environmental sustainability through their operations.

Innovative ﬁnancing is critical to creating opportunities

for public-private sector collaboration that will help ad-

dress global challenges. Innovative ﬁnancing has several

beneﬁts compared to traditional ﬁnancial approaches. For

example, it:

• Deploys signiﬁcant, new private sector capital that

would otherwise not participate in social investments.

While not all of innovative ﬁnancing capital is additional

2 See http://www.unpri.org/about-pri/about-pri/ for more information

(accessed September 2014).

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomesvi

Figure 1: A successful transition to sustainable development will require substantial resources

10 100 1,000 10,000

MDGs/SDGs

Infrastructure (non energy)

Land and Agriculture

Energy Efficiency

Renewable Energy

Universal Access to Energy

Climate Change Adaptation

Climate Change Mitigation

Biodiversity

Forests

Oceans

Estimates of annual investment needs for selected sustainable development sectors

USD billions

Notes: The x-axis is in logarithmic scale. There is signiﬁcant overlap across sectors. MDGs/SDGs stand for the Millennium Development Goals and their post-2015

successors, the Sustainable Development Goals.

Source: UNTT Working Group on Sustainable Development Financing, “Financing for Sustainable Development: Review of global investment requirement esti-

mates”, 2013.

Box 1: Innovative Financing has evolved from mobilizing resources to private sector engagement

Policies and conferences

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Creation of the MDGs

Sri Lanka Development Bonds

EU ETS

Solidarity Levy on Airline Tickets

IFFIm

Product (RED)

Debt2Health

Green Bonds

AMC for Pneumococcal

Results-based financing

Financial Transaction Tax

Development Impact Bonds

Prominent Initiatives

Engaging

the

private

sector

(2006-

2015)

Aid-based

pilots

(2000-

2005)

International Conference on Financing for Development, Monterrey

Geneva & New York Declaration: Initiative to fight hunger and poverty; First global

intergovernmental dialogue on innovative means for financing development

Millennium Summit; Declaration on Innovative Sources of Financing for Development

Paris Conference on Innovative Development Financing Mechanisms:

Leading Group on Innovative Finance for Development created

International Conference for Financing for Development, Doha:

Doha Declaration on Innovative Financing for Development

I-8 Group created

General Assembly resolution devoted to innovative sources of financing for development

Busan Declaration to further develop innovative finance mechanisms to mobilize private

finance for share development goals; Rio Declaration to scale up innovative financing

UN General Assembly to develop post-2015 goals

Source: World Economic Social Survey 2012 “In Search of New Development Finance”, Department of Economic and Social Affairs UN; “Delivering the Post-2015

Development Agenda: Options for a New Global Partnership”, Center on International Cooperation 2013; Dalberg analysis.

INTRODUCTION: The Unrealized Potential Of Innovative Financing vii

to either government ofﬁcial direct assistance (ODA) or

private philanthropic contributions, successful mecha-

nisms often channel resources to projects that would

not otherwise receive them. For example, guarantees

that enable investments in public goods (such as infra-

structure) and impact investing funds support small and

medium enterprises that might otherwise struggle to

access capital.

• Transforms ﬁnancial assets through ﬁnancial structuring

and intermediation to meet the needs of development

programs by distributing risk, enhancing liquidity, reduc-

ing volatility, and avoiding timing mismatches. Innovative

ﬁnancing mechanisms channel funds from people and

institutions that want to make investments, to projects

that require more resources than traditional donors and

philanthropies can provide. For example, green bonds

and other thematic bonds provide capital to support

investments in low-carbon infrastructure such as wind

farms, sustainable forestry management, and urban

infrastructure. In addition, innovative ﬁnancing mecha-

nisms such as the Pledge Guarantee for Health provide

bridge ﬁnancing for projects and institutions during the

gap period between when resources are committed and

resources are disbursed.

• Supports a cooperative public-private sector approach

to scale socially beneﬁcial operations that require

signiﬁcant capital outlays and traditionally sit squarely in

the realm of the public sector. In many sectors—such as

health, ﬁnancial services, and agriculture—private com-

panies with the expertise to design, produce, market,

and distribute new products are crucial to creating social

change. Innovative ﬁnancing mechanisms can adjust

incentives to encourage private companies to make

the investments necessary to create new products

and enter new markets. For example, the pneumococ-

cal advance market commitment sponsored by GAVI

reallocated demand risk for pneumococcal vaccines

in developing countries, which allowed pharmaceuti-

cal companies to produce more vaccines at scale and

dramatically lower the vaccines’ cost per dose.

Private sector actors have also beneﬁted from innova-

tive ﬁnancing mechanisms. In addition to creating chan-

nels for private actors to deploy capital to support develop-

ment, innovative ﬁnancing mechanisms also offer private

sector actors risk-adjusted ﬁnancial returns and access to

new markets. Bonds guaranteed by AAA rated international

organizations and issued in currencies with low volatility

offer a low-risk opportunity for both institutional and retail

investors to buy low-risk assets while channelling resources

to sectors that support positive development outcomes.

Most microﬁnance investment funds and impact invest-

ing funds also aim to offer risk-adjusted market returns.

Figure 2: Innovative ﬁnancing is a small component of public assistance

Evolution of funding for public goods in developing countries, 2001-2012

$ billions

1,000

150

300

250

200

100

4,000

4,500

6,000

3,000

3,500

2,000

2,500

1,500

500

5,000

5,500

200

110

137

200

2010

143

132

2011

148

200

Official aid flows and innovative financing resources mobilized

152

114

2012

Net Total Developing Country Government Expenditure

107

200

147

131

140

123

200

135

100

200

Innovative financing resources mobilized (left axis)

Official aid flows (left axis)

Net government expenditure (right axis)

Notes: Net Government expenditure does not include general budget support and loan disbursement to public sector; Ofﬁcial aid ﬂows include Ofﬁcial

Development Assistance and Others Ofﬁcial Flows; Innovative ﬁnance data is based on 278 innovative ﬁnance initiatives where volume data broken down by year

was available. It assumes that innovative ﬁnancing is additional to ofﬁcial aid.

Source: Development initiatives, “Investments to End Poverty,” 2013; OECD DAC Table 1; Innovative Financing Initiative Database; Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomesviii

Guarantees can facilitate investments in new markets,

while results-based ﬁnancing and performance-based con-

tracts create opportunities for private companies to proﬁt-

ably provide goods and services in markets they otherwise

would not touch.

Despite its beneﬁts, innovative ﬁnancing remains a

small component of public sector development as-

sistance. While the public sector has expressed renewed

interest in engaging the private sector, few successful

partnerships have been formed. Innovative ﬁnancing is a

small component of ODA, and an even smaller percentage

of government expenditures in developing countries and

foreign direct investment.

Innovative ﬁnancing is hampered by an inefﬁcient mar-

ket that constrains supply and diminishes demand. The

cost of developing and deploying new mechanisms, the

limited participation of investors beyond the traditional aid

community, and the lack of effective feedback loops have

thus far prevented innovative ﬁnancing from reaching its

potential. If the sector can recognize and surmount these

barriers, it will be able to grow and create opportunities for

bankable investments to drive new solutions to develop-

ment challenges.

Within the development community, there is a clear

need—and a professed desire—to collaborate on in-

novative ﬁnancing. This report asks: how can private

and public sector funders collaborate to channel more

resources to achieve development outcomes? Beyond

focusing on innovative ﬁnancing as a source of capital that

complements traditional assistance, the report focuses on

how speciﬁc innovative ﬁnancing mechanisms can support

development goals. The report is the cornerstone of a larger

initiative that mobilizes investors, companies, and policy-

makers to use innovative ﬁnancing approaches to achieve

development goals.

A common language that appeals to actors in both

the private and public sector will facilitate the growth

of innovative ﬁnancing. Through over 100 discussions

with representatives of government agencies, banks,

foundations, non-proﬁts, and private companies, we have

heard concerns that innovative ﬁnancing advocates fail to

understand the business models of private investors, fears

that private companies will earn extraordinary proﬁts at the

expense of the world’s poor, and disappointment at the

lack of transparency and performance history within the

market. This report, which was co-sponsored by a corporate

foundation and a donor government, aims to address these

issues directly by highlighting how novel instruments and

initiatives can produce positive outcomes for both public

and private actors.

This report intends to demonstrate how innovative

ﬁnancing can align with the strategic objectives of mul-

tinational corporations, ﬁnancial institutions, interna-

tional development agencies, and private foundations—

and enable collaboration among these groups.

It is our hope that after reading this report:

• Multinational corporations and ﬁnancial institutions

will understand opportunities for investment and col-

laboration that support their business models and align

with shareholder expectations.

• International development agencies will recognize the

potential for innovative ﬁnancing mechanisms to sup-

port engagement with the private sector and address

speciﬁc global challenges.

• Private foundations will identify ways to engage with

public and private institutions to mobilize resources,

share information, and make strategic investments in

novel ideas.

CHAPTER 1: What is Innovative Financing? 1

Deﬁnition

Innovative ﬁnancing means different things to different

people. In our interviews, we heard two distinct dimen-

sions of innovative ﬁnancing. The ﬁrst focuses on innovative

ﬁnancing as a source of capital that complements existing

ﬂows, particularly those from governments and philan-

thropies. Within this vision, innovative ﬁnancing provides

resources that are stable, predictable, and supplemental to

ofﬁcial development assistance (ODA) from donor coun-

tries. The second dimension focuses on innovative ﬁnancing

as a deployment (or use) of capital. This dimension focuses

on ways that innovative ﬁnancing mechanisms can make

development initiatives more effective and efﬁcient by

redistributing risk, increasing liquidity, and matching the

duration of investments with project needs. Our deﬁnition

of innovative ﬁnancing mechanisms for development (“in-

novative ﬁnancing”) encompasses both visions: approaches

to mobilize resources and to increase the effectiveness and

efﬁciency of ﬁnancial ﬂows that address global social and

environmental challenges.

The innovative ﬁnancing landscape is showing a shift

from basic resource mobilization tools to a diverse

range of solutions-driven ﬁnancing instruments. In

2001, bonds and guarantees focused primarily on resource

mobilization by leveraging the balance sheets of internation-

al ﬁnance institutions. Instead of providing funding at the

present time, public institutions either promised to repay

loans in the future or accepted the risk that projects may

not succeed, in order to encourage commercial investment.

In recent years, however, instruments through which the

private sector shares the risks and rewards from develop-

ment have gained more traction. This balance can occur

through an equity stake—which we often see in microﬁ-

nance and investment funds—or through results-based

ﬁnancing mechanisms such as performance based con-

tracts or awards and prizes. Within international develop-

ment, which relies extensively on grant ﬁnancing, this is an

important paradigm shift.

Our description of the market considers three dimen-

sions of existing innovative ﬁnancing instruments:

type of instrument, characteristics of the innovation,

and ﬁnancial function. We identiﬁed 14 different types

of instruments that are frequently classiﬁed as innovative

ﬁnancing. For each type instrument, we found examples of

instruments that successfully mobilized resources for a de-

veloping country, demonstrated innovation, and used ﬁnan-

cial solutions to support positive development outcomes.

Figure 3 provides an overview of what these instruments

CHAPTER 1:

What is Innovative Financing?

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes2

are, why we consider them innovative, and how they sup-

port international development.

Innovation is in the eye of the beholder. Innovative

ﬁnancing is innovative when it deploys proven approaches

to new markets (including both new customers and new

segments), introduces novel approaches to established

problems (including new asset types), or attracts new

participants to the market (such as commercially-oriented

investors). For example, microﬁnance pioneers extended an

established service to a new market and, eventually, new

participants. Advance market commitments developed a

new approach to create incentives for commercial suppli-

ers to bring their products to market. Green bonds use an

established product—bonds issued by companies and in-

stitutions—to channel capital from institutional investors to

address a global challenge. Collectively, these mechanisms

represent innovative ways of achieving development goals.

Innovative ﬁnancing creates value by producing posi-

tive development outcomes. In our survey of innovative

ﬁnancing mechanisms, we identiﬁed three distinct chan-

nels by which innovative ﬁnancing creates value: resource

mobilization, ﬁnancial intermediation, and resource delivery.

While many schemes achieve two or three of these goals

simultaneously—and almost all mobilize resources—

this framework provides a high-level overview of the

main channels:

• Resource mobilization. Innovative ﬁnancing brings ad-

ditional resources to bear for development challenges.

The mobilization of resources includes mandatory

mechanisms that capture the effects of negative exter-

nalities (e.g., Pigouvian taxes), voluntary mechanisms

(e.g., lotteries), and mechanisms that combine commer-

cial and philanthropic objectives (e.g., Product(Red)).

• Financial intermediation. Innovative ﬁnancing creates

efﬁciencies by distributing risks across many parties, en-

hancing liquidity, and pooling resources. The intermedia-

tion function includes the development of institutional

capacity to reduce transaction costs (e.g., by pooling

small investment opportunities) and to reduce or share

ﬁnancial and delivery risks (e.g., by promoting invest-

ment insurance).

• Resource delivery. Delivery refers to the allocation and

expenditure of resources either as part of an invest-

ment or as direct funding for development programs. It

includes initiatives that support a more effective deploy-

ment of resources by increasing the level of transpar-

ency (e.g., through commonly accepted metrics),

creating and aligning incentives (e.g., through pay-for-

performance contracts), and coordinating the activities

of different actors.

Figure 3: Innovative ﬁnancing instruments introduce new products, expand into new markets, and attract new

participants

What is innovative? How does it support development?

New

Product

New Market New

Participants

Mobilize

Resources

Financial

Intermediations

Deliver

Resources

Securities and Derivatives

Bonds and Notes

X X X

Guarantees

X X X

Loans

X X

Microﬁnance Investment Funds

X X X

Other Investment Funds

X X X

Other Derivative Products

X X X X

Results-based Financing

Advanced market commitments

X X X

Awards and Prizes

X X

Development Impact Bonds

X X

Performance-based contracts

X X

Debt-swaps and buy-downs

X X

Voluntary contributions

Carbon Auctions (voluntary)

X X X X

Consumer Donations

X X

Compulsory charges

Taxes

X X

CHAPTER 1: What is Innovative Financing? 3

Market Overview

Using our broad deﬁnition, innovative ﬁnancing

mechanisms have mobilized $94 billion since 2000. To

gain a better understanding of this market, we conducted

a survey of nearly 350 ﬁnancing mechanisms that have

been recognized as innovative ﬁnancing. In this survey, we

identiﬁed four distinct clusters that encompass 14 different

categories of instruments. Figure 4 provides an overview of

the categories that constitute innovative ﬁnancing. In this

report, we use the term “amount mobilized” to compare

different mechanisms. “Amount mobilized”—which ac-

counts for the amount disbursed directly (for example, by

an investment fund) or indirectly (for example, by a com-

pany as a result of a guarantee)—differs from “total amount

committed,” which represents the amount originally

promised by investors, or the total amount invested. For

example, in the case of guarantees, “amount mobilized”

represents the total contingent liability of the mechanisms,

and in the case of investment funds, it represents the

total assets under management. More information about

our methodology, including a deﬁnition of each instrument

category, is in Annex 1.

3 While our deﬁnition of innovative ﬁnancing is broad, we decided to

exclude some asset classes from our survey. We did not include bonds

to fund infrastructure or public private partnerships (PPPs) that focus on

infrastructure investment. In addition, we only considered mechanisms

where resources were deployed in developing countries. For example,

the Social Impact Bonds in the UK were intentionally excluded from our

study because they mobilized resources from within the UK that were

used within the UK.

Innovative ﬁnancing is not ﬁnancial innovation. The two

asset classes that mobilize the most resources, bonds and

guarantees, have existed for centuries. Bonds were ﬁrst

issued by city-states in renaissance Italy in the 14th century

and insurance was ﬁrst provided in 2500 BC to support the

transport of goods in Babylonia.

Even within the context of

international development, bonds and guarantees are not

new tools. The Multilateral Investment Guarantee Agency

(MIGA) was established in 1988, for example, and the Asian

Development Bank introduced partial risk guarantees in

1995. While the use of thematic bonds is relatively recent,

the World Bank has been issuing general purpose bonds

since 1947. Other instruments, such as microﬁnance funds

and impact investing funds, represent new and innovative

models for providing access to ﬁnance, but their underly-

ing business models are also well established within the

ﬁnancial services industry.

Securities and derivatives constitute more than 80%

of the amount mobilized between 2000 and 2013. The

largest category within securities and derivatives is guar-

antees ($36 billion, or 39% of the total), which reﬂects the

public sector’s ability to leverage capital by providing credit

enhancements. It also reﬂects the importance of MIGA,

which is the largest single mechanism in the database and

mobilized $24 billion between 2000 and 2013 (26% of the

total). Even when removing this large mechanism from the

database, securities and derivatives mobilized $53 billion

4 World Economic Forum, Rethinking Financial Innovation - Reducing

Negative Outcomes While Retaining The Beneﬁts, 2012

Box 2: Deﬁnitions of innovative ﬁnancing from leading institutions

World Bank

“Innovative ﬁnancing involves non-traditional applications of

solidarity, public private partnerships, and catalytic mechanisms

that (i) support fundraising by tapping new sources and engaging

investors beyond the ﬁnancial dimension of transactions, as

partners and stakeholders in development; or (ii) deliver ﬁnancial

solutions to development problems on the ground.”

—World Bank (2009), Innovating Development Finance:

From Financing Sources to Financial Solutions.

Organisation for Economic Co-operation and Development

(OECD)

“Innovative ﬁnancing comprises mechanisms of raising funds or

stimulating actions in support of international development that

go beyond traditional spending approaches by either the ofﬁcial

or private sectors, such as: 1) new approaches for pooling private

and public revenue streams to scale up or develop activities for

the beneﬁt of partner countries; 2) new revenue streams (e.g.,

a new tax, charge, fee, bond raising, sale proceed or voluntary

contribution scheme) earmarked to developmental activities on

a multi-year basis; and 3) new incentives (ﬁnancial guarantees,

corporate social responsibility or other rewards or recognition)

to address market failures or scale up ongoing developmental

activities.”

—OECD (2009), Innovative Financing to Fund Development: Progress

and Prospects.

Leading Group on Innovative Financing for Development

“An innovative development ﬁnancing mechanism is a mecha-

nism for raising funds for development. The mechanisms are

complementary to Ofﬁcial Development Assistance. They are

also predictable and stable. They are closely linked to the idea of

global public goods and aimed at correcting the negative effects

of globalization.”

—Leading Group on Innovative Financing

for Development (2012), FAQs: Innovative Financing

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes4

from 2000 to 2013 (56% of the total). After guarantees,

thematic bonds—which dedicate resources to speciﬁc

development goals such as low-carbon infrastructure—have

mobilized the most resources ($23 billion or 25% of the to-

tal). Combined, these two asset classes make up over half

of the total amount mobilized through innovative ﬁnancing.

Results-based ﬁnancing is the second largest category

of mechanisms. Results-based ﬁnancing refers to mecha-

nisms which use incentive-based payments to increase the

performance of investments and to transfer risk from the

investor that funds the delivery of goods and services to

the company or NGO that provides the goods and services.

The mechanism is an explicit contract between the out-

come funder and the delegated implementer who receives

a payment. Most results-based ﬁnancing mechanisms,

such as performance based contracts ($5 billion mobilized

or 5% of the total) and advance market commitments ($1

billion mobilized or 1% of the total) are direct contracts be-

tween the public sector and a private sector implementer.

While small, results-based ﬁnancing has grown rapidly from

$4 million in 2003 to $1.3 billion in 2012 (80% per year on

average). In addition, development impact bonds (DIBs) pro-

vide a new way to pool performance-based contracts and

facilitate private investment. While DIBs did not mobilize

resources between 2000 and 2013, new opportunities are

coming to market.

Voluntary and compulsory contributions contribute

only 10% of the total innovative ﬁnancing mechanisms.

The largest mechanism within this category is the voluntary

carbon market in which companies purchase carbon credits

to offset emissions. Other voluntary mechanisms, such as

efforts to tie a percentage of companies’ proﬁts to global

challenges, have limited scale and are difﬁcult to replicate.

For example, since 2001, Product(Red) has contributed

$215 million to the Global Fund—this amount represents

less than 1% of total contributions to the fund.

Within the

category of compulsory contributions, the largest single

example is the “solidarity levy on airline tickets,” a small tax

5 For example, D. Capital launched a DIB to support malaria prevention

and control in Mozambique in 2013. In 2014, UBS Optimus Foundation

and the Children’s Investment Fund Foundation recently approved

funding for the ﬁrst DIB in education, supporting the work of Educate

Girls, an NGO operating in government-run schools in Rajasthan, to

enroll and retain girls as well as improve learning outcomes for all

children.

6 Global Fund Pledges and Contributions to Date, http://

www.theglobalfund.org/documents/core/ﬁnancial/

Core_PledgesContributions_List_en

Figure 4: Bonds and guarantees are the largest innovative ﬁnancing mechanisms

Amount mobilized by innovative financing mechanisms, 2000-2013

Percent of total mobilized (n=278)

Bonds ; 24.8%

Guarantees

;

38.6%

Development Impact Bonds; 0.0%

Investment funds

; 8.1%

Microfinance

; 9.8%

Other derivative products

; 0.6%

Awards and Prizes

; 0.3%

Advanced Market Commitments

; 1.2%

Debt-swaps and buydowns

- - ; 1.5%

Performance-based contracts

; 5.3%

Consumer purchases

; 0.2%

Auctions

; 6.9%

Taxes and

Levies

; 2.6%

Source: Innovative Financing Initiative Database; Dalberg analysis

Securities and Derivatives

Results-based mechanisms

Voluntary Contributions

Compulsory Charges

Source: Innovative Financing Initiative Database; Dalberg analysis.

CHAPTER 1: What is Innovative Financing? 5

Figure 5: Innovative ﬁnancing mechanisms have focused on a range of development challenges

Innovative financing mechanism by sector

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Average size of mechanism (USD billion)

Number of mechanism

Access to

Finance

155

160

140

120

100

Energy and

Environment

Agriculture Health Disaster

Response

Education Housing Technology Multiple

Number (left axis)

Average instrument size (right axis)

E.g. microfinance, SMEs,

investment funds

E.g. guarantee facilities,

funds, currency swaps with

multi-sector mandates

Note: Sector information was available for 348 mechanisms. Average initiative size was based on data for 278 mechanisms. Other smaller sectors not shown

include Technology, Housing and Urban Development, Water and Sanitation, ICT and Media.

Source: Innovative Financing Initiative Database; Dalberg analysis.

on airline tickets in certain countries that mobilizes private

sector funds to support UNITAID.

It has raised $1.9 billion,

or 65% of UNITAID’s funds, since its inception in 2006.

An independent evaluation found that the levy has had no

negative effects on airline revenue or proﬁtability, air trafﬁc,

travel industry jobs, or tourism. While taxes and levies are

established tools for transferring resources from the private

sector to public purposes, novel mechanisms such as the

solidarity levy have successfully given international develop-

ment actors an additional and predictable revenue source.

Many innovative ﬁnancing initiatives seek to effect

change in various sectors, which indicates a desire by

initiative sponsors to diversify exposure and highlights

the need for cross-cutting solutions to address ﬁnancial

challenges shared by many sectors. Since 2000, innova-

tive ﬁnancing mechanisms have mobilized over $30 billion

to support investments in energy and environment ($14

billion), access to ﬁnance ($9 billion), and global health ($7

billion), with an additional $43 billion across multiple sec-

tors. Innovative ﬁnancing has had limited interaction with

the agriculture, education, and water sectors.

7 Nine countries have implemented the air ticket levy: Cameroon, Chile,

Congo, France, Madagascar, Mali, Mauritius, Niger and the Republic of

Korea.

Nearly all innovative ﬁnancing mechanisms combine

public sector resources with private sector resources

and expertise. In terms of amount mobilized, both the pub-

lic and private sectors have been important sources of capi-

tal. The largest category of innovative ﬁnancing ($44 billion)

is public sector investments in the private sector through

mechanisms such as guarantees, which mobilize invest-

ment, and results-based ﬁnancing mechanisms, through

which the public sector hires private companies to provide

public goods. Public investments in the public sector ($4

billion) occur through mechanisms such as debt-swaps and

dedicated levies. The private sector provides capital ($30

billion) to the public sector through voluntary and compul-

sory contributions and investments, such as bonds. The last

category, private sector investments in the private sector

($15 billion), captures resources from microﬁnance funds

and impact investing funds.

Most securities aim to provide risk-adjusted market

returns.

While mechanisms that offer below-market

returns remain an important part of the innovative ﬁnancing

landscape, mechanisms that target risk-adjusted returns

are increasingly prominent. Bonds, which make up 30%

of the amount mobilized by innovative ﬁnancing securities,

8 It is too early to determine the actual ﬁnancial returns of many

innovative ﬁnancing mechanisms. For this survey, we used targeted

returns.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes6

Figure 6: Most innovative ﬁnancing mechanisms support transfers between the public and private sectors

Private sector participation in innovative financing mechanisms, 2000-2013

Number of mechanisms (x-axis) and amount mobilized, USD million (y-axis) (n=278)

Invests capital (source)

280 260 240 220 180 160 120 140 60 80 20 40 200 100 0

15,000

Private Sector

(n=222)

Public Sector

(n=56)

Public Sector

45,500

Private Sector

30,500

44,300

48,100

3,800

Receives capital (use)

Source: Innovative Financing Initiative Database; Dalberg analysis.

Figure 7: The majority of instruments target risk-adjusted market returns

Target Financial Performance for Securities, Funds and Derivatives, 2000-2013

$ million (n=225)

Other investment

funds

(n=82)

Loans

(n=4)

5,800

Other derivative

products

(n=8)

Guarantees

(n=17)

36,000 23,200

Microfinance

investment

funds (n=112)

Bonds

(n=14)

1,800 9,100 600

Securities and Funds

Derivatives

Below Market Returns

Risk-Adjusted Market Returns

Source: Innovative Financing Initiative Database; Dalberg analysis.

CHAPTER 1: What is Innovative Financing? 7

are typically guaranteed by AAA rated international orga-

nizations. Returns vary with the issuing currency, and the

majority of bonds are issued in currencies with low volatil-

ity. Derivative products, including guarantees, tend to offer

below-market returns, but this is difﬁcult to assess because

of the dominant role of the public sector.

Trends and Evolutions of Innovative

Financing Mechanisms

Since 2001, innovative ﬁnancing for development has

experienced 11% annual growth. Starting at approxi-

mately $2 billion in 2001, the market has grown to nearly

$9 billion in 2012.

As shown in Figure 8, this reﬂects the

emergence of new instruments within the universe of

innovative ﬁnancing, rather than the growth of existing

instruments. In particular, the emergence of microﬁnance

funds, thematic bonds, and auctions - such as the voluntary

carbon market - has driven most of the growth.

Market-based mechanisms that target risk-adjusted

returns have grown since 2001.

While mechanisms that

target below-market returns remain an important compo-

9 These calculations reﬂect a conservative estimate based on 137

mechanisms for which annual amounts were available.

10 Debt-swaps and buy-downs, donations as part of consumer purchases,

and taxes were excluded from this analysis.

nent of the landscape (53% of the total in 2012), there is an

increased focus on opportunities that target both social and

ﬁnancial returns. There are two aspects of this trend. The

ﬁrst aspect, from an investor perspective, is the emergence

of investments that offer risk-adjusted market returns. This

includes low-risk investments, such as green bonds that

are backed by development bank balance sheets, and more

risky propositions, such as microﬁnance funds and impact

investment funds. The second aspect, from an implementer

perspective, is the emergence of results-based ﬁnancing

opportunities in which private companies and NGOs com-

pete to provide social goods.

The innovative ﬁnancing market is still evolving—some

models have proven to be successful, some are ripe for

scaling, and others are still new ideas in the testing

stage. Proven models, such as guarantees and bonds, have

easily replicated and scaled structures, beneﬁting from

clear standards for assessing risk and determining payment

terms; many have established track records. Models that

are ripe for scaling, such as performance-based contracts,

are also easy to create, but do not have enough perfor-

mance data to establish a mature asset class. Newer ideas,

such as AMCs and DIBs, are still being developed and

will require substantial support from concessional donors

before they can attract private capital and scale beyond the

pilot stage.

Figure 8: Innovative ﬁnancing has grown through the introduction of new instruments

11,000

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

12,000

13,000

Annual amount mobilized, 2001–2012

$ millions (n=278)

2012

Auctions

Performance-

based contracts

Awards and prizes

2011 2010

AMC

2009

Bonds

Investment funds

2008

Microfinance Funds

Loans

Consumer Donations

2007

Other derivative products

Taxes

2006

Guarantees

Debt-swaps and

buy-downs

2005 2004 2003 2002 2001

Note: Annual mobilized data was not available for 141 instruments. For these instruments, we assumed that the entire amount mobilized was mobilized in the

launch year.

Source: Innovative Financing Initiative Database; Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes8

Figure 9: Innovative ﬁnancing increasingly targets market returns

Resources mobilized for outcome-based solutions, 2000-2012

$ million (n=137)

2010 2011 2007

2006

2005

2004

2003

2002

2001

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009

2008

Results based finance

Below Market Returns

Risk-Adjusted Market Returns

Note: Debt-swaps and buy-downs, Donations as part of consumer purchases, and Taxes were excluded from this analysis

Source: Innovative Financing Initiative Database; Dalberg analysis.

Figure 10: Established instruments rely on standards and mobilize more resources

Landscape of innovative financing mechanisms

Taxes

Carbon Auctions

Consumer Donations

Simpler structures

Longer track record

Bonds and Notes

AMCs

Performance-based Contracts

Microfinance Funds

Debt-swaps/buy-downs Awards and Prizes

Loans

Other Investment Funds

Other Derivative Products

---Development Impact Bonds

Guarantees

Newer Ideas

Scaling Opportunities

Proven models

Bubble size = Total

$B mobilized

Note: No known Development Impact Bonds have been successfully issued to date although many are under development.

Source: Innovative Financing Initiative Database; Dalberg analysis.

CHAPTER 1: What is Innovative Financing? 9

Box 3: Characteristics of dierent market segments

Newer Ideas Opportunities to Scale Proven Models

Funds mobilized

to date

Less than USD 100 million or

only one instrument

Between USD 100 million and

USD one billion from multiple

instruments

Greater than USD one billion

from multiple instruments

Track record Little or none One or more clear success

stories since 2006

In use before 2006

Complexity Technically difﬁcult to structure Structure may be complex, but

there are existing templates

Simpler structures or many pre-

existing templates

R&D cost High R&D cost and lengthy

development runway

Moderate R&D cost and

development runway

Relatively low R&D cost and

quick to launch

Stakeholder

coordination

Multiple stakeholders required

for success, across public/

private/civil sectors

Multiple stakeholders required

for success

Coordination needed for a few

stakeholders or stakeholders

within only one group

Applicability Potentially limited to only certain

applications

Many applications but still

limited number demonstrated

so far

Has been applied to many

sectors and asset classes

Examples • AMC (AMC for Pneumococcal)

• DIBs (Malaria in Mozambique

Performance Note)

• Impact Investing Funds (The

Global Health Investment

Fund)

• Performnce-Based Contracts

(Mexico PES)

• Microﬁnance

• Bond (WB Green Bond)

• Guarantees (DCA Guarantees)

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes10

CHAPTER 2:

How Does Innovative Financing Create Value?

Innovative ﬁnancing mechanisms are tools to ad-

dress speciﬁc market failures and institutional barriers

that hinder global development. Innovative ﬁnancing

mechanisms encompass a broad range of structures that

can allow investors, company managers, and government

ofﬁcials to develop new strategies to address develop-

ment challenges. However, not all innovative ﬁnancing

mechanisms are appropriate for every challenge. This

chapter highlights how different types of innovative ﬁnanc-

ing solutions can produce positive outcomes and address

speciﬁc barriers.

Innovative ﬁnancing instruments have been used to

produce a range of development outcomes. Innovative

ﬁnancing has provided people in developing countries

access to goods, services, and capital. Microﬁnance

alone, for example, has provided loans to nearly a billion

people in 2012.

For private companies, innovative ﬁnancing has been a

source of capital as well as a mechanism to create markets.

Guarantees enable investments, while performance-based

contracts create opportunities to deliver services. Financial

intermediaries have beneﬁted primarily through access to

markets. For example, the market for green bonds is on

11 Source: MixMarket.com (accessed May 2014).

track to grow to $40 billion in 2014 through bonds issued

both by governments and corporations.

National governments and international donors have ben-

eﬁted from innovative ﬁnancing that funds public goods,

such as low-carbon infrastructure. Finally, innovative ﬁnanc-

ing has also increased value for money within international

development, allowing donor agencies to achieve more

with the same—or fewer—resources. Figure 11 provides an

overview of how different innovative ﬁnancing mechanisms

produce different outcomes for different actors. Bonds,

for example, provide capital for international donors, new

markets for ﬁnancial intermediaries, and both capital and

public goods for national governments. The outcomes of

various innovative ﬁnancing mechanisms are described in

more detail below.

Outcomes for Consumers and Private

Companies

Innovative ﬁnancing has provided consumers with ac-

cess to essential goods and services and has provided

companies with access to markets. Successful innovative

ﬁnancing mechanisms remove barriers to entry and enable

commercial investments in new products and markets.

12 Green Bonds Market Outlook 2014, Bloomberg New Energy Finance,

http://about.bnef.com/white-papers/green-bonds-market-outlook-2014/

(accessed June 2014)

CHAPTER 2: How Does Innovative Financing Create Value? 11

Typical barriers include: business models that are below

scale to be sustainably viable, market failures (such as lack

of information) that prevent the cost-effective delivery of

services, lack of facilities to manage and reallocate risk,

and inefﬁcient markets that create high transaction costs.

Innovative ﬁnancing mechanisms address these prob-

lems through resource mobilization, (e.g., driving invest-

ments as the microﬁnance industry became commercially

sustainable), ﬁnancial intermediation, (e.g., reallocating

the business risk associated with producing health com-

modities), and improved resource delivery (e.g., sharing

information about new products such as product-linked

savings accounts.)

Case study 1: Access to essential health commodities

through Advance Market Commitments accelerates

the ﬂow of capital to public goods that are not

economically viable without public support.

How it works: In an advance market commitment (AMC),

a buyer—typically a government or international organiza-

tion—agrees to a predetermined purchase price for a good

or service with a provider—typically a private company.

Originally, AMCs were conceived as a means to encourage

companies to invest in research and development for new

products, but it has also been used to increase production

for an existing product. Under the Pneumococcal AMC, for

example, donors pledged $1.5 billion to fund the subsidized

purchase of 2 billion doses of pneumococcal conjugate

vaccine (PCV) beginning in 2009.

In exchange for this

subsidy, manufacturers agreed to sell PCVs to low-income

countries at a price no greater than $3.50 for the next ten

years. As a point of comparison, the Pneumococcal AMC’s

prices for PCV are over 90% lower than those in high-

income markets.

13 As of December 2013, $652 million had been disbursed, which is the

number used to calculate amount mobilized in the database.

Figure 11: Innovative ﬁnancing instruments produce a range of outcomes

Outcomes of selected innovative financing instruments for different stakeholders

Access to Markets Public Goods Access to Goods Access to Services Access to Capital Value for Money

Customers/

Beneficiaries

Performance-Based

Contracts

Bonds

Taxes and Levies

Guarantees

Microfinance

Advance Market

Commitments

Development

Impact Bonds

Impact Investing

Funds

Private

Companies

Financial

Intermediaries

National

Governments

International

Donors

Proven

Models

Opportunities

to Achieve

Scale

Experiments

and New

Ideas

Note: The outcomes for proven models have been demonstrated while outcomes for replication opportunities and new ideas are more theoretical.

Source: Dalberg analysis.

Pneumococcal AMC

Start Year:

2009

Amount

Mobilized:

$1.5 billion pledged

$652 billion disbursed to date

Investors:

y Italy ($635 million)

y UK ($485 million)

y Canada ( $200 million)

y The Russian Federation ($80 million)

y Norway ($50 million

y The Bill & Melinda Gates Foundation ($50

million).

Why is it

innovative:

The AMC created incentives for vaccine

research and production for developing

countries as donors commit funds to

guarantee the price of the vaccines once they

have been developed.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes12

How it achieves outcomes: An effectively designed AMC

creates value for consumers by making essential goods

available and by lowering prices, and creates value for pro-

ducers by creating a market for the good. Ideally, the prede-

termined price for the good or service would be calibrated

so that the provider has incentives to produce the good but

does not earn excessive proﬁts—but this calibration is dif-

ﬁcult to achieve in practice. For example, the designers of

the Pneumococcal AMC did not (and could not) know the

necessary capital expenditure and unit costs of scaling up

production of the vaccine when they set the upfront sub-

sidy and purchase price. As a result, they established prices

that they believed would attract suppliers to the market

while maximizing value for money.

The Pneumococcal AMC was the ﬁrst attempt to use

an AMC to accelerate the introduction of a vaccine in

developing countries. Since its launch, two suppliers -

GlaxoSmithKline (GSK) and Pﬁzer - have produced and

distributed 82 million doses of PCV to 24 low-income coun-

tries. While precise return data is not available, an indepen-

dent evaluation found that manufacturers likely earn returns

that are at or above 10-20% per year, which is consistent

with historic industry performance.

The AMC combined long-term commitments and tem-

porary subsidies to lower prices and create a market for

health commodities. Since its launch, participating suppliers

have expanded capacity and additional manufacturers have

expressed interest in joining the initiative. It is impossible to

know if the opportunity to provide the vaccine to millions of

people in new markets would have been enough to entice

low-cost manufacturers to participate without the advance

guarantee that vaccines would be purchased.

How it can be replicated: Beyond the pneumococcal

example, few AMCs have been considered as success-

ful in furthering development goals.

An AMC is a useful

innovative ﬁnancing tool when private suppliers of goods or

services are involved, when providing the good or service

requires a high ﬁxed-cost investment, and when demand

risk makes private companies reluctant to make the upfront

investment. However, when only these three criteria exist,

the AMC funder would typically ﬁnd it more efﬁcient to

14 See the pneumococcal AMC process and design evaluation (http://

www.gavialliance.org/results/evaluations/pneumococcal-amc-process-

design-evaluation/) for a more detailed discussion of the challenges of

designing the pneumococcal AMC.

15 (Chau, 2013)

16 In addition to the Pneumococcal AMC, there has been discussions of

using an AMC for rural energy in Rwanda and bioenergy in Sri Lanka.

offer a more traditional forward contract or a volume

guarantee with a single supplier. For example, power-

purchase agreements, in which a power purchaser (often

a state-owned utility) agrees to purchase energy from a

power utility for the next 10-20 years, are common tools

for ﬁnancing electricity generating investments, including

renewable energy. Unlike advance market commitments,

power-purchase agreements do not aim to create a market

with multiple participants.

The more complex advance market commitment structure

is useful when the funders want to create a market in addi-

tion to providing a good and service. Speciﬁcally, AMCs are

well-suited for challenges with the following characteristics:

ﬁrst, when private suppliers are not willing to be or cannot

be transparent about their costs. As a result, it is difﬁcult

to determine the fair price that will attract new suppliers to

the market. Second, when payers can calculate a ﬁnancial

beneﬁt that allows them to set a price based on beneﬁts

and not costs. This allows the donor that issues the AMC

to determine the ceiling of how much it is willing to pay to

induce market entry. Finally, AMCs are appropriate when

there is a beneﬁt in having multiple companies compete for

the market rather than a funder partnering with one or two

organizations upfront. For some development challenges,

such as providing health commodities, donors will want to

work with multiple suppliers to avoid being dependent on

a single supplier. In other circumstances, such as provid-

ing electricity, the nature of the product requires a limited

number of suppliers.

Outcomes for National Governments

Innovative ﬁnancing has attracted private resources

to fund development projects and public goods.

Successful innovative ﬁnancing mechanisms create incen-

tives for private companies to invest in projects that beneﬁt

people in developing countries, in particular people at the

base of the pyramid. These incentives include: enhancing

proﬁt margins by blending capital from socially motivated

investors with more proﬁt-oriented organizations, enhanc-

ing credit by shifting project risk to organizations with more

creditworthy balance sheets, and creating marketing op-

portunities by being associated with socially responsible in-

vestments. We provide examples of different mechanisms

that provide these incentives for private companies below.

Case study 2: Capital for investments in low-carbon

infrastructure through green bonds.

How it works: The World Bank ﬁrst issued green bonds in

2008 to ﬁnance investments in low-carbon infrastructure,

CHAPTER 2: How Does Innovative Financing Create Value? 13

such as renewable energy infrastructure and energy ef-

ﬁciency improvements. In the past ﬁve years, green bonds

have grown considerably. According to Standard & Poor,

government and corporations issued $10.4 billion in green

bonds in 2013. A recent report by Bloomberg New Energy

Finance points out that the market is growing fast; at its

current pace, total volume of green bonds will surpass $40

billion by the end of 2014.

Green bonds have grown quickly because they can be eval-

uated using standard risk models, provide a risk-adjusted

return that meets investor expectations, and offer investors

the opportunity to be associated with a positive environ-

mental outcome.

To date, institutions with excellent credit

ratings and strong balance sheets have issued green bonds.

Notably, the yield for green bonds is the same as traditional

bonds offered by the same institution that are not dedicated

to low-carbon infrastructure.

How it achieves outcomes: Green bonds have suc-

cessfully channeled capital to low-carbon infrastructure,

which supports climate change mitigation and adaptation.

Furthermore, the use of green bonds by multinational cor-

porations suggests that this mechanism will scale beyond

the public sector and become a mainstream investment

product.

While the mainstreaming of green bonds is an impres-

sive achievement, given the lack of standards about what

constitutes a green investment, it is unclear how multina-

tional corporations will use the proceeds of these bonds.

This uncertainty presents a signiﬁcant investment risk and,

if left unaddressed, might limit green bonds’ effective-

ness to raise funds that support development goals in the

future. Based on an independent review with the Center for

17 For example, a two-year green bond issued by the World Bank in August

2013 had an issue yield equivalent to a spread of +8.3 basis points over

a comparable U.S. Treasury.

World Bank

Green Bonds

Start Year:

2008

Amount

Mobilized:

$4.4 billion

Investors:

y Institutional investors (e.g., Blackrock, Calvert

Investments, Nikko Asset Management)

Pension Funds

y DFIs

y Government backed funds

Why is it

innovative:

Green bonds provide an instrument through

which investors who are concerned with

the effects of climate change can make a

difference by speciﬁcally supporting climate

change related projects.

Figure 12: The market for green bonds is growing

Growth in green bonds issued by select international finance institutions, 2008–2013

$ million

2010 2009

414

2008 2013 2011

2,735

889

726

267

595

2012

730

793

480

2,119

714

451

1,381

EBRD

World Bank

EIB

Source: Innovative Finance Initiative Database; Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes14

International Climate and Environmental Research at the

University of Oslo (CICERO), the World Bank identiﬁed cri-

teria for projects that can be ﬁnanced through green bonds

to mitigate the effects of climate change and help countries

adapt to the effects of climate change. In addition, 24 banks

have signed green bond principles that provide voluntary

guidelines on the use of proceeds, process for project

evaluation, management of proceeds, and reporting.

shown in Table 1, the criteria for green bonds is very broad.

In addition, while individual institutions monitor the use of

green bond proceeds and evaluate the effects, there are no

standard mechanisms to verify that the bonds are actually

used to ﬁnance green projects or to compare the environ-

mental beneﬁts of different bonds.

How it can be replicated: Green bonds demonstrate the

potential of using the balance sheets of international ﬁ-

nance institutions to channel capital to global priorities. The

concept does not need to be limited to environmental proj-

ects. It can be used when there is a need for investment

in global priorities that surpasses the current resources of

18 As of May 2014, the following institutions are members of the Green

Bond Principles: Banca IMI S.p.A., Banco Bilbao Vizcaya Argentaria

(BBVA), Banco Santander S.A., Bank of America Merrill Lynch, Barclays

Plc, BlackRock, Inc., BNP Paribas, California State Teachers’ Retirement

System (CalSTRS), Citi, Crédit Agricole CIB, Danske Bank A/S, DNB,

HSBC Bank Plc, International Financial Corporation (IFC), JP Morgan

Chase & Co, KBC Bank NV, Mitsubishi UFJ Securities International Plc,

Natixis, Natixis Asset Management—Mirova, Nomura International

Plc, Nordea Bank Finland Oyj, RBC Europe Ltd, Société Générale CIB,

Standish Mellon Asset Management Company LLC, The Royal Bank of

Scotland plc (RBS), TIAA-CREF, Westpac Institutional Bank, World Bank.

the public sector; and (2) the investments will generate ad-

equate cash ﬂows through either proﬁts or accrued savings

to repay the principal and interest on the bonds.

A similar approach was used by the International Finance

Facility for Immunisation (IFFIm) to mobilize resources and

streamline the deployment of funds for vaccines. Similar

to sovereign bonds, the IFFIm governments make a legally

binding commitment to repay bonds sold to institutional

and individual investors. To date, the IFFIm has raised $4.5

billion at costs similar to those of the World Bank, proving

that this structure can efﬁciently raise capital.

Case study 3: Capital for investments in technology

innovations through impact investing

How it works: Since the term was ﬁrst used in 2007,

impact investing has emerged as an innovative approach to

producing both social and ﬁnancial returns. Impact investing

is an approach to select, manage, and measure the impact

of investments that produce a social and environmental

good. As show in Figure 1, most impact investing focuses

on sectors that produce social returns such as agricul-

ture, healthcare, and ﬁnancial services. Impact investing

channels investments in established asset classes such

as private equity, debt, convertible debt instruments, and

guarantees, with a focus on companies in either growth or

venture stages.

19 (World Economic Forum, 2013)

Table 1: Comparison of World Bank and Green Bond Principles Criteria

Category Example World Bank Criteria

Green Bond Principles

Usage Guidelines*

Mitigation

Solar and wind electricity generation (Renewable energy)

 

New technologies to reduce greenhouse gas emissions



Rehabilitation of power plants to reduce emissions



Increased transport efﬁciency



Waste management and construction of energy-efﬁcient buildings



Reforestation and avoided deforestation



Clean Drinking Water



Adaptation

Protection against ﬂooding



Food security improvements and sustainable agriculture

 

Sustainabe forest management

 

Biodiversity conservation



*Green Bond Principles use of proceeds is not limited to these examples.

Source: World Bank, Green Bond Principles (2014); Dalberg analysis.

CHAPTER 2: How Does Innovative Financing Create Value? 15

Impact investing can also attract capital to promising in-

novations, such as research and development for health

vaccines. The Global Health Investment Fund, for example,

uses public and philanthropic guarantees to attract private

investors (including high net worth individuals, institu-

tional investors, and strategic investors) to fund medical

research and development that will lead to the eradication

of preventable diseases in low-income countries. It offers

investors a ﬁxed return of 2% per year, as well as 80% of

any return made by the fund, and a partial guarantee from

the Bill and Melinda Gates Foundation and Sida for up to

60% of their invested capital.

How it achieves outcomes: The fund has successfully

raised $108 million, but it is too early to assess if it will

deliver new technologies. As of August 2014, it has made

two investments: a $8 million investment in a tuberculosis

diagnostics technology and a $5 million investment in a

new oral cholera vaccine.

How it can be replicated: Impact investing encompasses

a broad range of approaches and can be used whenever an

investor wants to focus on social, environmental, econom-

ic, and ﬁnancial returns. Within the context of innovative

ﬁnancing, it is particularly useful for:

• Providing capital to companies that struggle to access

capital, but produce important beneﬁts for broader

society. For example, small and medium enterprises are

important drivers of employment but frequently struggle

to raise the capital necessary to grow.

• Providing capital to early stage ventures that support

innovation. Impact investors can combine social and

ﬁnancial returns by focusing investments on innovative

approaches to global challenges, such as the Global

Health Investment Fund’s focus on new vaccines.

Case study 4: Credit enhancements to support

economic development through guarantees

How it works: Political risk insurance issued by public

institutions is an important component of international de-

velopment. The World Bank Multilateral Investment Agency

(MIGA) promotes foreign direct investment by insuring

projects against losses related to currency inconvertibility,

Global Health

Investment Fund

Start Year:

2013

Amount

Mobilized:

$108 Million

Investors:

y High-net-worth Individuals

y Foundations (Bill and Melinda Gates Founda-

tion, Children’s Investment Fund Foundation)

y Institutional investors (AXA Investment Man-

agers, JPMorgan Chase & Co , Storebrand)

y Strategic investors (GlaxoSmithKline (GSK),

Merck & Co, The Pﬁzer Foundation)

y Government-backed funds (German Develop-

ment Bank (KfW), and Swedish International

Development Cooperation Agency (Sida))

Why is it

innovative:

GHIF mobilized resources by combining

government and private guarantees to leverage

private investment for research for new

vaccines.

Figure 13: Impact investing focuses on social sectors

30%

31%

36%

43%

44%

45%

47%

51%

57%

Investment focus of impact investing funds, by sector

Percent of Survey Respondents

Education

Food and Agriculture

Water and Sanitation

Other

Healthcare

Financial Services (excluding Microfinance)

Information and Communication Technology

Housing

Energy

Note: Respondents chose all that apply.

Source: GIIN, J.P. Morgan (January 2013).

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes16

expropriation, war and civil disturbance, and non-honoring

of ﬁnancial obligations.

While MIGA is an important facilitator of ﬁnance, it is

not a novel institution and providing political risk insur-

ance is not a new idea. Since providing its ﬁrst guarantee

in 1990, MIGA has issued over 1,100 guarantees that

total $30 billion.

Over time, its exposure has shifted

from Latin America and the Caribbean to Sub-Saharan

Africa, reﬂecting both a change in policy as well as new

market opportunities.

20 MIGA 2013 Annual Report. http://www.miga.org/documents/Annual_

Report13.pdf

How it achieves outcomes: MIGA’s mission is to promote

investment in emerging markets. It creates value by lower-

ing the cost of borrowing compared to commercial offer-

ings or by creating new instruments, such as long-tenor

loans. By bearing some of the risk of cross-border invest-

ments, it supports investments in emerging markets that

create jobs and drive economic growth. It can achieve this

goal directly through its own operations or indirectly by ex-

posing the mispricing of risk and demonstrating that private

sector insurers can proﬁtably offer insurance in emerging

markets through products that go beyond commercial risk.

According to an independent evaluation, MIGA chan-

neled an estimated $56 billion of investments in high-

and medium-risk countries between 1990 and 2007. Its

guarantees are important mechanisms that allow invest-

ments in emerging countries to be approved by credit and

risk committees.

How it can be replicated: It is not clear that MIGA offers

a replicable model. MIGA, through its association with the

World Bank, is a unique institution that has the ability to ap-

ply enormous political pressure when assessing claims. It

has paid only six claims in its history. It is proﬁtable. While

these characteristics suggest good risk management, they

World Bank: Multilateral

Investment Agency (MIGA)

Start Year:

1988

Amount

Mobilized:

$30 Billion

Investors:

y Issued by the World Bank

y Reinsurance provided by insurance compa-

nies when necessary

Why is it

innovative:

MIGA mitigates political risks that prevent

private sector investment in developing

countries by providing political risk insurance.

Figure 14: MIGA exposure has shifted to Sub-Saharan Africa

3.61.1 1.7 1.81.51.2 2.71.71.4 1.31.21.70.80.70.70.50.30.20.2

MIGA Gross Exposure by Region, 1990-2013

$ billion, 3-year rolling average

1999 to 2001

1.7

1998 to 2000

1.3

1997 to 1999

0.9

1996 to 1998

2002 to 2004

Sub-Saharan Africa

Middle East & North Africa

South Asia

East Asia & Pacific

Latin America & Caribbean

2011 to 2013

Europe & Central Asia

1995 to 1997

1994 to 1996

1993 to 1995

1992 to 1994

1991 to 1993

1990 to 1992

2007 to 2009

2005 to 2007

2006 to 2008

2003 to 2005

2010 to 2012

2009 to 2011

2008 to 2010

2001 to 2003

2000 to 2002

2004 to 2006

Source: MIGA Project Database; Dalberg analysis

Source: MIGA Project Database; Dalberg analysis.

CHAPTER 2: How Does Innovative Financing Create Value? 17

Figure 15: Political risk is perceived as a barrier to investment and demand for investment insurance is growing

Major constraints to foreign investments

over the next three years, 2010–2013

Percent

2013

Macroeconomic instability

Lack of qualified staff

2012

Limited Size of the Market

2011

Poor Infrastructure

2010

100%

Other

Political risk

eak government institutions

Lack of financing

New Investment Insurance Volumes,

Berne Union, 2008–2012

$ billion

97%

MIGA

Other members

of the Berne Union

2009 2010

97%

96%

97%

98%

2008

2012 2011

21%

16%

18%

15%

20% 21%

22% 19%

10%

19%

11%

13%

11%

17%

18%

13%

8% 10%

Major constraints to foreign investments

over the next three years, 2010–2013

Percent

2013

Macroeconomic instability

Lack of qualified staff

2012

Limited Size of the Market

2011

Poor Infrastructure

2010

100%

Other

Political risk

Weak government institutions

Lack of financing

New Investment Insurance Volumes,

Berne Union, 2008–2012

$ billion

97%

MIGA

Other members

of the Berne Union

2009 2010

97%

96%

97%

98%

2008

2012 2011

21%

16%

18%

15%

20% 21%

22% 19%

10%

19%

11%

13%

11%

17%

18%

13%

8% 10%

Source: World Investment and Political Risk, 2013, MIGA; Dalberg analysis. Source: Berne Union, 2008-2012 Statistics; MIGA Annual Report 2013 and

2012; Dalberg analysis.

Figure 16: Long-term political risk insurance is becoming more widely available

590

515

705

630

415

350 350

2010

Political Risk Market Capacity by Tenor, 2010-2013

Total possible maximum per year, $ million

2013 2010 2013

380

10-year Project Risk 15-year Trade Risk (political)

970

540

415

+9%

+6%

10-year Trade Risk (political)

+22%

+23%

2010 2010

15-year Project Risk

440 440

320

370

2013 2013

710

Source: Gallagher London, PRI Report and Market Updates 2010 to 2013; Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes18

also reﬂect the inﬂuence that the World Bank can have in

resolving disputes before they become formal claims.

Nevertheless, given the high demand for political risk

insurance, it is an opportunity for new market entrants.

The tenor of guarantees offered by private re-insurers are

extending and are approaching those offered by MIGA. As

shown in Figure 16, the maximum amount insured per risk

has increased in recent years. This change could serve as a

model for private sector provision of other ﬁnancial interme-

diation services within the development space.

Outcomes for International Donors

Innovative ﬁnancing makes donors’ delivery of interna-

tional assistance more effective and efﬁcient. Financial

markets function because the price of an asset commu-

nicates information about its value. There is no analogous

concept in development, however. It is difﬁcult to assess

the value of an education program, less pollution, or bet-

ter health outcomes. Structures that enable collaboration

between development funders and service providers align

incentives by assigning a value to development outcomes

and creating a market to provide those services. As a

result, intended beneﬁciaries have more inﬂuence over

the services they receive and the private sector is more

likely to compete to deliver social goods and create more

efﬁcient solutions.

Case Study 5: New business models that create

opportunities for community development through

development impact bonds

How it works: Development impact bonds (DIBs) pool mul-

tiple performance-based contracts and turn social problems

into investible opportunities. They differ from standard

grant mechanisms because investor returns are based on

the achievement of a pre-determined outcome. Despite its

label, DIBs are not bonds. While they have capped returns

like ﬁxed-income investments, DIBs also share characteris-

tics with equity investments since neither the principal nor

coupon payments are guaranteed.

While there is no standard structure, DIBs frequently

involve investors that provide capital at the beginning of

the project, outcome funders that provide ﬁnancing if the

project succeeds, and a fund manager that allocates capital

to achieve development goals. Critically, they also include

a framework for monitoring and evaluation to determine if

the service provider is successful. Figure 17 provides one

possible structure. In this structure for a three-year bond

without a coupon, only 50% of the principal is guaranteed.

If the projects funded achieve the predetermined metrics at

bond maturity, the outcome funder will repay the investor

the full principal with a 5% annualized return. The manager

of the SPV and the service provider would also receive

performance bonuses in addition to upfront payments.

How it achieves outcomes: DIBs are still in a nascent

stage. Few have mobilized resources and internationally

oriented DIBs do not have long enough track records to

assess outcomes. They seek, however, to align incentives

between various actors, promote risk transparency, and

encourage innovation.

• Aligning incentives. The dynamics of international

development differ from many markets because the

entity that pays for a good or service—typically a donor

or philanthropy—is different from the entity that enjoys

the good or service—typically a recipient government or

individual. This situation limits the information available

to the funder and impedes an efﬁcient market. A DIB’s

structure transfers the risk of providing the service from

the funder to the service provider and investor. As a

result, DIBs work best for new approaches to providing

goods and services. If the service provider and investor

have a new way of achieving the outcome, they can po-

tentially earn more than if they funded the same project

through grants. As a result, for the DIB market to grow,

it will have to resemble a venture capital model in which

well-informed and experienced investors have the ability

to evaluate these new innovations.

• Promoting transparency. The investors and outcome

funders negotiate terms that reﬂect the probability of

success (from the investor’s perspective) and the abil-

ity to extract potential efﬁciencies (from the outcome

funder’s perspective).

By establishing a price for the

bond, beliefs about perceived risk are made transparent,

because both the output funder and the investor need

to calculate the level of risk.

• Encouraging innovation. The output funder does not

specify the method for achieving the desired outcome,

which allows the service provider to deploy innovative

approaches and to tailor the intervention to local situ-

ations. The implementer may, however, receive assis-

tance from the investor, for example, through perfor-

mance management systems or feedback loops; after

all, it is in the investor’s interest to help the implementer

succeed so that the investor receives his premium.

21 Both of these factors are difﬁcult to estimate ex-ante and create

ambiguity in the negotiation process.

CHAPTER 2: How Does Innovative Financing Create Value? 19

How it can be replicated: Given their risks, likely low

returns, and lack of performance history, DIBs will initially

appeal to traditional donors and philanthropies. Commercial

investors may become more interested once the model is

proven successful or if there is a signiﬁcant guarantee. In

order to make DIBs “investable opportunities,” outcome

funders will incur additional costs compared to funding

investment up-front (unless the investor has a lower cost

of capital than the outcome funder, which is unlikely). Even

social impact investors who merely aim to preserve capital

will require interest rates that compensate them for the risk

of a service provider failing to achieve the outcome targets.

Figure 17: Illustrative cash ﬂows of a Development Impact Bond

Investor Service Provider(s)

Initial Payment Guaranteed Payment Contingent Payment

Monetizeable Savings and Social Benefits

100

Positive

Externalities

Outcome Funder

Guarantor

(if necessary)

Credit

Enhancement

3 YEAR | ZERO COUPON

Special Purpose Vehicle

Potential Cash flows At issue

At maturity

(guaranteed)

At maturity

(If metrics are achieved)

Investor -100 +50 +66

Outcome Funder 0 -50 -75

Special Purpose

Vehicle

+5 0 +4

Projects +95 0 +5

Note: Cash ﬂows are for illustrative purposes only. Some DIBs have no guaranteed payments

Source: Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes20

CHAPTER 3:

What Are The Next Steps For Innovative Financing?

Opportunities

The focus of innovative ﬁnancing is shifting from

mobilizing resources to delivering positive social and

environmental outcomes through market-based instru-

ments. In the past ten years, the growth of the innovative

ﬁnancing sector has come from the emergence of new

mechanisms such as thematic bonds, microﬁnance, and re-

sults-based ﬁnancing. These mechanisms are market-based

structures that effectively align incentives and increase

focus on tangible outcomes.

Based on historic growth rates, we project innovative

ﬁnancing will grow to $24 billion per year by 2020.

This estimate is likely conservative, given increasing pres-

sure from governments, investors, and citizens to produce

tangible environmental and social results. Additionally, our

estimate does not include the recent increase in activity by

corporates that issue green bonds, the potential for invest-

ment in infrastructure, or the potentially rapid rise of new

22 We expect an annual average growth rate for the entire sector

of approximately 12% per year, but can vary from 3% per year

for derivative products excluding guarantees to 17% per year for

performance based contracts. Growth rates and other assumptions

used to make projections for each type of instruments are included in

Annex 1.

donors, such as those in China. Most importantly, it does

not reﬂect efforts to relax the constraints affecting the in-

novative ﬁnancing market (discussed below). Nevertheless,

the estimate accounts for several trends that will likely

shape the innovative ﬁnancing sector between now and

2020, such as:

• Increased use of established instruments by new

participants. Innovative ﬁnancing mechanisms that

have already received widespread acceptance, such as

guarantees and thematic bonds, will grow as commer-

cial investors and private companies incorporate them

into their capital allocation strategies. There is a need

to establish standards around how these products can

be used. Based on our experience with microﬁnance,

we have seen that while commercial investors enable

long-term sustainability, their involvement can also have

unintended consequences such as providing capital to

projects or individuals who will not be able to repay the

loan or distorting markets. Establishing guidelines for

how green bonds—or other thematic bonds—can use

proceeds to produce positive environmental outcomes

will likely reduce the chance that these funds are

used inappropriately.

CHAPTER 3: What Are the Next Steps for Innovative Financing? 21

•

Expansion of successful pilots into new markets. The

public sector can build on mechanisms that worked in

one sector, and deploy them in new sectors. Promising

mechanisms of this sort include advance market com-

mitments, results-based ﬁnancing, and impact invest-

ing. There is a need for investors—particularly investors

with a dual social and ﬁnancial mandate—to sponsor

opportunities in new markets.

• Continued innovation within development by creat-

ing new products. The public sector will continue to

develop and promote newer mechanisms such as

development impact bonds. The creation of these types

of mechanisms is an important part of the innovative

ﬁnancing market.

Constraints

The current innovative ﬁnancing market structure

impedes potential growth. Constraints limit the supply of

ﬁnance, weaken demand for new mechanisms or expan-

sion of existing mechanisms to new markets, and impede

the matchmaking between the two. Addressing these con-

straints could increase the market size substantially from

the currently projected $24 billion per year growth trajec-

tory. In particular, the barriers below hinder the growth of

innovative ﬁnancing.

Supply Challenges

Opaque language and limited understanding of inno-

vative ﬁnancing business models, operating environ-

ments, and different actors’ institutional constraints

reduce the supply of capital. Many current mecha-

nisms—particularly those still in the nascent stage—fail

to offer risk-return proﬁles that ﬁt investor requirements.

It is always difﬁcult to assess risks associated with new

instruments, but the use of inconsistent language makes it

difﬁcult for development practitioners and ﬁnancial manag-

ers to clearly communicate. For example, development

impact bonds, which do not guarantee the repayment of

the principal and offer a higher return when metrics are

achieved, have more in common with equity investments

than bonds. Current mechanisms lack the clear and compel-

ling product deﬁnition and risk-adjusted returns that private

sector investors require. The market would beneﬁt from

a clear segmentation that clariﬁes which products could

appeal to commercially oriented donors and which ones

will require temporary subsidies to establish the necessary

performance history.

Few institutions have the capacity, mandate, or experi-

ence with innovative ﬁnancing vehicles necessary to

create new products or to evaluate the risks of exist-

ing ones. Large institutional investors have a ﬁduciary

responsibility to achieve risk-adjusted returns that align with

Figure 18: The focus of innovative ﬁnancing is changing

Public goods related to

health, environment and

infrastructure

Targeted investment opportunities

within agriculture, energy and

infrastructure

Time

Size of sector

TODAY

Experimentation with

market-based instruments

grow the market

Outcomes-based finance

attracts private capital

Aid-based pilots mobilize

resources

Engagement of customers,

investors, corporations and

governments in emerging

markets

Taxes, levies and voluntary private

contributions

Foreign-based investment funds,

public-partnerships, and solutions

to address political constraints

Risk sharing and incentives to

mobilize private enterprises and local

investors

Mechanisms:

1995–2005 2005–2015 2015–2030

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes22

investor expectations. While many large investors believe

that responsible investing can produce ﬁnancial returns and

reduce reputational risk, they are not willing to sacriﬁce

ﬁnancial return for social beneﬁts. This reluctance restricts

the supply of capital to opportunities in which ﬁnancial and

social returns are correlated.

From a public sector perspective, many large donor agen-

cies do not have the legal authority and institutional incen-

tives to pursue innovative ﬁnancing schemes. Many donors

make investment decisions based on annual appropriations,

which limits their ability to make long-term commitments.

They also often do not have the authority to make invest-

ments with contingent liabilities or equity. While multilateral

ﬁnancial institutions (such as the World Bank) and bilateral

institutions with a private sector mandate (such as Proparco

in France and the CDC group in the UK) have greater ﬂex-

ibility, innovative ﬁnancing remains a relatively small portion

of government aid.

Finally, innovative ﬁnancing product sponsors’ failure to

engage with a broad part of the ﬁnancial sector further

limits capital and expertise. Certain providers of ﬁnancial

services, such as private banking and private equity, have

offered impact investing and microﬁnance investments.

However, other types of ﬁnancial institutions, such as insur-

ance companies and pension fund managers, have only

explored innovative ﬁnancing in a limited capacity. Within

ﬁnancial institutions, there has also been very little engage-

ment with the credit and risk assessment departments to

learn how to evaluate new innovative ﬁnancing vehicles—

this lack of involvement limits the supply of capital and

does not tap the departments’ expertise, which is neces-

sary to develop new products.

Intermediation Challenges

Lack of standards, data, liquidity, and performance

metrics makes it difﬁcult for investors to assess innova-

tive ﬁnancing opportunities. Clear, comprehensive, and

credible performance information will allow commercial

investors to participate in the market. In the case of green

bonds and microﬁnance, for example, the availability of

standardized information about the mechanisms’ ﬁnancial

performance has enabled investors to participate in these

markets. However, it is difﬁcult to gather this information

for many other types of innovative ﬁnancing mechanisms.

In addition, while organizations such as the Global Impact

Investing Network (GIIN) have made considerable efforts

to provide standard metrics for assessing the develop-

ment impact of these investments, there is still no way to

compare the social, environmental, and economic results of

different investments.

With the notable exception of bonds and microﬁnance,

innovative ﬁnancing instruments do not have the

market infrastructure necessary to create liquidity. The

Figure 19: Innovative ﬁnancing mechanisms are projected to mobilize $24 billion per year by 2020 based on his-

torical performance

Estimated amounts mobilized annually by innovative financing mechanisms

$ million

2,200

4,400

0 2,000

1,800

1,000

900

4,000 6,000 8,000 10,000 12,000

5,000

Guarantees 11,000

Impact Investing Funds

900 Taxes/Levies

100

Consumer purchases 50

Microfinance Investment Funds

6,000

Thematic Bonds

Development Impact Bonds 200

3,000

600

1,100

Advanced Market Commitments

Debt-swaps and buy-downs

Other derivative products

500

Performance-based contracts

Auctions

7,000

2,000

Proven

Models

Opportunities

to Scale

New Ideas

Source: Innovative Financing Initiative estimates based on historic performance.

CHAPTER 3: What Are the Next Steps for Innovative Financing? 23

heterogeneous and bespoke nature of many innovative ﬁ-

nancing mechanisms prevents investors from trading prod-

ucts to create liquidity in the market. A common infrastruc-

ture, such as credit rating agencies and exchanges, would

help facilitate the trading of products to increase liquidity.

Demand Challenges

A lack of investment in design funding limits innova-

tion and increases the costs associated with introduc-

ing new instruments. Creating new innovative ﬁnancing

mechanisms—especially mechanisms without track re-

cords—can be very costly. The GAVI Alliance, for example,

provided more than $30 million to the Pneumococcal

Vaccines Accelerated Development and Introduction

Plan (PneumoADIP) to build the business case for the

Pneumococcal AMC. Microﬁnance required decades of

grants and concessional ﬁnance before it became a com-

mercially viable investment. Creating new mechanisms also

takes a signiﬁcant amount of time. Designing the IFFIm

required the UK Government, the World Bank, Goldman

Sachs, and the lawyers for GAVI to work together for over

two years. Likewise, the Global Health Investment Fund, an

impact investing fund that supports research and develop-

ment for new vaccines, spent over two years raising capi-

tal, despite having guarantees from the Gates Foundation

and the Norwegian government. Without signiﬁcant upfront

support, innovative ﬁnancing mechanisms often operate at

below scale and fail to achieve their potential.

Proposed Solutions and Roles for

Different Actors

Public and private actors must work together to ac-

celerate the growth of the innovative ﬁnancing mar-

ket. We have identiﬁed three ways to support the market

growth, described in more detail below. First, organizations

that design and implement innovative ﬁnancing mecha-

nisms can make greater efforts to share knowledge and

learn from each other. Better information about the ﬁnancial

and social performance of innovative ﬁnancing products

will attract new actors. Second, new partners can provide

capital and expertise. In particular, institutions than manage

capital for private investors can actively seek investments

and development practitioners can create opportunities that

meet the investment criteria and requirements of those

investors. Third, there is a need to reduce the start-up costs

and transaction costs of new innovative ﬁnancing mecha-

nisms. New mechanisms can adopt successful strategies

from existing efforts, but learning from past efforts requires

increased transparency and more systematic monitoring

and evaluation of performance.

1. Share knowledge and learn about innovative ﬁnanc-

ing through a central resource for technical assis-

tance, data, and tools. Innovative ﬁnancing consists of

a heterogeneous collection of asset classes that behave

differently under varying market conditions and are gov-

erned by different sets of rules and regulations. There are

no standardized ways to describe performance, and this

Box 4: Potential for growth in dierent sectors

Global Health: Innovative ﬁnancing in health has mobilized over $8.2 billion total since 2006. By 2020, an additional $18 billion may be

mobilized for innovative ﬁnancing mechanisms in global health.

In addition to the previously tested models, several additional areas

are ripe for innovative ﬁnancing. These include mHealth (mobile platforms for collecting data, technology platforms for education and

diagnostics), new diagnostic tools, nutrition (micronutrients and biofortiﬁcation), and reproductive health (e.g., long term birth control

solutions).

Agriculture and Food Security: Innovative ﬁnancing in agriculture and food security has mobilized approximately $1 billion over the last

three years. At the current investment pace, the opportunity for innovative ﬁnancing mechanisms would reach an additional $2.5 billion

total by 2020. A number of mechanisms in agriculture and food security have focused on accelerating access to capital. In addition, new

innovative ﬁnancing mechanisms could include improved inputs (biofortiﬁed crops, improved crop yields through plant breeding and

open pollinated crop development, fertilizer with reduced waste and run-off), innovation in harvest and storage (improved on-farm stor-

age technology or improved drying and processing technology), and improved ICT service to enable market transactions.

Climate, Environment, and Energy: Various innovative ﬁnancing mechanisms and funds have mobilized over $17.4 billion in the sector

since 2007. Based on growth rates from 2007-2013, the opportunity for climate and environment related innovative ﬁnancing could

be as high as an additional $45 billion by 2020. Additional areas ripe for innovative ﬁnancing include: green community development

innovations such as new green building materials, energy efﬁcient transport systems such as vehicle sharing or electric scooters, and

household-level innovations such as improved or advanced technology for off-grid cooking (especially cook stoves), and lighting and solar

innovation.

a Based on the assumption that non-IFFIm funding grows at maximum historical 2006-2011 CAGR, and IFFIm funding remains stable at historical 2006-2013

average size.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes24

information is rarely publically available. As a result, it is

difﬁcult to compare performance across different assets

and identify mechanisms that most effectively produce

development outcomes. In addition, a broader under-

standing of how different types of innovative ﬁnancing

mechanisms can address speciﬁc problems would help

push the sector forward.

2. Engage new partners by promoting asset classes

that attract proﬁt-oriented managers and investors.

Engaging the private sector will require new approaches

to creating bankable products. These products may

include public sector investments in supportive policies

and regulation, risk capital, and knowledge. Promising op-

portunities that produce social and ﬁnancial returns and

that identify innovative and more efﬁcient ways to deliver

goods and services will entice private sector actors. An

initial opportunity, for example, could be the expansion of

thematic bonds from the environmental sector to other

development areas such as health and education. Like

green bonds, these bonds would be issued by interna-

tional ﬁnance institutions and would mobilize private sec-

tor capital in a manner consistent with existing business

models and asset requirements. These opportunities

would create channels for the ﬁnancial industry to partici-

pate in investments that produce social returns.

3. Finally, support the development of promising and

proven products by collaborating during the design

phase. The current approach for developing new innova-

tive ﬁnancing products is costly and time consuming.

Often, the public sector champions new products that

do not take into account the business needs of poten-

tial investors. A channel for private sector institutions

to participate on their terms during the early stages of

product design would help overcome the obstacle of

differing priorities. Creating a public-private partnership

will reduce transaction costs associated with launching

new products and will build coalitions of organizations

that are committed to growing the sector. Public funders

would specify what will be achieved by articulating

a limited number of objectives and proposing incen-

tives to catalyze private investment. Financial inter-

mediaries would determine how to attract capital and

achieve those objectives.

Increased use of innovative ﬁnancing mechanisms will

require greater coordination between different actors.

For example:

• Regulators and Policymakers can ensure that country

laws allow innovative ﬁnancing funding mechanisms

and actively seek opportunities to collaborate around

new innovative ﬁnancing mechanisms.

• Foundations and NGOs can fund research to identify

appropriate opportunities for new mechanisms and host

events to facilitate collaborations around speciﬁc new

mechanisms.

• Development Banks and Impact Investors can invest

in promising but unproven ideas, provide guarantees,

Box 5: Challenges vary by sector

Sample barriers and challenges for engaging private sector players in the sector (not exhaustive)

Agriculture

• Lack of credit history and collateral implies a high risk for lenders

• Complex risk proﬁle due to agronomic and political risks

• Low demand for ﬁnancing among SHF due to high risk evaluation

Education

• Importance of scale (low margins)

• Few exit options

• High risk due to long time horizon and lack of collateral

Energy and

environment

• Difﬁculty of measurement of impact

• Difﬁculty in getting to scale

• Uncertainty related to the political environment

Health

• High leve of uncoordinated action within the sector

• High risk in the early product development phase

• Limited exit options, and reputational risks when exiting

Infrastructure

• Lack of understanding and capacity to structure projects

• Complex risk exposure (e.g., related to cross-border investments)

• Lack of transparent regulatory frameworks and legal security

CHAPTER 3: What Are the Next Steps for Innovative Financing? 25

and promote the use of standards to measure and com-

municate social and ﬁnancial performance.

• Financial Intermediaries can identify promising op-

portunities that produce social and ﬁnancial returns,

communicate the needs of different types of investors

to policy makers, and provide liquidity to create markets.

• Institutional Investors can provide capital to invest-

ments that provide risk-adjusted returns and actively

seek opportunities to collaborate around new innovative

ﬁnancing mechanisms.

• Private companies can seek innovative and more efﬁ-

cient ways to deliver goods and services and participate

in public-private partnerships

Conclusion

Meeting global commitments to eradicate poverty and

to respond to climate change will require all possible

sources of ﬁnancing. Identifying new opportunities for

funding requires collaboration between different actors—

especially investors, entrepreneurs, and policy-makers.

Innovative ﬁnancing provides a set of tools for donors who

want to create more development impact through their

investments, corporations open to new business models

in new markets, and ﬁnancial institutions looking for new

opportunities.

Innovative ﬁnancing is a critical tool to engage the pri-

vate sector and increase the international community’s

focus on development outcomes. Innovative ﬁnancing

is a bridge that enables the transition from grant-funding

models to structures that support markets and promote

long-term sustainability. Innovative ﬁnancing can attract

private companies that want to expand into new markets,

investors and fund managers who want to produce both

ﬁnancial and social returns, and governments that want to

achieve more and better development impact in a resource-

constrained environment.

There is an opportunity and need to accelerate the

growth of bankable investments that mobilize re-

sources for development and increase the efﬁciency

and effectiveness of ﬁnancial ﬂows. To capitalize on

this opportunity, the status quo needs to change: many

potential sources of capital and expertise remain untapped,

and new innovative ﬁnancing mechanisms often fail to

account for the existing business models, incentives, and

constraints of investors and private business. In addition,

the innovative ﬁnancing market is still very conservative;

bonds and guarantees dominate the market by shifting the

risk from private to public investors. The more innovative

mechanisms that do exist often only involve a small set of

actors or target speciﬁc issues. Further innovative ﬁnancing

opportunities are often missed because few players have

the context and credibility to “translate between” public

ﬁnance institutions, private players, and local governments.

Increasing the use of innovative ﬁnancing will require

a coordinated effort from public and private partners.

This coordinated effort will need to increase informa-

tion and transparency on innovative ﬁnance successes

and failures, demonstrate scalable models to enable

innovative ﬁnance and build a global network of inves-

tors and entrepreneurs to expand the sector. By combin-

ing private sector approaches to achieving risk-adjusted

returns with a philanthropic orientation to producing social

impact, the international community can harness innova-

tive ﬁnancing to address global economic, social, and

environmental challenges.

Box 6: Proposals to accelerate the creation of innovative ﬁnancing products

Description Deliverables

The Innovative

Financing

Exchange

The Innovative Financing Exchange will

provide technical assistance, build capacity for

negotiations, and support data measurement

and outcomes.

Date: Gather and publish annual performance data

Tools: Create and share a risk management framework

Advice: Support practitioners creating new products

Innovative

Financing

Structuring and

Marketing Group

The Innovative Financing Structuring and

Marketing Group is a public-private partnership

to identify and replicate models that work and

use them in new sectors and markets.

Identify three scalable models and work with public

and private partners to mobilize additional resources.

Innovative

Finance Incubator

The innovative ﬁnancing incubator will support

the design and development of new products to

test approaches and partnerships.

A co-funding facility to support new innovative

ﬁnancing products.

Source: Dalberg analysis and expert interviews.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes26

ANNEX 1:

METHODOLOGY AND DEFINITIONS

Data collection approach

The data used in this report is a conservative estimate

of the innovative ﬁnancing market. We used Annex 9

(Glossary of Selected Innovative and Traditional Financial

Instruments and Mechanisms) in Navin Girishankar,

Innovating Development Finance, From Financing Sources

to Financial Solutions World Bank Policy Research Working

Paper 5111, November 2009) as a starting point and com-

plemented it with additional desk research. In particular, we

drew upon surveys of innovative ﬁnancing by the OECD,

and the Leading Group on Innovative Financing. In addition,

we drew on data collected by the Global Impact Investment

Network (GIIN) to capture information about microﬁnance

and other investment funds.

To determine whether or not an instrument should be

included, we asked three questions.

• Maturity and Scope: Did the instrument mobilize re-

sources for a developing country? We started with a list

of 14 types of instruments that commonly referred to as

innovative ﬁnancing. These instruments and our deﬁni-

tions of them are provided below. We did not include

institutions (such as the Global Alliance for Vaccines or

Immunizations), generic fundraising approaches (such

as crowd funding sites), or ﬁnancial ﬂows between indi-

viduals (such as remittances). We also limited the scope

to transfers between countries. As a result, we did not

include instruments such as the Social Impact Bonds

in the UK and the US because those use domestic re-

sources for domestic purposes or the important growth

in resources within developing countries.

• Innovation: Did the instrument introduce a new product,

facilitate entry into new market, or attract new partici-

pants? As discussed above, innovation is in the eye of

the beholder. In determining whether or not an instru-

ment is innovative, we adopted a very broad deﬁnition

of innovation. This is consistent with how international

organizations implicitly deﬁned the market.

• Intention: Did the sponsors of the instrument intend to

produce positive social and environmental outcomes?

We recognize that many types of international resource

ﬂows, including foreign direct investment and remittanc-

es, have positive development effects. For the purpose

of this study, we limited our scope to investments

where the investor had a stated intention to produce

positive social or environmental beneﬁts in addition to

ﬁnancial returns. This is consistent with the deﬁnitions

ANNEX 1: Deﬁnitions of Innovative Financing Mechanisms 27

of impact investing proposed by the Global Impact

Investing Network and the World Economic Forum.

While we made every effort for this database to be com-

plete, it is likely that we did not include all possible innova-

tive ﬁnancing instruments. We hope to continue reﬁning

this database in the future. If you would like to receive a

copy of the database, please contact us at innovativeﬁ-

[email protected].

Market projections

We projected the innovative ﬁnancing market size based

on the historic growth rates of different mechanisms. The

higher end of the range was calculated as the maximum

of the historic annual growth rate for all innovative ﬁnanc-

ing mechanisms between 2003 and 2013 (12.3%) and the

growth rate for the speciﬁc type of instrument. The lower

end of the range was estimated as the minimum of the

historic growth rate for innovative ﬁnancing as a whole and

the speciﬁc type of instrument.

In addition, we made decisions based on the availability

of data about which year to use as the baseline and what

period of time to use to calculate historic performance.

Table 2: Overview of Data Used in Report

Number in

Database

Number that

mobilized resources

between 2000-2003

Amount mobilized

between 2000-2013

($ million)

Percentage

of Total

(percent)

Total

mobilized

(USD M)

Securities and Derivatives

Bonds 14 14 23,200 25% 29,500

Guarantees 23 17 36,100 39% 56,700

Impact Investing Funds** 98 82 5,800 6% 5,900

Loans 6 4 1,800 2% 2,300

Microﬁnance Investment Funds 130 112 9,100 10% 9,300

Other derivative products 13 8 600 1% 600

Subtotal 284 237 76,600 82% 104,300

Results, output, and performance-based mechanisms

Advanced Market Commitments 6 4 1,100 1% 1,100

Awards and prizes 1 10 300 0% 300

Debt-swaps and buy-downs 4 4 1,400 1% 1,400

Development Impact Bonds 5 0 - 0% -

Performance-based contracts 16 13 5,000 5% 5,000

Subtotal 49 31 7,800 8% 7,800

Voluntary contributions

Auctions 2 2 6,500 7% 6,500

Donations a part of consumer purchases 6 4 200 0% 200

Subtotal 8 6 6,700 7% 6,700

Compulsory Charges

Taxes 6 4 2,400 3% 2,400

Subtotal 6 4 2,400 3% 2,400

347 278 93,500 121,200

* Of the 347 mechanisms in the database, only 278 mobilized resources between 2000 and 2013. This reﬂects the emegence of new asset classes such as

Development Impact Bonds, which did not mobilize any resources during that perid, and new products, such as the DFID Innovation Prizes for Environment and

Development which was launched in 2013 and has not been implemented yet.

** We deﬁned the universe of impact investing and microﬁnance funds based on the decision of managers to register with ImpactBase, a leading database of

impact investing funds. Many fund managers elect not to register with ImpactBase, which makes this a conservative estimate of the market size.

Source: Innovative Financing Initiative Database; Dalberg analysis.

Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes28

Deﬁnitions of each instrument

Securities and Derivatives

Bonds and Notes

Debt ﬁnancing raised in capital markets to fund development interventions like microﬁnance or

climate change interventions

Guarantees

Financial commitment to provide payment in case of ﬁnancial loss, including insurance

products, that act as a risk-mitigation incentive to attract other funders

Loans

Loans made with concessionary repayment terms to borrowers for implementing speciﬁc

development interventions like green credit lines

Microﬁnance Investment

Funds

Investment funds that ﬁnance microcredit lenders in developing countries who provide low-

income and marginalized borrowers with access to ﬁnance

Other Investment Funds

Investment vehicles that are structured and funded to target a speciﬁc development challenge,

often blending investors with different risk/return proﬁles

Other Derivative

Products

Financial instrument that derives its value from performance of another asset like securities tied

to residential mortgages or weather events

Results-, output-, and

performance based

mechanisms

Advanced market

commitments

Commitment of funds to guarantee price/market for products once developed

Awards and Prizes

Financial reward for development solutions in a competitive selection process

Development Impact

Bonds

Investors fund development intervention upfront, government/donors repay them with interest

based on results achieved

Performance-based

contracts

Grant contracts structured to disburse based on meeting speciﬁc performance targets

Debt-swaps and

buy-downs

Developing country debt repayment obligations are transferred or reduced based on meeting

development goals

Voluntary

contributions

Carbon Auctions

(voluntary market)

Voluntary participation in legally binding exchanges for trading carbon credits and reducing

emissions

Donations as part of

consumer purchases

A percentage of each purchase of a consumer product goes to fund a designated development

challenge

Compulsory

charges

Taxes

Speciﬁc tax imposed by government to raise funding for a speciﬁc development challenge

ANNEX 1: Deﬁnitions of Innovative Financing Mechanisms 29

Table 3: Assumptions used to calculate market projections

Instrument

Historic

Compound Annual

Growth Rate

CAGR implied

by projected

range midpoint

Baseline

Year in

Calculations

Period used to

calculate the

historic growth rate

Projected

Midpoint

(USD M)

Percent

of Total

Compulsory Charges

Taxes and Levies 1.6% 7.7% 2013 2007-2013 687 3%

Results Based Mechanisms

AMC 15.7% 14.1% 2012 2009-2012 985 4%

Awards and prizes -30.7% 3.2% 2012 2005-2012 1 0%

Debt-swaps and buy-downs 19.2% 16.1% 2012 2004-2012 185 1%

Performance-based contracts 21.8% 17.7% 2012 2009-2013 3,321 14%

Securities and Derivatives

Bonds, notes 16.9% 14.7% 2012 2006-2012 5,261 22%

Development Impact Bonds NA 14.1% 2014 NA 110 0%

Guarantees 7.2% 10.0% 2012 2003-2012 9,075 38%

Investment funds 10.0% 11.2% 2012 2006-2012 580 2%

Loans -1.5% 6.9% 2012 2003-2012 18 0%

Microﬁnance Investment Funds 15.2% 13.8% 2011 2005-2010 2,304 10%

Other derivative products -45.8% 3.0% 2012 2008-2012 6 0%

Voluntary contributions

Auctions -5.3% 5.9% 2012 2008-2012 1,619 7%

Consumer Purchases 7.0% 9.8% 2012 2006-2012 38 0%

Weighted Average 12.3% 12.0% Total 24,191 100%

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