The Potential and Limitations of Impact Bonds – Lessons from the first five years of experience worldwide

This study aims to examine critically the potential for this innovative financing mechanism to address the financing and quality service delivery issues described above. As there has been considerable fervour around impact bonds in recent years, we identified the need to provide an impartial and independent perspective with respect to the potential benefits of impact bonds. The research for this study consisted of a systematic review of the literature, more than 70 structured and informal interviews, and online surveys of 30 individuals. This study provides clear definitions of the concepts, key players, and development processes of impact bond transactions, a comprehensive inventory of all active 38 active SIBs as well as some of the social and development impact bonds in the development stage. It also gives an inventory of key policy actions and legislation to support the impact bond ecosystem, an analysis of the stakeholder motivations, key facilitating factors, biggest challenges faced in the 38 impact bond transactions, a critical examination of 10 positive claims made about impact bonds, and an analysis of the future potential of impact bonds and any potential derivatives with a particular focus on developing country contexts.