Can blockchain help us scale Social Impact Bonds?
Enough has been said about the biggest barrier to large-scale adoption
of impact bond mechanisms in emerging economies; the need for those who want to
be commissioners of outcomes to address their internal procurement and contracting
In this article we look at, what systemic changes would enable the rapid scale-up of pay-for-success financing mechanisms?
TRANSPARENCY, RELIABILITY, ACCOUNTABILITY
It is inevitable that use of distributed ledger technology (DLT), of which the blockchain
is the most well-known example, will become an integral part of the mechanics of
impact bonds mechanisms in the future. Thanks to the built-in trust of the technology,
DLT will not only enable transparent, secure and real-time data collection but also,
through smart contracts, enable immediate outcome payments when a target is met.
EFFICIENT, COST-EFFECTIVE, IMMUTABLE VERIFICATION OF RESULTS
Having independent verification agents cross-checking data is an expense that pay-for
success financing mechanisms can ill afford if they are to be scalable. Using DLT
coupled with existing technology – including basic feature phones – we will be able to
build systems that cross-reference inputs, outputs and outcomes through a number of
validated filters to provide robust evidence of achieved results, obviating the need for a
second layer of verification.
COST-EFFECTIVE PERFORMANCE MANAGEMENT
The feedback loop that service providers need to be able to adapt their approach to
successful implementation of their activities – and to be able to achieve the impact
goal – can be used with all confidence given verifiable front-line data. This will address
a larger development challenge around capacity and the challenge in impact bonds of
costly performance management.
THE DEMOCRATISATION OF INVESTMENTS IN DIBS
Developing an impact exchange built on distributed ledger technology will enable
individual investors to contribute to the SDGs, using a secure, transparent platform on
which they will be able to choose the area of impact for their investment, and
ultimately have visibility of the precise impact that their investment has enabled.
Are you working on Blockchain and other DLTs in the field of innovative finance? Get in touch with us!We would love to know more!