June 8, 2018 |
In a bid to raise employment levels, Colombia's government decided to try something new. Rather than just spend 2.2 billion pesos ($770,000) on a project for 500 people in three cities, it turned to a tool that tied funding to the outcome. The so-called Colombia Workforce initiative became the first social impact bond, or SIB, issued in a developing country a little over a year ago. Backed by several non-government organizations and foundations, the bond has raised funds to provide training and placement services for vulnerable populations in the country. But there is a catch, as far as investors go. The returns depend upon the success of the project. Payment at the end of 18 months for the
Test cases in Colombia and Peru are proving the effectiveness of impact bonds, but not their appeal to institutional investors.