Impact Bonds and Maximizing Finance for Development

This paper outlines the potential contributions of impact bonds to the World Bank Group’s Maximizing Finance for Development (MFD) approach. The MFD approach is in part a response by the World Bank Group to the 2030 Sustainable Development Agenda. This agenda calls for multilateral development banks (MDBs) to foster greater private investment, public spending efficiency, and private participation in development activities. MDBs have further committed to the Hamburg Principles, which urge the crowding-in of private financing by 25 to 35 percent between 2017 and 2020.

These resources will be needed in order to help bridge a financing gap of about $2.5 trillion per year in order to reach the Sustainable Development Goals (SDGs). The human costs of this shortfall can be seen clearly as a result of the poor state of service provision in low- and medium-income countries, where delivery often falls far short of policy objectives and hampers progress on the SDGs.