Ms Naina Batra, moderating the conversation, began by saying that when it came to the choice of funding instruments they used, philanthropists and others in the ecosystem were beginning to consider a more diverse range of options. They were rapidly moving away from a tradition of deploying or relying on grants and towards new debt and equity funding mechanisms – the range of which she referred to as the ‘continuum of capital’ now available to the sector.

The speakers pointed out that the stage of maturity/expansion at which an organisation stood was heavily influenced by the suitability of these new financial instruments to their needs. In most cases, only once organisations reached a certain scale could they start to consider more innovative funding options like development impact bonds (DIBs). Until this point, the patience and flexibility of grant-based capital tended to be essential for organisations still finding their feet and working out their operating models.

Ms Safeena Husain, head of Educate Girls, an NGO focused on improving education for girls in India, discussed the challenges and merits of testing new financial instruments in the social sector. She shared the experience of Educate Girls in taking up the first impact bond of its kind as a service provider, the end results of which were published this year. Her decision to use this tool was not an easy one, and she was warned that the data in her ecosystem was too weak. She was motivated to take on this challenge because DIBs allowed Educate Girls to have better control over the value they were adding to girls’ lives as they scaled up rapidly, a process which made it more difficult for the organisation’s leadership to stay in touch with what was going on the ground.

Ms Husain said the commonly cited trade-off between financial and social impact on DIBs was not seen in her experience. In terms of social impact, they delivered 160% of their learning target and investors received their money back plus a 15% return on investment.  

Speakers then shared their views on the need to experiment in the field of innovative finance as the social sector continued to find its way on this subject. Ms Tracy Palandjian walked the audience through the different approaches her organisation, Social Finance, was applying to impact bond deals it was running. In particular, she saw merit in working with a new type of payer – the individuals who would benefit from an intervention.

Mr Francis Ngai, founder of Social Ventures Hong Kong (SVhk) added to this point about experimentation by describing the innovations with which his organisation had had success, while incubating over 40 social innovation projects. The most important thing to keep in mind, he said, was that all capital decisions should be based around the end impact they created. He said that innovative ideas could help mobilise capital – for example, one project SVHk had supported had repurposed houses so that they were affordable for single mothers struggling to keep up with the high cost of rent in Hong Kong.

Ms Palandjian described what she considered to be three core values of impact bonds as a funding mechanism for the social sector – the risk transfer they allowed for; the essential focus on impact they creates; and their ability to drive accountability in a sector where it was often in short supply.

The panel was asked to share their views on how they thought about the measurability of their work. It was agreed that there were both risks and benefits associated with the emphasis on measurability created by instruments like DIBs. Ms Hussain described how a focus on measuring outcomes rather than inputs empowered her staff on the ground to make the right decisions in real time.

The risk of focusing on measurable impact was that things that got measured easily would suck up all the money available in that sector. For example, it was harder to recognise progress in projects targeting social justice or human rights, so there was a risk such initiatives would be left behind. The second risk with measurement was that organisations could set the wrong metrics, which could produce really perverse results. One solution, according to Ms Husain, was for the government to take a role in setting standards around metrics.