Implications for Innovative Financing to Increase Funding for Neglected Tropical Diseases: An Assessment of the Impact Bond Model Applied to NTDs Open Access

Tassopoulos, Cynthia (Spring 2019)

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While progress has been made in recent years to reduce the Neglected Tropical Diseases (NTDs) burden, the collective NTD community of international and endemic country stakeholders will still be unlikely to meet its various control, elimination, and eradication goals for NTDs by 2020. Interestingly, the gap to achieve these goals stems from a lack of financial resources to scale the well-established mass drug administration (MDA) interventions for preventive chemotherapy NTDs (PC-NTDs), rather than a technical gap. 

Therefore, NTD stakeholders have shown a growing interest in innovative financing approaches and tools as new financial opportunities. One instrument in particular—the impact bond—has attracted attention, in part driven by the broader development finance community’s immense enthusiasm for the promise of impact bonds to emphasize outcomes-based program investment, improve service delivery, and reduce the risk of upfront investment.

The purpose of this study is, therefore, to assess if the impact bond model is an effective and efficient instrument to increase financing, and specifically domestic financing, for NTDs. This assessment has three components: a systematic literature review for impact bonds, an investment case analysis of a hypothetical NTD-focused DIB, and a comparative analysis of the impact bond and other innovative financing instruments. 

Ultimately, this study finds that there is not a clear investment case to currently pursue an NTD-focused impact bond model to increase NTD funding. The evidence supporting impact bonds is still being developed, which makes it difficult to strongly conclude that the impact bond will be a worthwhile investment for the NTD community. Instead, the findings suggest that NTD stakeholders should remain skeptical of the promise of impact bonds and other innovative financing instruments. While innovative financing offers a way to engage new private investors and introduce a culture of results-focused financing, it is critical to assess innovative financing instruments for their value and cost-effectiveness when possible. 

Key words: Neglected Tropical Diseases, PC-NTDs, impact bond, innovative finance, domestic funding.

Table of Contents

Chapter 1. Introduction 1

1.1 Context & Rationale 1

1.2 Problem Statement 3

1.3 Purpose Statement 4

1.4 Significance Statement 4

1.5 Definition of Terms 5

Chapter 2: Literature Review 7

2.1 NTD and the 2020 Goals 7

2.1.1 The History of NTD Efforts 8

2.1.2 NTD 2020 and 2030 Goals 11

2.1.3 NTD Progress 13

2.2 The NTD Funding Landscape 14

2.2.1 Current Funding Landscape 14

2.2.2 Funds to Meet 2020 Goals 15

2.2.3 Lessons and Implications from Endgame Financing 16

2.3 The Call for Increased Domestic Funding for NTDs 17

2.4 Innovative Financing Instruments 20

2.4.1 The Rationale for Innovative Financing Instruments 20

2.4.2 IFI Overview 21

2.4.3 Evidence to Support IFIs 27

2.5 Social & Development Impact Bonds 30

2.5.1 Results-Based Financing 30

2.5.2 SIB Concept & Overview 31

2.5.3 DIB Concept & Overview 34

2.5.4 Examples of SIBs and DIBs 35

2.5.5 The Evidence for Impact Bonds 41

2.6 Impact Bonds for NTDs 45

Chapter 3: Methods 48

3.1 Systematic Review 48

3.1.1 Search Strategy & Sources 48

3.1.2 Evidence Base & Quality Assessment 50

3.2 In-Depth Interviews 52

3.3 Planned Analysis 53

3.3.1 Impact Bond Descriptive Analysis 53

3.3.2 Investment Case Analysis 53

3.3.3 IFI Comparative Analysis 55

3.4 Methodological Limitations 57

3.4.1 Search Strategy 57

3.4.2 Evidence Quality 58

3.4.3 Analysis 58

Chapter 4: Results 59

4.1 Current State of Impact Bonds 60

4.1.1 Impact Bond Theory and Structure 60

4.1.3 Evidence for Impact Bonds 72

4.1.4 Special Topics for Impact Bonds 76

4.2 Assessing the Investment Case for an NTD Impact Bond 81

4.2.1 NTD Goals & Objectives 81

4.2.2 The NTD-DIB Investment Case Analysis 86 Strategic & Market Fit: 86 Financial Outlook 98 Operational Fit 105 Investment Case Analysis Takeaways 111

4.3 Comparative Analysis: DIBs vs Other IFIs 113

4.3.1 The IFI Landscape 113

4.3.2 Determining the Comparison Set 116

4.3.3 Comparative Analysis 119

4.3.4 Comparative Analysis Takeaways 120

Chapter 5: Discussion & Conclusion 123

5.1 Key Takeaways from the NTD-DIB Investment Case Analysis 123

5.2 Other Factors Influencing the Investment Case Analysis 124

5.3 Key Takeaways from IFI Comparative Analysis 126

5.4 The Broader Alignment of Innovative Financing and the NTD Context 127

5.5 Improving the Investment Case for NTDs and IFIs 128

5.6 Conclusions & Recommendations 131

References 133

Appendix 140

Understanding Impact Bonds and Innovative Financing Applied to NTDs 140

Overview of IFIs from Comparative Analysis 142

Additional Tables & Figures 152

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