The UK is to launch the first development impact bond - an international version of the social impact bond - International Development Secretary Justine Greening has said.

Development impact bonds are an adaptation of social impact bonds, a type of payment-by-results agreement where investors put money into an organisation to pay for an intervention, and are repaid at a profit by funders if the intervention proves successful.

The main additional characteristic of development impact bonds is that in countries whose governments cannot yet afford the full cost of additional public services, donors provide some or all of the repayment to investors when the results are proven.

Greening will launch the new bond to invest in the prevention of deadly sleeping sickness in Uganda while attending the Global Partnership for Effective Development Cooperation summit in Mexico.

A new £1.5m inception project will research and design a bond to purchase drugs to treat infected cattle before the disease spreads.

The new model has been pioneered by Social Finance and the Center for Global Development.

Speaking to Civil Society News, Toby Eccles, development director and founder of Social Finance, said he had seen lots of interest in development impact bonds from all sides – development institutions, people on the ground, and the wider investment community.

“The transactions involved with development impact bonds are likely to be bigger than social impact bonds,” he said. “And the investor base for an international development impact bond is likely to be wider than for domestic social impact bonds.”

Eccles also said that there were differences between what he had seen attracted service deliverers to social impact bonds and what was attractive about development impact bonds.

“While when dealing with social impact bonds people were initially attract by the innovation, with development impact bonds work there is much more a focus on the flexibility if offers,” he said.

“People like that it is possible to shift the way of working and become more flexible to respond to local need when you work to outcomes.”

He added that he saw room for engaging the private sector as investors into development impact bonds.

“If you ask the private sector to invest into malaria reduction you can argue that if malaria around your factory is reduced by this level it will be a benefit to your business activity.”

Alongside the launch of the Uganda sleeping sickness development impact bond, DFID will also support the development of new development impact bonds by bringing together investors, governments and aid agencies to design new investments in the coming months.

The UK will also set up a new online ‘open source’ knowledge platform to share our findings to inform further investment.

The UK will also help to convene new “development cooperation hubs” in Nigeria, Mozambique and Kenya where private companies, governments, international organisations and civil society organisations are able collaborate on joint development projects.