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Research on Impact-Linked Finance

Evidence for an Innovative Blended Finance Approach

Research agenda

«Is Impact-Linked Finance effective?»

Blended finance is a powerful tool in scaling solutions to some of the most intractable challenges that the world faces today. Impact-Linked Finance, a new concept developed and introduced by our practice partners Roots of Impact and the Swiss Agency for Development and Cooperation, is a promising sub-set of blended finance. That said, it should not be seen as a panacea. Impact-Linked Finance has its place in the practitioner’s toolbox – alongside other blended finance as well as traditional forms of financing the SDGs -, but it is still a young and innovative practice.  

This is why IBF practice partner Roots of Impact has launched a research agenda to ensure that rhetoric meets reality. By collaborating with top implementing partners, research centers, and universities across the globe, this research agenda seeks to produce high-quality information about if, how and why Impact-Linked Finance works. Ultimately, a transparent accounting of the strengths and limitations of Impact-Linked Finance will furnish blended finance actors with the information they need to decide when and how to implement it. It will also support them with the necessary evidence as they advocate for this fast-growing tool. 

To learn more, read on the individual projects below and find their results in the relevant research reports. As the projects close, we will share these independent reports here and hope to inspire more blended finance actors with innovative and effective approaches. 

Impact-Linked Finance research

Finalized, ongoing & planned

IBF Research Projects ILF 2022

Project snapshot 1

«How Impact-Linked Finance Incentivizes High-Impact Investment in Agricultural SMEs»

Small and medium enterprises (SMEs) have high potential for impact, but it’s costly and risky to reach them with financing. Globally, SMEs in emerging markets face a financing gap of USD 1 trillion. To close this gap in rural communities, Root Capital partnered with Roots of Impact, the Swiss Agency for Development and Cooperation, and the Inter-American Development Bank’s Lab on «Social Impact Incentives (SIINC) to Unlock Finance for Early-Stage Agricultural Businesses in Latin America.» SIINC is one blended finance solution within the Impact-Linked Finance approach.

This report shares the essential findings from this project and lays out six lessons for how future Impact-Linked Finance projects can go even further in extending access to finance.

Project team:

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-> To the research paper, released in January 2022

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Project snapshot 2

«How Investors Perceive Impact-Linked Finance»

In this project, the University of Oregon and Texas Tech University research the investor perspective on Impact-Linked Finance. The currently ongoing project consists of two parts:

(1) A qualitative overview of how investors understand and perceive Impact-Linked Finance instruments, and

(2) an experimental portion testing the effect of an Impact-Linked Finance deal on investor self-report of propensity to invest in a given enterprise.

The results, once ready, will be released by the project team below and also shared on this page.

Project team:

Interested in our Impact-Linked Finance research topics?

We have a great network of practice partners and overview of the sector. For researchers who are interested in the specific topic of Impact-Linked Finance and would like to exchange or collaborate, we are happy to have a discussion. You can contact Jordan Wolken, Analyst Impact Intelligence & Education at Roots of Impact, at jwolken@roots-of-impact.org.

Project planned:

«Emerging Insights from Social Impact Incentive (SIINC) Agreements»

This study is planned to focus on developing insights from the experiences of a sample of prospective Social Impact Incentives (SIINC)-eligible enterprises, half of which have gone on to implement this specific Impact-Linked Finance instrument. The goal is to test the effectiveness of SIINC, an innoative blended finance mechanism that uses donor-facilitated impact monetisation to support and scale impact enterprises. 

Project team: tbd

Stay tuned for more research projects to come

Need to get an introduction into Impact-Linked Finance?

Would you like to understand the basic concept around Impact-Liked Finance?

Then this page by our IBF practice partner Roots of Impact is a great start.