Abstract:
In July 2012, three freshly-minted Harvard Kennedy School graduates bought one-way tickets to Medellin, Colombia, to launch a nonprofit startup they called Instiglio. Their idea: to bring Social Impact Bonds, still experimental even in affluent nations, to Colombia and other low to middle income countries. This statistics case--one of two nearly identical HKS cases about Instiglio--provides background about the SIB model (a financing mechanism for experimental social programs, with private investors shouldering the financial risk of failure) and tracks the early experience of the HKS graduates in Colombia. The case includes a summary of the issues the group faced in designing a first draft SIB agreement, including several questions about evaluation design and tricky issues in structuring a payment system. The other HKS Instiglio case, HKS case number 2026.0, Betting Private Capital on Fixing Public Ills: Instiglio Brings Social Impact Bonds to Colombia, intended for a policy analysis course, emphasizes the process of selecting a project, given limited information and political complexities.
Learning Objective:
This case is designed to focus the class on challenges of crafting a SIB agreement, including evaluation design: how to select treatment and control groups; how to select a measure of performance that is both legitimate and practical; how to address the potential for a social desirability bias. The case also supports discussion of the contractual payment deal and the complicating question of standard error.
