Pay-for-Results Sustainability Strategy for Haiti

Pay - for - Results Sustainability Strategy for Haiti Capstone Project Final Report May 2023 Faculty advisor: Rob Johnson Team members: Ekky Gompa Simanjuntak Fernanda Benavides Kate Hyeon Jiahui Ju Sarim Raza CAPSTONE PROJECT FINAL REPORT MAY 2023 2 T ABLE OF C ONTENTS List of Abbreviation 3 Executive Summary 4 1. Introduction 5 1.1 Overview of Haiti 5 1.2 Overview of the Haiti Impact Facility (HIF) 7 2. Methodology 8 2.1 Desk Research 8 2.2 Funder Meetings 8 2.3 Interviews 8 3. Outcome - based Financing Recommendations 9 3.1 OBF Landscape 9 3.2 Similar Impact Facilities 12 3.3 Recommendations for Securing Funders and Investors 17 4. Haitian Diaspora Recommendations 24 4.1 Diaspora Opportunities and Landscape from Best Practices 25 4.2 Diaspora Engagement in Similar Contexts 27 4.3 Characterization of Haitian Diaspora 30 4.4 Haitian Diaspora Engagement Strategy 37 4.5 Product Recommendation to Haitian Diaspora 41 Appendices 53 Appendix A: HIF Infographic 53 Appendix B: Recent Impact Facilities 54 Appendix C: Impact Bonds in Latin America 56 Appendix D: Diaspora Bonds – Comparative perspectives 58 Appendix E: Haitian diaspora organizations in the United States 61 References 62 CAPSTONE PROJECT FINAL REPORT MAY 2023 3 L IST OF A BBREVIATION CAGR : Compound Annual Growth Rate CFO : Commission on Filipinos Overseas EDTF : Ethiopian Diaspora Trust Fund GDP : Gross Domestic Product HIF : Haiti Impact Facility ICRC : International Committee for the Red Cross IDB Lab : Inter - American Development Bank Innovation Lab LAC : Latin America and the Caribbean LDIF : Liberian Diaspora Initiative Fund LEDP : Local Economic Development Plans LoCAL : Local Climate Adaptive Living M4EG : Mayors for Economic Growth OBF : Outcome - Based Financing ODA : Official Development Assistance OECD : Organization for Economic Co - operation and Development ReDC : Remittance for Development Council UNCDF : UN Capital Development Fund CAPSTONE PROJECT FINAL REPORT MAY 2023 4 E XECUTIVE S UMMARY This report aims to provide recommendations for developing the funding pipeline of the Haiti Impact Facility (HIF), an outcome - based financing model that ties funding to the achievement of demonstrable impacts in Haiti. The HIF is an initiative of the Inter - American Development Bank Innovation Lab (IDB Lab) to transform Haiti's current cycle of aid dependency and create a more efficient development process with tangible results. The Capstone team researched to complement the work already done by the IDB Lab and its technical partner, Levoca, to facilitate the project's financing. This report focuses on the design of the HIF and aims to provide data - based strategic recommendations to orient th e financing mechanism. It consists of the following sections: an overview of the Haitian context and the HIF (Section 1); a discussion of the research methodologies (Section 2); lessons learned from other similar impact facilities (Section 3); and research on the potential of the Haitian diaspora as one of the financiers and champions of the facility (Section 4). CAPSTONE PROJECT FINAL REPORT MAY 2023 5 1. I NTRODUCTION 1.1 O VERVIEW OF H AITI Haiti is the poorest country in Latin America and the Caribbean (LAC) region (World Bank, n.d. a), with nearly 60% of the population living below the poverty line of USD2.42 per day (Levoca, 2021). The average GDP per capita in the LAC region in 2021 was USD8,327.60, while Haiti ’ s GDP per capita averages USD1,829.60 (Table 1), the lowest in the region (Worl d Bank, n.d. a). Haiti is also one of the most unequal countries in the LAC region, mainly due to the welfare gap between the urban and rural areas, stemming from 66% of the poor population living in the rural areas with limited means for income generation from agricultural production (World Bank, n.d. a). The reliance on remittances from the Haitian diaspora consistently increased and reached the highest amount of USD 4.2B in 2020, demonstrating an 11% growth between 2019 to 2020 and accounting for 20% of total GDP (World Bank, n.d. a). Table 1. Key Metrics of Overall Development in Haiti Key Metrics Total population (2021) 11,447,569 Net migration (2021) - 32,977 GDP per capita (USD, 2021) 1,829.6 GDP growth (annual %, 2021) - 1.8 Life expectancy at birth, total (years, 2020) 64 Personal remittances received (% of GDP, 2021) 20.0 Human Capital Index (HCI, scale 0 - 1, 2020) 0.4 Access to electricity (% of population, 2020) 46.9 Source: The World Bank CAPSTONE PROJECT FINAL REPORT MAY 2023 6 These statistics are relevant despite an average of USD 854.6M delivered in official development assistance to Haiti every year (Figure 1) (OECD, 2019), reinforcing the idea that the aid provided was ineffective in delivering the results to improve the lives of the vulnerable population. To elaborate, the sectors receiving the largest donations are health, followed by other social infrastructure and services, education, and humanitarian aid. Despite being the most invested sector, healthcare and education in Haiti remain challe nging. Haiti is experiencing a new cholera outbreak, and infant and maternal mortality rates remain high, with more of the poorest households losing access to prevention measures. The limited access to quality education and healthcare severely inhibits Hai tian children's potential, and it is predicted that over 20% of the children are at risk of cognitive and physical limitations. Further, only 61% of the adult population is literate, with 40% lacking access to essential health and nutrition services (Levoc a, 2021). Figure 1. Bilateral ODA by Sector for Haiti, 2019 - 2020 Average Source: OECD - DAC, Aid at a Glance Charts - OECD 2018 The development challenges in Haiti arise from the continued political instability, increasing violence, and unprecedented levels of insecurity, all of which combine to worsen the existing CAPSTONE PROJECT FINAL REPORT MAY 2023 7 fragility and vulnerability. Haiti remains vulnerable to natural di sasters such as earthquakes, hurricanes, and floods, with more than 96% of the population exposed to these shocks. Natural disasters have a detrimental impact on the economy, as demonstrated by the most recent earthquake on August 14th, 2021, that accumula ted more than USD1.6 billion in damage, costing 11% of the GDP (World Bank, n.d. a). 1.2 O VERVIEW OF THE H AITI I MPACT F ACILITY (HIF) Despite the consistent and significant inflow of aid from bilateral governments and multilateral organizations, Haiti has faced persistent development challenges. Hence, the HIF seeks to transform the development landscape of Haiti by employing the outcome - based financing (OBF) model. Specifically, the HIF will be a pay - for - results platform with a circular financing mechanis m between multiple stakeholders. As illustrated in Appendix A, the IDB will pool investors who will provide the working capital for selected service providers. The service providers will implement the projects and strive to achieve the pre - agreed - upon resu lts per contract. An external evaluator will verify their achievements, and the funder will repay the investors for the outcomes achieved. Some projects may also provide the investors with some return on their investment. A key part of this financing mec hanism is engaging with the funders and investors and having them financially committed to the projects. The value proposition of the HIF can be categorized into co - financing, ecosystem building, and knowledge - sharing. The outcome funders and investors can participate in the learning process of scaling up the positive outcomes of various evidence - based programs. The next appeal would be capacity building at the grassroots level through funding and investing in projects that will help service providers incre ase the effectiveness of service delivery. The last value proposition is knowledge sharing, which is particularly important since the HIF will launch between one to two pilot projects to build a proof of success. It will then scale up by implementing proje cts focusing on social protection and health, education, WASH (Water, sanitation, and hygiene), rural and natural resource development, and labor markets. CAPSTONE PROJECT FINAL REPORT MAY 2023 8 2. M ETHODOLOGY The Capstone team employed a mix of desk research, funder meetings, and interview s to generate new, insightful, and value - add information. It worked with the IDB Lab and Levoca teams to produce acute observations on the current development of the HIF and actionable recommendations on the best funder and investor engagement strategies. 2.1 D ESK R ESEARCH In the form of a literature review, desk research was used to analyze the OBF landscape, comparable facilities, and diaspora financing models, focusing on topics related to facility and project design and financing strategies. The analysi s involved identifying and selecting comparable facilities and OBF models, examining their key features, and drawing comparisons. The main findings of the analysis were used to develop recommendations tailored to the Haitian context and the HIF design, whi ch focused on addressing the key economic development challenges in Haiti and leveraging diaspora resources to support these efforts. 2.2 F UNDER M EETINGS The Capstone team participated in ten meetings with potential funders and the IDB Lab and Levoca teams. The Capstone team aimed to understand the fundraising process and identify strategic recommendations. 2.3 I NTERVIEWS The Capstone team conducted seven one - on - one interviews with members of the IDB Lab and Levoca teams involved in the HIF and other Haitian diaspora experts. The interviews were conducted in a virtual setting over a 30 - minute time frame, with one Capstone team member acting as a facilitator and another as a note - taker. The conversations were not recorded. The purpose of the inter views with the IDB Lab and Levoca team was to derive lessons learned during the first year of project execution. The interviews with the Haitian diaspora aimed to gain insights into any successful examples of Haitian diaspora financing efforts that contrib uted to the development of Haiti. CAPSTONE PROJECT FINAL REPORT MAY 2023 9 3. O UTCOME - BASED F INANCING R ECOMMENDATIONS Key Points: 1. The HIF should coordinate with local communities to identify urgent needs, develop systemic interventions allowing for innovative outcome delivery, and give servic e providers autonomy to adapt to unexpected events in fragile contexts for optimal resource utilization. 2. Private sector partnerships are crucial to the success of OBF and impact facilities, enabling innovation, cost reduction, funding alignment, and sustainability through blended financing. 3. To engage governments in fragile contexts, the HIF should offer capacity building at the local level and incentivize officials to prioritize outcomes through an outcomes - driven approach, building sustainable partn erships and maximizing impact despite political instability. 3.1 OBF L ANDSCAPE Outcome - based Financing refers to any mechanism involving the funder providing payments to individuals or institutions when the pre - agreed - upon results are achieved and verified (World Bank, n.d. b). It includes various applications, such as social impact bonds, pay - for - results contracts, or performance - based - aid (OECD, 2019b). The OBF landscape has grown significantly over the past few years, particularly with the increa sing attention on the efficient use of resources and demonstrable results during the COVID - 19 pandemic, which regressed some of the integral achievements in development. Most recently, as the financial market stabilized, OBF attracted interest from the dev elopment sector as an innovative tool that can transform the way development functions. According to the Outcome Accelerator Report (2022), between 2022 and 2023, more than 300 OBF programs were launched across various sectors and geographies, with the tot al financing estimated to be around USD 3 billion. The form of OBF applications that experienced the most momentum were social impact bonds and blended finance. CAPSTONE PROJECT FINAL REPORT MAY 2023 10 The increase in development projects employing outcome - based financing models and their success es highlight a need to consolidate the lessons learned from the most relevant and successful OBF models. The following recommendations are based on comparable OBF projects in fragile contexts, focusing on tying back the lessons to the observations by the C apstone team throughout the engagement with the clients and funders. 1. Use OBF as a tool for driving innovation Case Study: Innovation is a pivotal part of delivering results in fragile contexts, and OBF has proven to be a tool that can drive innovation thro ugh an outcome - based lens. An example of this can be taken from Sierra Leone (Global Partnership for Education, n.d.). The country faces significant development challenges, with learning levels ranking among the lowest in the world. Children born in the co untry can only expect to complete 8.9 years of school, or 4.5 years when adjusted for learning, by the time they turn 18. This is out of a total of 12 years of formal education that is expected by this age. Despite lifting the ban on pregnant girls attendi ng school in April 2020, other factors such as early forced marriages, school - related gender - based violence, and poor in - school sanitation facilities continue to present challenges for girls' education. Consequently, the government has prioritized girls' e ducation as part of its policy agenda. The target population for this project includes 134,000 children enrolled in grades one to six across public schools in Sierra Leone, with a particular focus on girls. To achieve this, five service providers were sele cted to implement five distinct interventions across five geographical lots. The outcomes - based financing program aims to engage with non - state actors and align incentives to improve learning. Key Takeaways for the HIF : One of the major reasons this progr am have been successful is because i) multiple service providers were selected to achieve the same outcomes, and ii) service providers had the autonomy to choose the best method to accomplish these outcomes. These two factors allowed the OBF to become a ca talyst for driving innovation in the sector. Given Haiti's complex development challenges, driving grassroots - level innovation is a prerequisite for an effective development. The HIF can use OBF to drive innovation in multiple sectors in Haiti by setting o utcomes for service providers and allowing them to innovate to achieve the set outcome. 2. Increase government engagement through an outcomes - driven approach Case Study : One of the paradoxes of the international development landscape has been that it has oft en operated in isolation from the public service delivery landscape, resulting in the creation of alternate public service delivery systems in developing economies. An example of this can be working on improving the education sector of the CAPSTONE PROJECT FINAL REPORT MAY 2023 11 country, without improving the public education system, but creating a separate system of education provision. The caveat to these alternate structures is that they fall apart as soon as the development body behind them pulls back. This phenomenon has also been seen in th e OBF landscape, making a case for inculcating government engagement into the design of the OBF model in use. An excellent case study illustrating this phenomenon is the Outcomes Fund for Physical Rehabilitation in Pakistan, which seeks to tackle the unmet demand for mobility - focused assistive devices in the population (Palladium, n.d.). With over 1.1 million people in need within a population of 220 million, the current infrastructure of physical rehabilitation services is not equipped to meet this demand. Healthcare insurance schemes only cover some of these services, leaving patients with significant out - of - pocket expenses. The intervention aims to ensure the sustainability of high - quality physical rehabilitation services without continued support from th e International Committee for the Red Cross (ICRC) and increase government engagement to ensure coverage of these services within the national health insurance scheme. The intervention proposes building a data - driven business case to demonstrate the econom ic and social benefits of expanding healthcare coverage to physical rehabilitation services. The payment for physical rehabilitation services would be linked to quality - of - service delivery outcomes, and reimbursements for additional services would be made to the national health insurance scheme. The linkage of the project with the national insurance scheme is pivotal to ensuring the sustainability of the project, after ICRC and other partners exit the project. Key Takeaways for the HIF : Although the Outcome s Fund for Physical Rehabilitation in Pakistan is still in its ideation phase, it is an excellent example of how OBF can be used to show outcomes to already established government projects and develop projects that the government can run in the future. The ability of OBF to increase efficiency for development outcomes can allow it to be tied to government public service delivery, hence allowing OBF to act as a catalyst to increase efficiency for the delivery of public services while also creating a sustaina ble model for public service delivery. In the case of the HIF, this strategy can be used to increase government engagement down the line. 3. Leverage shared value corporate partnerships Case Study : Social Finance worked with Google to develop the Community V ehicle Specialist (CVS) program, a vocational training and job placement initiative designed to help people in underserved communities within the United States develop marketable technical skills and secure employment (Social Finance, n.d.). The CVS progra m provided training on automotive maintenance and repair, soft skills, and job readiness. The program was offered in partnership with local workforce development organizations and CAPSTONE PROJECT FINAL REPORT MAY 2023 12 community colleges, and graduates related to job opportunities at participat ing dealerships. Social Finance designed a Pay for Success model to finance the program, with investors providing upfront funding and being repaid based on the program's success in placing graduates in jobs and achieving specified wage targets. The program was successful in helping participants secure employment and advance in their careers, with 85% of graduates being placed in jobs and over 80% retaining employment for at least six months. Key Takeaways for the HIF : This is an excellent example of how pri vate sector investments can be mobilized by creating shared - value projects, where the private sector has a dual benefit of engagement, i.e., return from and business contribution to the project. Exploring shared value partnerships in the context of the HIF can result in the development of more innovative development solutions and reduction in costs. Furthermore, it can help align incentives for the private sector in Haiti to invest in development outcomes, resulting in a possible sustainable source of fund ing with a shared - value element for the private sector. 3.2 S IMILAR I MPACT F ACILITIES Impact facilities, like the HIF, are impact hubs that provide resources and support for organizations and OBF projects. They can be categorized into four types based on sector focus and geographical location. • The first type focuses on multiple sectors and operates in several countries. • The second type focuses on a single sector and operates in multiple countries. • The third type covers various sectors but operates in a single country. • The fourth type focuses on a single sector and operates in a single country. Figure 2 shows the distribution of the impact facilities that were analyzed for this report (see Appendix B for more detail). The figure shows that the fourth typ e is the most prevalent, with half of the facilities analyzed operating this way. The HIF would fall under the third type, operating exclusively in Haiti but addressing multiple sectors. Although working across multiple sectors may present more challenges for the HIF, according to the Capstone team ’ s interview with a HIF team member, the HIF was intentionally designed in this way to harness the benefits from flexibility, a broader impact, and a shift from the status quo. The analysis was that too many devel opment projects stay siloed when focusing on one sector. CAPSTONE PROJECT FINAL REPORT MAY 2023 13 Figure 2. Distribution of Impact Facilities Source: Authors own work In this research, the focus is on the facilities that either work in similar fragile contexts, impact local communities, or use an OBF model like the HIF. Below are four specific recommendations for the HIF based on best practices from other similar impact facilities. 1. Focus on local needs and priorities and conduct a systematic approach to ensure the model ’ s sca lability and effectiveness It is important for an initiative focusing on local development to prioritize designing context - appropriate solutions that are informed by user needs. Case study : The Mayors for Economic Growth (M4EG) Facility is an impact initia tive operating in the secondary cities of six countries, including Moldova, Ukraine, and Armenia. The initiative uses an innovative portfolio approach to support the local economic development plans in countries where complex challenges require new models of thinking, beyond the sector - specific or technical solutions (M4EG, 2022). The local CAPSTONE PROJECT FINAL REPORT MAY 2023 14 authorities engage in a three - step process to develop a coordinated portfolio of interventions aligned with the goals and priorities of their communities: 1) listen to s takeholders to identify local needs and priorities, 2) analyze the information gathered to develop a better understanding of the local context, and 3) select the best projects. The deep analysis of the cause through proactive engagement with the local comm unity helped M4EG implement a coordinated portfolio of economic development interventions that are aligned with the goals of the Local Economic Development Plans (LEDP). M4EG also uses a three - step system innovation approach (Figure 3) to implement the co ordinated portfolio efficiently. The first step involves building an adaptive portfolio of connected interventions that learn from each other and lever change in socio - economic systems (M4EG, 2022). Then, M4EG works collaboratively to design a portfolio wi th interrelated interventions. The third step is establishing a framework and capabilities for adaptive management to ensure that the interventions remain relevant and effective over time. Figure 3. Three steps of the systems innovation Source:Mayors f or Economic Growth Facility, "Overview of M4EG.” Key Takeaways for the HIF : The HIF can collaborate with various stakeholders to develop systematic interventions that are coordinated and aligned in addressing the most salient local needs and priorities. Moreover, establishing an adaptive management framework, including continuous monitoring and evaluation of the interventions, can help to ensure their relevance and efficacy over time. An adaptable and iterative outcome verification matrix can also be developed to track the interventions' progress and outcomes. CAPSTONE PROJECT FINAL REPORT MAY 2023 15 2. Apply blended financing models that combine concessional debt and grants as catalytic funding in various sectors to promote sustainability and attract private sector investment. Blended f inancing, like concessional debt, enables facilities to attract more funding, and at the same time, grant awards as catalytic funding for the stakeholders. Case study: The Youth4Business Innovation and Entrepreneurship Facility is an initiative in Uganda t hat uses competitive catalytic funding in the form of blended finance to support innovative solutions to youth unemployment. This approach combined concessional debt finance from partner financial institutions with grants providing matching funds, leveragi ng private sector investment to ensure sustainability and gain additional support for youth - led businesses (Youth4Business, n.d.). This financing model also ensured sustainability by incentivizing financial institutions to provide longer - term loans to yout h - owned SMEs, which allowed for scale ups that de - risked the investments. Key Takeaways for the HIF: The financing model that combines grants and concessional debt finance can be extended to other sectors of the HIF, on a contract - by - contract basis. The ap proach will be most useful for service providers that do not have sufficient internal capital. For instance, concessional debt finance can offer financial support to smallholder farmers, cooperatives, and agribusinesses in the agriculture sector, resulting in increased productivity, enhanced market access, and the promotion of sustainable agricultural practices. Additionally, in the climate sector, grants and concessional debt can act as catalytic funding to encourage regenerative practices that build clima te - resilient coastlines and make seedlings affordable and accessible. Efforts of this kind enhance the long - term viability of the investment. 3. Ensure the transparency and accountability of funding distribution and engage with the Haitian government and oth er trusted local organizations. Involving government, trusted local organizations or international organizations with a strong presence in the financing model increases the transparency and accountability of funding, making the funding opportunity more att ractive to the stakeholders. Case Study: The Local Climate Adaptive Living (LoCAL) facility provides innovative financing to local governments in the least developed countries such as Nepal, Niger, Burkina Faso, Sudan, Guinea, Liberia, Uganda, Tanzania, Malawi, Mozambique, Zambia, to respond to climate change (UNCDF, n.d.). The grants are channeled through existing government systems from national treasuries to the local level, ensuring that local governments get their normal budget and additional grants. Grants are awarded based CAPSTONE PROJECT FINAL REPORT MAY 2023 16 on meeting specific milestones, incentivizing local governments to use the funds effectively and accountably. Key Takeaways for the HIF: During the interviews with the HIF team, the Capstone team identified that one of the HIF ’ s biggest challenges to implementation is political instability, along with the resulting corruption and collusion. The World Bank Group considers corruption a major challenge to its twin goals of ending extreme poverty by 2030, since corruption impedes inve stment, with consequent effects on growth and jobs (World Bank, n.d. c). Using similar approach as the LoCAL facility, the HIF can increase trust and transparency by ensuring that funds are distributed through established and auditable government channels. However, Haitian institutions do not trust the government because of its history of serious corruption. The extent of the problem is evident from Transparency International's 2018 Corruption Perceptions Index, which ranked Haiti as the second - most corrup t country in the Western hemisphere, trailing only behind Venezuela (Lherisson, 2018). The HIF can distribute fund directly, but this case study suggested that in Haiti where there is a lack of trust in government, partnering with trusted local NGOs or int ernational organizations with a strong presence in Haiti as a channel for fund distribution helps ensuring transparency and accountability. Furthermore, engagement with the Haitian government and other stakeholders may be necessary to address any concerns or issues related to trust and transparency. 4. Prioritize sustainability by prioritizing resilient projects and investing in local authorities to improve their capacity. Identifying the projects that are more resilient to the country ’ s fragile context and building capacity to improve local ownership can help promote sustainability and scalability. Case study: The M4EG network was designed so that the cities could benefit from training, capability development, and knowledge exchange activities fo cused on building innovative growth strategies that are highly contextualized on local ecosystems. Key Takeaways for the HIF: When identifying projects in Haiti, additional effort must be invested to determine whether they would be resilient against Haiti ’ s fragile political context. On the one hand, an ideal project for the HIF may not be the ideal project for the public sector, or political unrest may cause difficulties when collaborating with the public sector. Furthermore, the most resilient projects m ay not be the best fit for the OBF model. Therefore, to ensure an effective intervention, it is crucial to choose projects that are both CAPSTONE PROJECT FINAL REPORT MAY 2023 17 robust and sustainable in the Haitian context, by mitigating against any potential unrest and providing ample flexibili ty during the design process. Additionally, the HIF should leverage partnerships with local organizations to build local capacity, ensure local ownership of projects, and promote sustainability and scalability. For example, to build local capacity, the HIF could provide technical assistance and training to local partners on regional financial management system or budgeting system. Also, the HIF could promote knowledge sharing and learning by establishing a network of local authorities, such as the Urban Lea rning Center, which provides learning modules, resources, peer - to - peer support, and mentoring, to provide training and technical assistance to local partners and encourage collaboration among different stakeholders. To promote ensure local ownership of pro jects, the HIF could involve local communities in the design and implementation of projects and provide training to help them take on leadership roles in managing and sustaining the projects over the long term. 3.3 R ECOMMENDATIONS FOR S ECURING F UNDERS AND I NVESTORS Key Points: 1. To ensure clear communication with funders and investors, simplify the model by offering different scenarios and clearly stating the value proposition of the HIF, which would help organizations understand their roles and responsibilities and visualize their involvement. 2. Target large - to - medium size foundations with prior experience in Haiti and provide a strong value proposition to re - direct or increase funding. 3. Ensure transparency at every engagement process by leveraging in - person meeting opportunities and create a multiplier effect between the interested funders and investors and data - sharing initiatives. To better understand the funders and investors that make up the OBF world, the structure of Latin American impact bo nds and lessons - learned reports were analyzed (Appendix C). The findings from this analysis were then applied to the HIF model to provide strategic recommendations for funder and investor engagement. The recommendations are grouped in two different categor ies: (i) Recommendations from best practices and (ii) Recommendations for enhancing the engagement processes of funders and investors. The first type of recommendations is mainly based on lessons learned documents from past CAPSTONE PROJECT FINAL REPORT MAY 2023 18 impact bonds, and thus, can be a pplied more generally. The second type of recommendations are more specific to the HIF, as they are mainly based on observations made by the Capstone team throughout the project. 1. Recommendations from best practices A. Engage the outcome funders early in the design process and find a champion within the organizations Since the outcome funders will pay for the results, they must be on board with the timeline, costs, and metrics from an early project stage. Mainly because most donors are agenda - driven, they will likely want to be part of the project design to ensure it is feasible and aligns with their goals and agenda (Oroxom et al, 2018). Involving the funders in the project design will make it easier to align the project goals with the funders' goals and e nsure that the project meets their expectations. Furthermore, to have a successful funder engagement strategy, finding a senior funder organization that can champion the process is recommended. The HIF is currently executing this strategy through multiple one - on - one conversations with the funders during the project design and scope assessment phase. To ensure the success of the HIF, the Capstone team suggests bringing more emphasis on consolidating trust among all different stakeholders throughout the imple mentation process. For example, data sharing could help the funders and investors understand how their money will be spent, allowing them to manage their expectations from the beginning of the project. B. Engage more than one outcome funder to diversify risk Having a pool of outcome funders helps diversify the risk and provides investors the certainty of repayment if outcomes are achieved. Most of the past experiences in Latin America had multiple funders, allowing them to share the project's burden between d ifferent actors (Agusti Strid, & Ronicle, 2021). Additionally, engaging more than one funder increases the likelihood of successfully raising the amount of money the HIF needs. “ Splitting the bill” between organizations may help engage funders sooner. A c aveat to consider when engaging multiple funders is that each additional organization can bring a new set of priorities and interests (Gustafsson - Wright et al, 2017). This may add more complexity in terms of the organization and decision - making processes o f the HIF. CAPSTONE PROJECT FINAL REPORT MAY 2023 19 C. Target suitable investors, with a particular emphasis on foundations, while remaining open to other types of organizations Since the HIF focuses on social impact, the investors engaged with the model should have an aligned focus on impact. Henc e, the primary type of investors the HIF is trying to engage are foundations, which have the resources that can be mobilized and a shared social vision. Additionally, the main type of investors in Latin American social bonds were local foundations, further emphasizing that these types of investors have already demonstrated a significant interest in taking on the funder and investor role in OBF projects. Nonetheless, other types of investors have been part of impact bonds in Latin America. For instance, in A rgentina, the social impact bond Egresar - Proyecta tu Futuro had among its investors two banks and one corporation (de la Pe ñ a, 2021), demonstrating that it is possible to engage the private sector in this type of projects. And, as it was mentioned in recommendation #3 of section 3.1, mobilizing private capital to invest in development outcomes can be useful to develop a financial sustainability strategy in the long term. Thus, the HIF should explore engaging private sector investors. Specifically, beca use the private sector invests in projects that not only focus on the financial return but also on social impact has increased during the last years, and the HIF can be a good opportunity for them to fulfill both interests. D. Reach out to investors who are already knowledgeable of the work by the service provider organizations Contacting investors who are already aware of and appreciate the projects and work of the service providers helps leverage the reputations of the organizations involved and invites a m ore diverse array of private - sector investors (Oroxom et al, 2018). The Capstone team noticed that in initial conversations, many potential funders/investors asked about the service providers and if some specific organizations would be part of the projects . These questions are common because investors want to minimize risks. If the service providers are organizations well known to them, then the risk of not achieving outcomes will likely decrease, and they can feel more confident about their investment. 2. Re commendations for enhancing the engagement processes of funders and investors A. Articulate the value proposition showing the upside of working with the HIF CAPSTONE PROJECT FINAL REPORT MAY 2023 20 The Capstone team suggests communicating the value proposition of the HIF more strongly with the funde rs and investors, so that they can understand the leverage the HIF will bring, such as matching the funding and the built - in infrastructure. This is important because most of the funders that the HIF is targeting, which are those with prior experience in f inancing development projects in Haiti or other fragile contexts, or have demonstrated interest in OBF models, will have a similar portfolio of grantee partners. To convince them to finance these service providers through the HIF, instead of through their existing pipeline, the HIF needs to emphasize that the same financing will be achieved but at lower cost and effort for the funder organizations, as these will be borne by the HIF. In other words, appeal the benefit of working with an impact facility, whic h aims to achieve economies of scale by financing multiple projects through an intermediary that is responsible for project management, monitoring and evaluation, and others. After thorough review of the HIF ’ s current contact for funders/investors, the Ca pstone team developed a list of additional organizations that may be interested in investing in fragile context or have demonstrated an explicit interest in Haiti (Table 2). The organizations are grouped according to their types. Hence, to market the HIF to these organizations, the Capstone team suggests focusing on the value proposition. From separate conversations with foundations, the Capstone team discovered that the foundations would express greater interest in funding the HIF if their fundings we re matched by the IDB, i.e., USD200,000 for an equal amount pledged by the funders. For multilaterals and bilateral aid organizations, an appeal could be the alignment of funding, as they would be financing similar service providers, but the HIF offers an ease of process through an established due diligence, project infrastructure and management, M&E, and data management that is not costed out to the funder. Concerning diaspora organizations, the visibility of the HIF could help with the marketing of the or ganizations ’ missions to a larger audience. Similarly, the corporate organizations could aim to leverage the HIF in its marketing and corporate social responsibility initiatives . CAPSTONE PROJECT FINAL REPORT MAY 2023 21 Table 2. Potential Funders/Investors Source: Authors own work B. Focus on large - to - medium sized foundations with prior experience in Haiti to channel the inflow of funding to the HIF Another suggestion for the HIF is to strategize whether they will target one large foundation that can provide larger funding size, or sma ll - to - medium foundations that typically deploy grants in the range of US10,000. This is from an observation made in funder meetings, where a small family foundation was highly curious about whether their smaller grant size would be a meaningful contributio n to the HIF. However, if the HIF would like to continue pursuing mid - size funders, then the important value proposition would be investing into a standardized vehicle of funds that can bypass the legalities involved in financing organizations. Hence, a cr ucial step for the HIF at the current stage to ensure sustainability of its financing strategy would be deciding whether trying to channel the funding already flowing into Haiti or bring in funders who are not investing in Haiti but are interested in the O BF model. In the prior case, the value proposition should be based on pointing out why these funders should steer their funding away from existing organizations. The latter should focus on leveraging the value of IDB, its expertise in the region and social impact bonds, to convince the funders that the HIF can overcome the persistent political instability. Observing the breadth of conversations of the HIF, the Capstone team suggests working with bigger organizations that can work together with the HIF to bu ild a proof of success that will be crucial for scalability and sustainability . CAPSTONE PROJECT FINAL REPORT MAY 2023 22 C. Provide different scenarios when presenting the HIF to potential funders/investors When reaching out to potential funders and investors, IDB Lab and Levoca used a strategy th at did not impose a role (funder vs. investor) for the organization to fulfill. In other words, the HIF team allowed the organization to self - select based on their interests, whether they saw themselves as a funder or investor, after thoroughly understandi ng the HIF model and expressing how they believed their needs and goals would be mutually beneficial. The advantage of this strategy is that the HIF team did not close the door to any possibilities – the organization could explore all the possible roles they want to play within the HIF. However, the Capstone team noticed that this strategy could lead to so me confusion for the organizations, as many would repeatedly ask clarifying questions about the expectations of the HIF team for their organization and the responsibilities and benefits each role would entail. To tackle this situation, the Capstone team r ecommends formulating different scenarios for funders/investors that explain the hypothetical responsibilities they would face in each role. Using this approach, it can be easier for them to identify as part of the HIF. Furthermore, since the technical det ails of the HIF are still being defined, it may take much work to answer technical questions about the HIF, e.g., the amount expected from the donors/investors and return on investment, within a short time during the meetings. Hence, providing a range of e xpected funding or returns might be helpful. D. Meet with funders/investors in person and gather a pool of interested funders/investors in the same meeting Remote meetings can be challenging due to technical matters (like internet connection) and the “ person al connections” are more difficult to achieve. Talking to a person through a screen makes it more challenging to identify if they are paying attention to the meeting or understanding what is being proposed. Therefore, holding meetings in person should be c onsidered, when possible, mainly because the goal of the meeting is to convince the other organization to be part of the HIF. Additionally, engaging funders and investors is time - consuming because it requires constant follow - up to emails, calls, and coordinating multiple calendars. One alternative the HIF can consider speeding up the process is to gather a pool of organizations t hat have already expressed their interest in the project as funders/investors and organize a meeting with all of them simultaneously. This boosts the interest of organizations if they CAPSTONE PROJECT FINAL REPORT MAY 2023 23 perceive that others are also willing to participate in the project and push funders to confirm commitments. E. Explore the possibility to aggregate the funding on the ground The HIF could consider tapping into informal groups within the diaspora community that will help to aggregate the funding from individual level investors. These saving groups, also called Sòls or Susu in Creol, are the method for building social capital based on trust within a group of people (Steinberg, 2021). This method is used by many of the Latin communities to avoid unfamiliar processes and unnecessary fees in opening and maintaining bank accounts. The engagement of the HIF investor through diaspora Champions could also engage the leaders of the local Sòls to work to convince broader savings group members. CAPSTONE PROJECT FINAL REPORT MAY 2023 24 4. H AITIAN D IASPORA R ECOMM ENDATIONS Key Points: 1. Since the Haitian diaspora is dispersed, the HIF needs to develop a systematic approach to align interests with different segments in the Diaspora Community. This would require mapping the Diaspora community based on salient characteristics. 2. The potential of the Haitian diaspora mainly lies in its larger size relative to some other successful diaspora engagement in the US. However, it is essential that the HIF brings together the Haitian diaspora through effective trust - buildi ng and tailored product offerings. 3. The least risky and costly option to consolidate the vast Haitian diaspora in the US is crowdfunding. Crowdfunding is the most appropriate product for the Haitian diaspora as it can offer ease of access, process a high nu mber of transactions, and be tailored to various ticket sizes of funding. After crowdfunding proves to be successful, the HIF could gradually expand to other products based on market feedback. This section continues the recommendations for engaging with the existing funders and investors, explicitly focusing on utilizing the Haitian diaspora ’ s potential as another key stakeholder. After establishing a thorough understanding of diasporas worldwide, the successful cases of diaspora engagement will be explo red to provide a complete analysis of how other countries leveraged their diaspora ’ s potential for national development. Then, Haitian diaspora characteristics are analyzed in detail, and the observations are combined with the best practices from other dia spora engagement examples to provide a detailed engagement strategy and products tailored to the distinct Haitian diaspora characteristics. The Capstone team ’ s interviews with the Levoca team revealed that one of the perceived strengths in the working dyna mic between the IDB Lab and Levoca is the presence of the Haitian diaspora as the primary executors and managers of the HIF. As such, the HIF has readily components it can leverage to properly engage the Haitian diaspora. Yet, with a deeper understanding o f their characteristics, the HIF can approach the Haitian diaspora CAPSTONE PROJECT FINAL REPORT MAY 2023 25 strategically and avoid repeating the same mistakes as other international organizations that failed to gain trust and engagement. 4.1 D IASPORA O PPORTUNITIES AND L ANDSCAPE FROM B EST P RACTIC ES There are many examples of the diasporas supporting their home country ’ s development. The most common example is through remittances, where the diaspora sends a portion of their earnings to their close family or friends back home to support basic life n eeds. Another example is through foreign direct investment in industries such as tourism and technology, which usually account for a significant amount of a country ’ s GDP (Nicolas, 2016). They can also act as reputational intermediaries and cultural interp reters (Agunias and Newland, 2012), contributing to increasing FDI, trade, and cultural promotion of the home country. According to the Gevorkyan (2018) model, the benefits of diaspora engagement can be generalized into the following for categories: 1) ma croeconomic development, 2) social development, 3) institutional change, and 4) repatriation. Figure 4 models the gradual growth of the four factors through an arrow indicating the direction of the improvement. The ideal outcome, a positive change in all f our factors, is represented by the blue arrow showing a movement in the northeast direction. There are different strategic initiatives that the national government can undertake to harness the four benefits. For example, growth in domestic industry, incre ase in FDI and remittances, formation of a migration development bank or diaspora portal, are all diaspora engagement initiatives that can contribute to the development of the country ’ s macroeconomy. On the other hand, social development growth can be fost ered through an increase in aid, charity, grant, and the number of NGOs in the country. Furthermore, the increased accountability and transparency required by the diaspora in return for proactive engagement will indirectly lead to improvements in political and institutional development. These advancements can, in turn, eventually increase in repatriation, such as in the case of the Indian Diaspora in the United States (Tejada, 2016) and the Asian Diaspora in Australia (Hugo, 2016). The model also shows how diaspora contributions differ from one to another depending on the development focus areas. The four factors surrounding the model are the benefits that countries can expect from engaging the diaspora, motivating the countries to implement national strateg ies to harness these effects. The location of each point repre