The driver of this new replenishment process is for IDB Lab to develop a business model that is more scalable, generates more impact per each dollar deployed, and is financially more sustainable. IDB Lab aspires to evolve into a dynamic hub that harnesses emerging innovations to tackle the most pressing development challenges in the region and amplifies the impact of the entire IDB Group.
IDB Lab's capital will increase by up to $400 million. Of that amount, $200 million will be from fresh contributions from country donors, to be deployed over a seven-year period. Under the multisource funding model, these contributions would be matched by an equivalent amount from IDB net-income transfers. Furthermore, IDB Lab anticipates generating more resources from portfolio reflows and core mobilization from third-party organizations.
Future value proposition
As an innovation hub for inclusive development, and to continue increasing scalable impact, IDB Lab will undertake strategic shifts. Primarily, it will seek to leverage its convening power to serve as a central aggregator of actors and resources, with the goal of generating systemic impacts in addressing development challenges.
IDB Lab will also move from a single-project operational approach to a program-based model that encompasses multiple projects, tools, and partnerships. In doing so, it will also seek to generate greater synergies with both the IDB and IDB Invest.
At the same time, it will concentrate efforts around well-defined development challenges where entrepreneurial innovation can wield substantial impact but there is still not enough market support.
Ultimately, IDB Lab will play a leading role in enabling a new wave of entrepreneurial solutions capable of alleviating poverty, addressing the climate crisis, and fostering inclusive growth across the region.
The transition entails:
1. Regarding impact
a. More ambitious targets
- Triple the resources it mobilizes per dollar deployed and to scale up 40% of its projects.
- Ensure that 100% of its projects have a direct or indirect impact on poor and vulnerable (P&V) populations, that 70% address gender equality, and 50% the climate crisis.
b. Introduce innovations in measurement
- We are introducing the concept of depth of impact. This will allow us to see how much our projects change the life of the beneficiaries.
- We are also developing a methodology that will allow to report and learn from projects that indirectly reach P&V. For example, projects that are focused on gender, diversity or climate that have proven co-benefits for P&V.
2. Regarding long-term sustainability
To become less dependent on donor funding, IDB Lab proposes to transition to a multi-source funding model where future donor contributions are supplemented by increased self-generated income, greater resource mobilization, and transfers from the IDB.
a. Increased self-generated income
- We have been inverting the mix of financing instruments to make more use of reimbursable products. During MIF III we have gone from 40% to 60% and in MIF IV we would take it up to 75%.
- Equally important will be the greater ambition for Direct Equity investments, particularly Follow-on investments.
- Non-reimbursable instruments will continue to be used selectively to explore untested fields and to support innovations at their very early stages.
b. Greater resource mobilization
- The hub model contemplates engaging with non-traditional partners by creating new mobilization structures.
- More joint IDB Group efforts such as the C2LAC with IDB Invest or Source of Innovation and the Amazon Fund with the IDB.
c. IDB Transfers
- As IDB Lab provides more explicit value to the rest of the IDB Group, it will seek to obtain dedicated IDB funding through a net-income transfer mechanism.
Manzano Guillen, Maria De Gador
