Project: Armenia Dairy Productivity DIB
State of development: Current
Stage of development: Early stage
Stage notes: In mid to late stages with first iteration of design having been largely completed. Funders needed and then looking to engage service providers to co-create and finalise the design
Type of instrument — Impact Bond: Yes; Outcomes Fund: No; Social Impact Incentives (SIINC): No; Social Impact Guarantee: No; Payment-by-results (no pre-financing): No; Technical Assistance and Market-building program: No; Other: 
Part of a larger outcomes-based financing program: No 
Expected launch date: Q2 - 2023 or later
Total expected project development time: >24 months
Expected length of project (years): 6
Project design process began: 2020/2021
Rationale for using outcome-based finance: An impact bond aligns partners around shared incentives and associated accountability which is necessary to solve the inter-related market failures in Shirak dairy production leaving many smallholders without an avenue to earn their wayout of poverty. Rigorous monitoring and focus on outcomes measurement in an impact bond allows the programme to focus on changes in household income net of production costs, producing a more realistic measure of impact than other programmes. In an area where multiple interventions have not achieved sustained impact, an impact bond provides the flexibility to innovate in service delivery as well as strong feedback loops to understand what works. This is complemented by a focus on value for money which has been lacking in a number of other input-driven agricultural progammes.
Key challenges to launch: 1. The complexity of the issues area and number of interrelated challenges makes the context of operation complex
2. A lack of publicly available data on smallholder numbers, costs and intervention costs means that further iterations of the programme design and payment mechanism will be necessary
3. Lack of infrastructure and applicable public and private financial mechanisms to secure the sustainability of activities to be implemented during the project
Role of the domestic government — Outcomes funder: No; Service provider: No; Member of project committee: Yes; No formal role: No; Other: 
Service providers identified and selected — Request-for-proposals: Yes; Direct contracting by outcome funder/investor/intermediary: No; Provider-led deal development: No; Other: Service providers not yet selected . The procurement process has not been finalised but is anticipated to be open procurement following an RFP, potentially with an EOI stage before that
Feasibility study: Yes
Proposed financing instruments — Debt: No; Equity: No; Guarantee: No; Grant: No; Other: 
Technical assistance grant: Yes — 
Estimated maximum potential outcome payment: 4000000 USD
Social/developmental challenge: The poverty rate in the Shirak region is significantly higher than the Armenian average and agriculture, particularly dairy farming, is a key source of income. Dairy farming is however charactrised by low-input subsistence activity that leads to persistently high levels of smallholder poverty, indebtedness and outward migration. Low dairy productivity coupled with market failures in the dairy value chain mean that the market operates at a low-level equilibrium of poor quality and low prices, with little possibility of smallholders being able to pull themselves out of poverty
Expected intervention model: Holistic intervention that could include a multifaceted service package designed across four pillars of infrastructure, agricultural practices, operations and market linkages:
1)        Infrastructure: provide capital for processor and/or smallholder infrastructure investments, acting as co-finance where existing grant-programmes exist.
2)        Agricultural practices: provide training and vet services to improve smallholder practices.
3)        Operations: provide temporary input subsidies, which could be used to de-risk the additional costs associated with adopting new on-farm practices.
4)        Market linkages: support the development of market infrastructure/systems to promote quality-responsive milk pricing from processors, including the potential introduction of milk collection and cooling points. 
Policy sectors — Employment and private sector development: Yes; Education: No; Social protection: No; Criminal justice: No; Health: No; Agriculture: Yes; Environment and climate change: No; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: ; Other: 
Secondary SDG goals: 1, 2, 3, 8, 9, 10, 11, 12, 15, 17
Target population: Dairy processors and smallholders (with between 3 and 19 cows) in Shirak
Targeted number of unique service users or beneficiaries: 2708
Unit type of targeted beneficiaries: Individual
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: No; Upper-middle-income: Yes; High-income: No
Beneficiary notes: Approximately 2,700 smallholders and 8 dairy processors
Notes: Data for this pipeline project was last updated in April 2022.
Delivery location: Shirak, Armenia