Development Impact Bonds in Financing Flood Risk Management

In this paper, the authors propose a new innovative solution to financing flood prevention and financing its consequences using the development impact bonds model. Firstly, the necessity of financing the flood problem is to be described as a public task, including the presentation of previous methods and solutions. Secondly, the authors derive a new model for financing flood problems basing on development impact bonds. This kind of financing comes from the New Public Management idea called "payments-by-results". The new model shows that there is a possibility to construct a financial mechanism, which allows financing anti-flood interventions, such as relocation of residents from flood-threatened areas, using private financial resources, and giving the government the guarantee to pay only for the success of the intervention, which means a guarantee of effective public spending. At the end of the paper a SWOT analysis into this solution is presented.