CommunicationPublished on 19 May 2026

Impact-linked finance: funding only for projects with a measurable impact

How can the impact of development funding be further increased? Impact-linked finance (ILF) is one way. The principle behind this innovative financing model is simple: only projects that generate additional social or climate-related benefits while also attracting private investment receive financial support. A visit to two social enterprises in Bangladesh shows how ILF works.

ILF incentivises innovation and sustainable solutions: at the Apon supermarket, textile workers benefit from low prices and free health insurance. — © SDC

In Bangladesh, the daily lives of millions of people are affected by precarious wages in the textile industry and uncertain agricultural yields. Two social enterprises are demonstrating how entrepreneurial innovations can tackle these challenges in concrete terms: the Apon company is improving living conditions for textile workers directly in the workplace, while the start-up Aunkur is empowering smallholder farmers with innovative technology. Both examples illustrate how ILF in development cooperation adds social value.

• A supermarket with a social mission: a concept proving its worth

  

  Saif Rashid runs supermarkets on the premises of textile factories, allowing employees to shop at lower prices right where they work. — © SDC

  Apon is a social enterprise that runs supermarkets directly on the premises of textile factories. Why? Because wages for the predominantly female workforce are very low. At around CHF 80 per month, textile workers earn just half the average salary in Bangladesh. “Higher wages aren’t feasible in this industry due to global competition,” says Saif Rashid, founder and CEO of Apon. “This is where our business model comes in: instead of workers receiving higher wages, they can shop with us at lower prices – an average 10% cheaper than at the bazaar.” Purchases are made on credit and deducted directly from the workers' wages at the end of the month. “This means that the company pays them the exact amount of money they still have left.” Apon also offers employees free health insurance, which 14,000 people have made use of so far.

  “Everyone benefits”

  The textile companies give the retail spaces to Apon free of charge. For Kazzi Moazzem Huq, CEO of garment manufacturer Silver Composite Mills Ltd, where Apon operates a supermarket, this is a win-win situation: “Everyone benefits: both our company and our 4,000 employees. After a long day at work, they don't have to trek all the way to the bazaar any more. They can just do their shopping here on site during their break and pick up their stuff after work.”

  Under ILF, the SDC has provided Apon with USD 250,000 paid out in instalments – each linked to clearly defined impact targets. The company also secured a business loan of USD 1.5 million from a private investment fund. This synergy is central to the ILF approach: the focus is not only on financial support, but on the targeted linkage of business growth with measurable added social impact.

  Originally, Apon's business model was primarily based on expansion – i.e. the number of supermarkets and products on offer. It was only through ILF that impact became a key business metric, including customer savings, number of health insurance policies taken out, and the ratio of women among the beneficiaries.

  Building on this, Apon is now striving to achieve some ambitious goals: the company aims to reach up to 150,000 employees and enable total savings of USD three million for its customers going forward.

• Smart agriculture boosts yields for 40,000 farms

  

  Aunkur CEO Shurid Mashrur: with data-driven solutions, Mashrur's social enterprise helps farmers operate in a more productive, cost-effective and climate-friendly manner. — © SDC

  The social enterprise Aunkur, which also benefits from the SDC's ILF system, takes a different approach. Co-founder and CEO Shurid Mashrur explains: “I come from a smallholder farming family and I know the challenges farmers in our country face.” This used to include a lack of reliable data to make informed decisions about what to plant, when and where. “With our three-part solution, we can now provide farmers with this important information.”

  First, a specially developed device is used to measure soil conditions in the field, identifying which nutrients are lacking and which fertilisers should be used. The second component is a mobile weather station supplying real-time weather data and forecasts. “Both data sets are fed into an evaluation system that combines the information and provides specific recommendations for suitable crops and ideal planting times,” explains Mashrur.

  Aunkur received USD 100,000 from the SDC, which is tied to additional outcomes that must be specific and measurable: the number of farmers supported, lower production costs, higher yields (8-12%), rising incomes (8-15%) and lower CO₂ emissions. So far, Aunkur has supported over 40,000 farms with its solution. “And that's just the beginning.” The potential in Bangladesh, a country shaped by agriculture, is huge, says Mashrur. And so are his ambitions.

From grants to investments

ILF is an innovative financing model in development cooperation. It always follows the same basic principle: SMEs that are willing to generate additional impact jointly define the expected outcomes – relating to social or environmental concerns, for example. These must be achieved within a specified timeframe.

The ILF funds are then paid out in stages. Each payment is contingent on the agreed targets actually being met.

At the same time, the SMEs must generate additional funds from private investors, enabling them to invest and grow. The rule is that the private investments must be at least twice the amount of the ILF funding. It is also key that these investments come from private sources and are not publicly funded. If the agreed targets or investments are not (fully) achieved, the ILF funding is either reduced or not paid out at all. All conditions are contractually defined and rigorously monitored. In this way, ILF ensures that financial support is directly tied to measurable added impact while simultaneously mobilising private investment. The greater the demonstrable impact, the larger the financial reward.

Bangladesh in transition: Switzerland lends its support

Through its 2026–28 cooperation programme, Switzerland is supporting Bangladesh as it enters a decisive phase: the transition from a developing country to an emerging economy – and the gradual phasing out of bilateral cooperation.

Bangladesh has made remarkable progress in recent decades – both economically and socially. At the same time, the country faces major challenges: political tensions, rising poverty, climate risks and the ongoing Rohingya crisis continue to impact the lives of over 175 million people.

This is where Switzerland's new cooperation programme for 2026–28 comes in. It marks the final phase of a partnership spanning over 50 years and focuses on a responsible transition. With a budget of CHF 43.5 million, Switzerland is providing targeted support in areas where it can contribute particular expertise: climate change adaptation, sustainable economic development, and the management of migration and displacement.

Switzerland has a track record of concrete achievements in Bangladesh to build upon: it has helped strengthen democratic processes, promoted local participation and developed innovative financing models enabling investment in sustainable projects. It also remains a reliable partner for humanitarian aid – for example, in supporting Rohingya refugees and the affected host communities.

Central to the new programme is the handover of responsibility to local actors. Successful approaches are to be consolidated and embedded for the long term. The programme thereby serves as a bridge: it builds on the gains made and lays the foundations for sustainable development that will continue beyond the end of bilateral cooperation.

Switzerland will maintain its long-standing diplomatic engagement through its embassy in Dhaka, and humanitarian operations in support of Rohingya refugees will continue for as long as necessary.