Investors might be expected to run a mile from a deal on offer in a conflict-torn part of Africa. At best, it will pay an annual return of 7%; at worst, 40% of the original investment is lost. But a dozen social investors have pooled SFr26m ($27m) to finance the world’s first “humanitarian impact bond”, issued by the International Committee of the Red Cross (ICRC). It will pay for three rehabilitation centres to be built and run in the Democratic Republic of Congo, Mali and Nigeria.

The ICRC’s obligations are backed by “outcome funders”, ie, donors, mostly governments. The bond is an example of “impact investing”, in which private investors seek out social and financial returns, and of “blended finance”, in which public funds help them to do so. Variants have included a bond aimed at educating girls in India and a World Bank-led initiative to raise money to respond to pandemics. The novelty in the ICRC’s bond is that the money raised will be used in conflict zones.

Of the 90m disabled people in the world in need of a mobility aid, the ICRC estimates only 10% have access to adequate rehabilitation. So centres that make wheelchairs, crutches and prostheses, and train people to use them, can have a big impact. The ICRC helps build and run such centres all over the world. But its budgets are set on an annual basis, and it has been hard to plan ahead. Bond markets can help.

The coming three years will be used to build the centres and train staff; by the fourth year they should be operational. In year five comes the reckoning. The efficiency of the new centres will be compared with a benchmark, based on other centres. If the new centres outperform, the social investors will get a return. If the centres do badly, they will lose money (as will the ICRC, which faces a penalty of up to 10% of the bond’s value). The balance will be repaid via the ICRC by the donors (although if the centres do disastrously, they have to pay only 50% of the original amount).

Read more: A new bond taps private money for aid projects in war zones