Islands Bond was one of a number of initiatives proposed to address depopulation across Scotland's islands, however the consultation process reveal that "island communities do not support the proposed Bond".
It was found that consultation respondents were fairly evenly split between those in favour and those opposed to the Bond, however those in favour of it were largely non-islanders.
Island respondents raised concerns about the proposed approach and whether it would achieve the objective of reversing population decline.
The greater focus on the importance of addressing population decline was welcomed by the islanders, as well as the commitment to work with communities to develop local solutions.
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Welcoming the feedback from islanders, the Scottish Government is continuing to further develop other means to tackle depopulation including undertaking Practical Policy Tests, influenced by its engagement with island communities, that will inform the wider 'Addressing Depopulation Action Plan'.
Rural Affairs and Islands Secretary Mairi Gougeon said: "I would like to thank everyone who responded as part of the consultation process, and especially our island communities for their constructive feedback and suggestions. It is directly because of the feedback from islanders that we are changing our approach.
"The Islands Bond was never intended to be a silver bullet to address our island population challenges. Rather, it was just one element of our wider work, across all Scottish Government, to support our island communities.
"We will continue to address the issue of depopulation on our islands with our National Islands Plan commitment to develop an Action Plan to address this issue, with a draft publication in 2023.
"The learnings and suggestions gathered through the Islands Bond consultation will be used to shape a range of Practical Policy Tests to inform this Action Plan.
"Additionally, we are investing £8.3 million this year to deliver the National Islands Plan and critical infrastructure projects based on local priorities.
"Consultation with communities who are directly impacted by the introduction of new policies or strategies is a crucial part of policy development. Taking the decision demonstrates our continued commitment to listen to island communities and ensure policy is delivered in collaboration with them, rather than to them."
