India: development impact bond ‘yields impressive results’

29 Jun 17

One of the world’s only operational development impact bonds has delivered strong results in its second year, in some cases exceeding its targets, according to its architects.

The three-year DIB, launched in June 2015, funds an education programme run by Indian NGO Educate Girls in a remote rural district of Rajasthan – an area chosen for its particularly poor record on girls’ education.

Backers of the DIB – one of only two in action worldwide – said the bond’s continued achievement evidences the benefits of the innovative, results-based funding model.

Under a DIB, private investors pay the upfront costs and bear the risks of a project, and are repaid later by donors or governments based upon the results achieved. Faced with trillions of dollars worth of development needs, they are seen as a key instrument to leveraging more funding towards initiatives like the sustainable development goals.

The progress of the two currently active DIBs will be seen as a proof of concept, supporting the design of others.

Phyllis Costanza, CEO of the UBS Optimus Foundation, the upfront investor in the DIB, explained: “The DIB is demonstrating its potential to attract much-needed funding as investors are increasingly seeing that they can achieve real social impact and results-based financial returns.”

The year two results showed the bond had already achieved 87.7% of its three-year target to enrol 79% of all eligible out-of-school girls in the programme area.

It has also achieved 50.3% of the three-year learning target, which measures improvements in learning from a baseline test administered at the start of the programme period.

That means the UBS Optimus Foundation remains on track to recoup its initial investment, which is paid back once results are achieved by the Children’s Investment Fund Foundation (CIIF). CIIF will pay interest of up to 15%, depending on how far the children’s learning targets are reached, with the Educate Girls NGO also receiving part of this payment it it achieves its targets.

Safeena Husain, executive director of Educate Girls, said the DIB had not only brought positive results, but a “shift in [the NGO’s] DNA” that had had a “positive ripple effect” across the entire organisation.

“The razor-sharp focus on outcomes and the flexibility in programme delivery that comes with a payment by results contract has enabled us to deliver improved outcomes,” she said. “The continuous feedback and analysis of data allows us to indentify learning lags in children and weaknesses in our own teams.”

This emphasis on performance, she explained, helped the NGO identify hurdles, and prompted the redesign of its whole curriculum and retraining of its staff, resulting in better outcomes.

Ultimately, the DIB hopes to improve education – directly and indirectly through improvements in targeted schools – for 15,000 children, 9,000 of whom are girls, in 166 schools spread across 140 villages in the district.

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