First Development Impact Bond Is Launched

June 17, 2014

Yesterday, the UBS Optimus Foundation, Children’s Investment Fund Foundation, Educate Girls and Instiglio announced the launch of a Development Impact Bond (DIB) pilot to improve educational outcomes in Rajasthan, India.

The DIB will be a three-year pilot project aimed at addressing  the challenges of high dropout rates and poor education quality in Rajasthan where, as Instiglio explain here, 40% of girls leave school before reaching fifth grade and only 15% of primary school children can read a simple story in Hindi.  An upfront investment, $238,000, to tackle this problem was raised by UBS Optimus Foundation from UBS clients who want to make investments that have a social impact. This investment will go to Educate Girls, an NGO that works in public schools in Rajasthan, to implement a range of programs designed to retain students and improve learning outcomes.  Under the DIB, Educate Girls aims to retain 10,000 girls and improve results in basic English, Hindi, and math for 20,000 boys and girls in about 150 of the most poorly performing schools in Rajasthan. Program results will be rigorously measured and, if Educate Girls is successful in improving outcomes, CIFF, the outcome payer in this case, will pay investors back with returns at around 7-13% depending on the rate of success.  Instiglio, a non-profit intermediary, is the project manager. 

One exciting thing that was emphasized at the launch event of the Educate Girls DIB – and what sets DIBs apart from traditional grant or input-based funding – is that, because working capital is coming from private investors, Educate Girls will have the flexibility to use this funding as they see fit and adapt programs to data they are getting on the ground as to what girls’ needs are.  This pilot demonstrates in practice that DIBs are one way to align different forms of capital around a clear development goal and to improve the business model of social service delivery by enabling providers to try innovative approaches, adapt to lessons learned in real-time, and stay focused on the outcomes that matter. 

The organizations represented at the launch were also very much focused on the demonstration effect of this DIB – the very first to come to the market, with investment capital and outcomes funding committed. Phyllis Costanza, CEO of the UBS Optimus Foundation, explained that, in addition to improving the lives of children that stand to gain from this pilot, UBS Optimus Foundation’s interest in it was to test the model and potentially demonstrate to other investors that DIBs could be a way to invest in social outcomes and help to scale programs that can demonstrate success.  Michael Anderson, CEO of CIFF, explained that CIFF was interested in testing the outcomes-based payment model not only to “buy results” but to “change systems” and explore the transformative potential of bringing in new players to solve social problems.

The partners behind this DIB will be finalizing design details, including plans for an evaluation of the DIB, and expect service delivery to begin in June 2015.  


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