The coalition behind the world’s largest education development impact bond (DIB), reveals that year one education projects funded by the DIB in India, have helped to increase the overall number of children achieving basic education outcomes by 30 per cent.
First year results also show that 40 per cent of schools participating in the DIB programmes either met or exceeded their targets for literacy and numeracy skills when compared to non-participating schools. Based on the learning outcomes from year one of the programme, the outcome payment for risk investors is on track, with the results averaged out over the lifetime of the DIB.
The Quality Education India DIB, launched in September 2018, set out to improve the quality of literacy and numeracy.
Commenting on the first year results, Richard Hawkes, Chief Executive, British Asian Trust said: ‘In many ways, year one was a start-up year for both the DIB and NGOs testing the concept and allowing for adjustments to make improvements along the way. The ambition remains that the learnings from the DIB will be used to create an education ‘rate card’, an assessment of costs for tried-and-tested delivery outcomes against funding, to improve the quality of education.’
The DIB, the largest of its kind for funding education, raised U$11 million in its first phase of funding. The structure includes a results-based finance mechanism, where the outcome funders only pay for successful results. If the outcomes are not fully achieved, funders will pay proportionate to the results achieved.
Geeta Goel, Country Director, India, Michael & Susan Dell Foundation, said: ‘The early signs are that outcome-based funding models, with an incentive attached, have the potential to drive quality in education and attract new forms of capital to sustain it. The key test for this DIB has been on proving the scalability of education programmes, without diminishing the quality of outcomes. There are a number of key learnings from year one, which will help to inform the remainder of the programme, as well as future DIBs and government policy decisions.’
The working capital used by NGOs to deliver the programmes is provided by the ‘risk’ investor, in this case UBS Optimus Foundation. If successful, the investor is able to recover their capital and earn a return if pre-determined education outcomes are met
‘The UBS Optimus Foundation takes the same business-minded approach to philanthropy that we do in all aspects of our work at UBS, so our clients can be sure it delivers the social return they should be getting from their contribution. We closely monitor the programmes we’re funding, we challenge assumptions regularly, and we hold grantees to extremely high standards of performance. That’s why we decided to discontinue one of our under-performing programmes’, said Phyllis Costanza, CEO UBS Optimus Foundation.