The first phase of the fund raised $11 million and the consortium wants to use this as a springboard to double the size of the development impact bond
New Delhi: A group of global philanthropic foundations, including UBS Optimus Foundation, British Asian Trust, Michael & Susan Dell Foundation, and Tata Trust Tuesday announced a ‘development impact bond’ (DIB) worth $11 million and promised to double the fund size in the coming days to improve the education outcome of 300,000 students in Delhi and Gujarat.
This is the largest education DIB in the world and is an innovative education financing model based on measurable outcome rather than the present input model of social financing that does not bother about result.
The first phase of the fund raised $11 million and the consortium wants to use this as a springboard to double the size of the DIB, said Richard Hawkes, chief executive of British Asian Trust.
“This landmark financial instrument applies an entrepreneurial approach to philanthropy and is likely to change the lives of over 300,000 children in India by driving up standards.... If the potential of this type of funding is unleashed, it could improve the lives of generations to come," Union finance minister Arun Jaitley said in a written message.
The central government will closely follow the outcome as it promises performance-based funding in the education sector, said NITI Aayog vice-chairman Rajiv Kumar, who was the chief guest at the ceremony held to launch the DIB.
DIB is not a money market instrument. Investors identify a problem and then one ‘risk investor’ or a group puts money upfront to roll out the programme. If the programme becomes a success, the “outcome funders" pay back the risk investors the funds invested plus a certain percentage of incentives. If the target is not achieved, the risk investor is not paid. In the present DIB, Zurich-based UBS Optimus is the risk investor. The outcome funders include the Michael & Susan Dell Foundation, Tata Trusts, the Mittal Foundation, and British Telecom providing funding through British Asian Trust.
India is an experimental ground for DIB in the education sector and its success will help replicate the model in other countries, said Maya Ziswiler, head of social finance at UBS Optimus.
The DIB participation of Tata Trusts is in line with its focus to create meaningful and measurable impact, said R. Venkataramanan, the managing trustee. The DIB approach offers them time and space in terms of assessing the outcome, he said, and expressed conviction that the outcome model in education will attract significant resources to the sector.
The Michael & Susan Dell Foundation is focusing on government schools and low cost private schools through the DIB, said Vikas Verma, director, India, of the foundation. He hoped that the success of the education DIB convinces governments in the Centre and in the states to put in money in outcome based models to achieve a more robust education result. He said these are early days and in the next few years, the country may witness many more DIBs in other social sectors, a view that Venkataramanan shared.
“The DIB’s ambition is to drive meaningful improvement in learning outcomes at scale, while also leveraging our learnings to help the government and other funders make informed policy and spending decisions," said Geeta Goel, country director, India, Michael & Susan Dell Foundation.