The big news today is, indeed, big. UBS teaming up to provide DIB/SIBs to help development and education in the emerging world.
For those not versed in the world of finance, however, UBS is, despite its massive size as a bank and wealth manager, the secondary partner. The Children’s Investment Fund Foundation is a seriously interesting organised. It is run by the wife of Chris Hohn, a leading London hedge fund manager. Having a Chris Hohn vehicle endorse the DIB/SIB PFS model is a fascinating one as it gives the SIB model a huge credibility boost – something in financial circles much much more significant than, say, the political classes.
The SIB ball is rolling forward and this is very exciting news indeed.
In order to improve the quality of girls’ education and attract new investment for social outcomes, the UBS Optimus Foundation and the Children’s Investment Fund Foundation (CIFF) are launching the first Development Impact Bond in education.
A funding model for the future Development Impact Bonds (DIB) aim to provide new sources of financing to achieve improved social outcomes in developing country contexts. Investors provide external financing and only receive a return if pre-agreed outcomes are achieved. Funds to remunerate investors would come from outcome payers, usually a donor or a government agency. Financial returns to investors are intended to be commensurate with the level of success. An independent evaluator verifies results to determine success and re-payment.
“This is a world first for international education,” says Michael Anderson, CEO of CIFF. “Development Impact Bonds will focus governments and the aid industry on costing and paying for results. This model can transform the way development is done: new ways of working, and a clear accountability around outcomes for children. We want to test this model, and we want to show the world it can work.”
In India, 3.7 million girls are out of school. In Rajasthan, 40% of girls drop out before reaching fifth grade and for those who remain learning quality is low. Two hundred thirty-eight thousand US dollars made available up front by the UBS Optimus Foundation will go to Educate Girls, an NGO operating in government run schools in Rajasthan to enroll and retain girls, as well as to improve learning outcomes for all children. CIFF will pay for social outcomes achieved by the program. This DIB aims to become a ‘proof of concept’ for replication and scale-up in the education sector and beyond.
“This Development Impact Bond marks a turning point in the way social investment opportunities will be conceived in the future”, explains Phyllis Costanza, CEO of the UBS Optimus Foundation. “With the expertise of the UBS Optimus Foundation, UBS is in a unique position to create an investable solution targeting the bottom of the pyramid. This model strives to become a financially attractive way for investors to improve the lives of children facing adversity.”