World's largest education impact bond makes the grade

The Quality Education India Development Impact Bond (DIB), which is focused on improved learning outcomes for children in the states of Maharashtra, Delhi, Uttar Pradesh and Gujarat, has for a second year in a row, seen all the programs that were evaluated exceed their learning targets.

Since its launch in September 2018, the world's largest DIB in education has funded the delivery of teaching enhancement programs to 700 schools, reaching more than 100,000 students aged 5–11. Unlike other forms of funding that simply focus on indicators such as enrollment numbers, the DIB program focuses on learning gains by children in school. And an independent evaluation of more than 6,000 students showed that students in the DIB gained more than 2 years’ worth of additional learning compared to their counterparts in a representative control group. This exceeds the ambitious learning targets that were set for the programs.

Examples of the work paid for by the DIB include training for teachers and school administrators, and new privately operated free schools in poverty-stricken areas with high rates of out-of-school children. The DIB, operating on a four-year timeline, is now mid-way, ending in 2022.

The pandemic hit India whilst schools were closing for the academic year. The DIB stakeholders immediately responded and connected with local NGOs that ensure students and staff are safe, building awareness on COVID-19 and supporting and encouraging innovation such as remote learning to address school disruptions.

The DIB raised USD 11 million in its first phase from the Michael and Susan Dell Foundation and the British Asia Trust. The intention is to double the size of the DIB in the coming years. The structure includes a results-based finance mechanism, where the outcome funders only pay for successful results. These outcome funders can range from charitable foundations and private enterprises to national governments. If the outcomes are not fully achieved, funders will pay proportionate to the results which are achieved.

The working capital of 2.9 million Swiss francs – much of which direct contributions from UBS clients – used to deliver the programs is provided by the ‘risk’ investor, in this case UBS Optimus Foundation. If successful, the Foundation is able to recover its capital and earn a return if pre-determined education outcomes are met. All returns will be rolled over into other philanthropic programs.

Delivery of the change programs at the local level is managed by a carefully selected group of non-governmental organizations (NGOs). The learning outcomes of students and schools participating in the DIB program are independently verified by sector specialists, ensuring the maximum impact is achieved for the investment provided. UBS Optimus Foundation, however, retains a firm grip on the stewardship and distribution of funding throughout.

1. The risk investor, in this case the UBS Optimus Foundation, commits up to USD 3 million to fund implementing partners' work upfront
2. Outcome funders; The Michael and Susan Dell Foundation and the British Asia Trust commit USD 11 million over four years
3. Local NGOs: Pratham Infotech Foundation, Gyan Shala, Kaivalya and SARD, deliver education interventions to improve learning outcomes of students
4. Learning outcomes are measured annually by an independent evaluator – Grey Matters India
5. Verified achievement of learning outcomes triggers outcome payments to repay the risk investor

As a firm we are unique in the financial industry in having a global foundation staffed with philanthropic experts who use their know-how and experience to select, monitor and guide program partners – so programs can grow and improve the future of as many children as possible.

In November 2017, UBS Optimus Foundation launched the Utkrisht impact bond – at that time the largest-ever DIB, as well as the first to target improvements in mother-and-child healthcare provision, this time in Rajasthan, India. In 2018, the Foundation announced the final results of the Educate Girls Development Impact Bond – a world first in education and forerunner to the Quality Education India DIB above. The Educate Girls DIB closed after three years having achieved 116% of its enrollment target and 160% of its learning target in the last of its three years in operation.