So how does it work in practice? A socially-motivated investor – in this case the UBS Optimus Foundation (UBSOF) - puts in the working capital so the service provider – Educate Girls - can carry out its work on the ground. An outcome payer, in this case the Children’s Investment Fund Foundation, promises to pay back the investor (UBSOF) the original amount plus extra returns as long as agreed enrolment, literacy and numeracy targets are met. The targets are assessed regularly by an independent evaluator over the course of the program.
The DIB concept sits at the nexus of a trend towards impact investing for socially-beneficial outcomes and our clients' growing interest in innovative philanthropic financing models. Because a DIB ties financial returns and payments to rigorously-measured social outcomes it has the potential to sustain long-term, results-focused partnerships among non-profits, donors and investors.
We believe the DIB model can play a significant role in harnessing the power of private capital to complement traditional development efforts and funding streams. And it brings with it a new rigor with regard to performance, which can be replicated to allow existing development resources to be deployed more efficiently and cost effectively. The Educate Girls DIB has been designed with this longer-term, game-changing aim in mind. And we at the UBS Optimus Foundation are working on the next generation of DIBs, which will be announced later this year.