Innovative Finance in Education : Social Impact Bonds Presentation by Manas Rath, 24th Feb 2016

Difficult to attribute A Program Inputs Activities Outputs Outcomes Impact Easy to count Difficult to measure Difficult to attribute

Challenges for Donors Not clear about outcomes and impact Inputs Activities Outputs Outcomes Impact Not clear about outcomes and impact Make multi-year commitments up-front No exit Scrutiny (e.g. Govt.)

Challenges for Service Providers / NGOs Inputs Activities Outputs Outcomes Impact Lack of program flexibility Line item budgets Ability to innovate Team motivation

The Outcome? Donors: Service Providers: Small grants—“risk mitigation” Stay with what’s Proven Activity-level Control / Reporting Service Providers: Multiple Donors/Priorities Path to scale? Incentive for Innovation? Invest in capabilities

Program Manager / Designer Financial Structure Buyer of Results Impact Measurement 3 4 Investor Service Provider Beneficiary 1 2 Program Manager / Designer

Benefits... For Service Provider: For Buyer of Results Flexibility Scalable instrument Incentives to achieve Impact/Outcomes For Buyer of Results Pay for delivered results Can increase funding For Investor: Potential for financial upside Can replace grants May support Service Provider actively

Examples Prisoner Recidivism - UK: Min. of Justice, Rockefeller Foundation: (8.4)% - NY: Bloomberg Philanthropies, Goldman Sachs Diabetes Management - Government of Mexico Addressing sleep disorders in Uganda - DFID

Process (1/2) Determine desired Outcomes Target audience Absolute or Relative Goals Mission creep Appoint Program Manager / Designer Program Design and Financial Model of options / costs Identify Buyer of Results and Investor

Process (2/2) Negotiate agreements Geography and Scale of Program (% of total budget?) Formulae for Payments Set total amount and split across Outcomes (Price1 x Outcome1) + (Price2 x Outcome2) + ... 2 sets of payments Timing of Payments Who will monitor impact?

Pre-Requisites Tested and Proven Model Experience with rigorous assessments Good team in place Learn and adapt

India : Girl Child Education 1 200 Mn non-literate women 2 3.7 Mn out of school girls 3 40% girls leave before 5th grade 4 1% girls reach 12th grade 5 Awareness, economics, social norms, quality of education, infrastructure in schools

Educate Girls (EG) Right to Education Act, 2009 Rajasthan: 9 out of 26 Gender Gap districts 44% women literacy (men=76%) Highest rate of under-age marriage (68%)

Educate Girls (EG) Established 2005 Now 6 districts, 550 empl., 8,000 schools, 1Mn children The Program: Community engagement Door-to-door work Enroll out of school girls Improve infrastructure for girls Engage SMC Keep them in school Volunteers to help teachers Engage SMC Improve learning outcomes

Educate Girls (EG) : Achievements Bought 80,000 girls into school Improved attendance from 62% to 87% Improved learning outcomes for 350,000 children Engaged 4,500+ community volunteers Improved school infrastructure—27% more girls toilets

The SIB (1/2) Determine desired Outcomes Reduce out of school girls (20%) Improve learning outcomes (80%) Appoint Program Manager Instiglio (Cambridge, USA) Program Design and Financial Model of options and costs Growth plans Operating model improvements

The SIB (1/2) Identify Buyer of Results and Investor UBS Optimus Foundation (Investor) Children’s Invest. Fund Foundn. (Buyer) Negotiate agreements 18,000 girls, 140 villages, 166 schools $422,000 Single payment to Investor 32% of upside as bonus to EG Who will monitor impact? IDinsight, SF

Watch Out Design carefully—what is goal? Ensure no perverse interests (protect beneficiaries) What –ve things could people do to achieve results? Align performance metrics across team Complexity: Tariffs, Thresholds, etc Keep eye on changing costs

The End