World's largest education impact bond makes the grade

The Quality Education India Development Impact Bond (DIB), which set out to improve the delivery of core skills teaching in the states of Delhi and Gujarat, has reported a 30% increase in the number of children achieving its benchmark learning outcomes in its first year of activity.

Since its launch in September 2018, the world's largest DIB in education has funded the delivery of teaching enhancement programs to 600 schools, reaching more than 100,000 students aged 5–11. Unlike other forms of funding that simply focus on enrollment numbers, the DIB program focuses on the objective quality of the schooling provided. And based on an independent evaluation of more than 12,000 students, the program has resulted in almost a third more students achieving basic literacy and numeracy skills, and 40% of the target schools demonstrating significantly higher improvements in proficiency, than a similarly representative control group of students from non-participating schools.

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 is set to operate on a four-year timeline, ending in 2022.

Pioneering the 'pay-as-they-grow' model

The DIB raised USD 11 million in its first phase of funding. 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 ۶Ƶ clients – used to deliver the programs is provided by the ‘risk’ investor, in this case ۶Ƶ 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. ۶Ƶ Optimus Foundation, however, retains a firm grip on the stewardship and distribution of funding throughout.

The ۶Ƶ Optimus Foundation takes the same business-minded approach to philanthropy that ۶Ƶ takes in all aspects of our work at the firm, so our clients can be sure it delivers the social return they should be getting from their contribution. We closely monitor the programs we're funding, we challenge assumptions regularly, and we hold grantees to extremely high standards of performance.

This is why underperforming programs of the DIB are subject to defunding. Having analyzed closely the year-one results of all NGOs, we've taken the decision not to continue with one of the underperforming programs, due to its declining efficacy compounded with some operational challenges. But all three original NGO partners will be retained going into year two. They will be joined by a fourth, which will provide an online numeracy learning tool, as well as support for teachers in data, literacy and assessments.

A track record of pairing philanthropy with impact

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, ۶Ƶ 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.

Delivery model

  1. The risk investor, in this case the ۶Ƶ Optimus Foundation, commits up to USD 3 million to fund implementing partners' work upfront
  2. Outcome funders commit USD 11 million over four years
  3. Local NGOs deliver education interventions to improve learning outcomes of students
  4. Learning outcomes are measured annually by an independent evaluator
  5. Verified achievement of learning outcomes triggers outcome payments to repay the risk investor

Development impact bonds are not financial products.

The ۶Ƶ Optimus Foundation is a grant-making foundation that helps ۶Ƶ clients use their wealth to drive positive social change for children. It connects clients with inspiring entrepreneurs, new technologies, and proven models that help bridge a gap preventing children from surviving and thriving. The foundation selects programs that improve children's health, education and protection, ones that have the potential to be transformative, scalable and sustainable. And because ۶Ƶ covers all the administrative costs, 100% of all donations go to support program partners, including research and development activities that benefit children.

Disclaimer | This article was created by ۶Ƶ Optimus Foundation. It has no regard to the specific objectives, financial situation or particular needs of any specific recipient and is provided solely for information purposes. It is not intended as a promotion of any ۶Ƶ services nor an offer or a solicitation of an offer to sell or buy any product or other specific service. Certain products and services are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis. Nothing herein shall limit or restrict the particular terms of any specific offering. No offer of any interest in any product will be made in any jurisdiction in which the offer, solicitation or sale is not permitted, or to any person to whom it is unlawful to make such offer, solicitation or sale. Not all products and services are available to citizens or residents of all countries. Although all information and opinions expressed herein were obtained from sources believed to be reliable and in good faith, ۶Ƶ Optimus Foundation makes no representation or warranty, express or implied, as to the accuracy, completeness or reliability of the information contained herein. The information contained in this document is not intended to be a complete statement or summary and is subject to change at any time without notice. ۶Ƶ Optimus Foundation is under no obligation to update or keep current the information contained herein. ۶Ƶ Optimus Foundation does not provide investment, legal or tax advice and this document does not constitute such advice. It strongly recommends to all persons considering the information herein to obtain appropriate independent legal, tax and other professional advice. ۶Ƶ Optimus Foundation expressly prohibits the redistribution or reproduction of this document in whole or in part without its prior written permission and accepts no liability whatsoever for the actions of third parties in this respect. Neither ۶Ƶ Optimus Foundation nor any of its directors, representatives or agents accepts any liability for any loss or damage arising out of the use of all or any part of this article.

 More articles on the topic Our mission