A coalition comprising HRH Prince Charles’s British Asian Trust, the Michael & Susan Dell Foundation, UBS Optimus Foundation and Tata Trusts, together with the Comic Relief, the UK Government’s Department for International Development (DFID), the Mittal Foundation, and British Telecom, launched the world’s largest education development impact bond: “Quality Education India” Development Impact Bond (DIB).
The first phase of the fund raised USD 11 million and the consortium wants to use this as a springboard to double the DIB in size in the coming years. To date, this is the largest DIB globally for education and the largest DIB in India with a potential to be significantly scaled up further. With this new and innovative social finance tool, the consortium aims to improve literacy and numeracy skills for more than 300,000 children, drive focus towards outcomes in the development sector and transform the way education is funded in India. While traditional funding streams are under severe pressure, innovative financing mechanisms such as DIBs, are a complementary tool to attract new private capital and will also play a major role in bridging the financing gap to achieve the UN’s ambitious Sustainable Development Goals.
Commenting on the launch, Shri Arun Jaitley, Honourable Union Minister of Finance and Corporate Affairs, Government of India, said, “I am delighted by the launch of the Quality Education India DIB. This is a very serious group of organisations and people with the shared aim to improve education in India. This landmark financial instrument applies an entrepreneurial approach to philanthropy and is likely to change the lives of over 300,000 children in India by driving up standards in literacy and numeracy. If the potential of this type of funding is unleashed, it could improve the lives of generations to come too. This Government strives to see the best possible outcomes for the money invested. Every rupee to be spent in this DIB aligns with one goal: improving the quality of education. This type of outcome-based funding is fundamental for driving quality and improving learning outcomes in the education sector. Very good luck and I look forward to seeing the successes of this in the years to come.”
DIBs are results-based finance mechanisms. The ‘outcome funders’ only pay for successful results. If the outcomes are not achieved, the funders do not pay. The working capital that enables the organisations to deliver the programmes comes from ‘risk’ investors who can recover their capital and earn a return if the programme is successful – in this case, if pre-determined education outcomes are met. The risk investor's return is recycled again for social good. The outcomes to be measured are agreed upon at the outset and independently verified. This applies efficiency and discipline to development funding.