Knowledge
India ‘development bond’ is making it possible for girls to get into school
The world’s first “development impact bond” provides private investors a return from donors or governments if pre-set targets are achieved. Charity Educate Girls in rural Rajasthan is the first entity to receive funding for 3 years.
The backers of an innovative new funding model for development programs in India which gives private investors a return on their investment has claimed that the program has already helped get marginalized girls in Rajasthan into the classroom.
The world's first "development impact bond" works on a simple principle that private investors provide upfront funding which earns them a return from donors or governments if pre-set targets are achieved.
UBS Optimus Foundation, a grant-making foundation of the Swiss bank, was the first entity to donate under this new model. The Foundation made an undisclosed investment to a program by charity Educate Girls in rural Rajasthan for 3 years. At the end of the 3 years, it is planned to payout to the foundation its funds along with an interest of up to 15%, depending on whether the children's learning targets are met.
"While this is designed to improve the quality of girls' education in Rajasthan, the concept could be attractive to funders across a range of issues who want to make investments with both financial and social returns," Kate Hampton, chief executive at the Children's Investment Fund Foundation – which will pay back the investment and interest – said in a statement.
The model is perceived to be unique and innovative as it is seen as a way for governments and donor agencies to transfer risks to investors, and increase implementation efficiencies of programs.
Critics however point out to the potential difficulty in measurement of goals and that the model frees the governments of their responsibility of providing basic services to their citizens.
"It's based on the premise that school education cannot be done by governments, but only by micro institutions, and that you can improve accountability and achieve targets with rather weak measurements and monetary incentives," said Jayati Ghosh, a professor of economics at Jawaharlal Nehru University in New Delhi.
"There is definitely a gap in education, but to think you can fix it with a 15% return is just wrong. The government is completely reneging its responsibility," she said.
Though India enacted the Right to Education Act in 2009 with much fanfare, the reality is that the funding for the program has declined in the past 2 years.
Although, Rajasthan has the lowest literacy levels for girls, activists say enrolment is still high under the RTE Act because its ceiling on annual household income that qualifies children for RTE is higher than in many other states.
The development bond is primarily looking to improve education for 15,000 children in 140 villages in Bhilwara district. The numbers of girls enrolled in primary education and their progress in English, Hindi and mathematics are being measured.
So far, the program has enrolled 44% of all out-of-school girls identified in the first year, and achieved 23% of the target for learning progress, according to the statement.
*This story was covered by Thomson Reuters Foundation.
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