Straight A's for world's first education bond

11-year-old Anaya from Rajasthan, India loved going to school. But when her mother became unwell, she was forced to stay home to do household tasks and take care of her younger sibling. Eventually, she had to drop out of school entirely. "We don’t have much money and cannot afford fees, supplies or fancy uniforms for her. It might be nice if Anaya studied. But really what difference will her going to school make?" her mother wondered.¹

Anaya's story is just one of many. Nearly three million girls are currently out of school in India. They have to stay at home to care for younger siblings or spend several hours every day on household chores. And educational concerns aren't isolated to girls. Less than 50% of all children across India learn the most basic skills in reading and mathematics². As of today, India has the highest illiteracy rate in the world.³

Philanthropist, organizations and governments are keen to change this with necessary capital. Yet, lack of transparency is a major obstacle for unlocking funds, as results on the ground are not always measurable or easily reportable.  

In 2015, UBS Optimus Foundation joined forces with partner organizations to find a solution and launched the first Development Impact Bond (DIB) in education. The ultimate goal was to test the feasibility of the DIB overall and improve education, directly and indirectly, for about 7,300 children, across 166 schools and 140 villages in Rajasthan, India.

So how did it work?

• The social investor, UBS Optimus Foundation (UBSOF), provided the upfront working capital of USD 270,000, which enabled Educate Girls, the local NGO, to carry out its work on the ground.
• The outcome payer, the Children’s Investment Fund Foundation (CIFF), promised to pay back the UBS Optimus Foundation the original amount plus extra returns as long as enrolment and learning targets were met.
• The non-profit evaluation firm, IDinsight, assessed the improvement in learning and validated the number of girls enrolled, providing CIFF with the transparency they required.
• The non-profit impact bond and results-based financing advisory organization, Instiglio, provided technical advice during the design, overall project management as well as performance management assistance to Educate Girls on behalf of UBSOF.