Development Impact Bond: Are India’s daughters a good return on investment?



Anand Chandrasekhar in Bhilwara, Rajasthan


girl sits on the floor and looks to the camera
It’s barely been a month since Naina was re-enrolled and she’s already missed two days of school. She had to perform all the household chores as her mother was visiting relatives(

The world’s first private, performance-based investment aims to keep girls in rural India in school. But can projects like the one supported by the UBS Optimus Foundation change societal attitudes that lead to high drop-out rates?

Nani doesn’t have much time for journalists, especially when there is a bullock munching on her maize crop. The sprightly grandmother gives chase and the opportunistic bovine is shooed away. She finally finds some time to talk to under the shade of a mango tree.

“I did not go to school. In my time, there were no schools around and our family never sent us, so we didn’t go,” she says.

Half a century later, Nani’s granddaughter Maya has hardly fared any better. She used to go to school but dropped out as someone was needed to graze the family’s goats. In the village of Jaliya – and all over the Bhilwara district in the northwestern Indian state of Rajasthan – goats represent the end of the line when it comes to a girl’s education. Few parents are prepared to send their daughters to school beyond the primary level, even to free government schools. Sons, on the other hand, are bundled off to private schools if the family manages to scrape together the fees.

There is a widely-held conviction that a girl is bound to leave the family and hence there is nothing to be gained by educating her. Hence, instead of diligent school goers with a promise of a better future, the girls become goatherds. Like 14-year-old Maya, many of them are married off and biding time until they are sent off to their husbands and in-laws where they are expected to help with domestic chores and produce offspring.

Nani in the field
Nani never went to school due to a lack of opportunities when she was a girl(

Maya is already married and had to drop out of school to graze the family’s goats(

It’s hard to believe but Maya is one of the luckier ones. She has been coaxed back to school as part of a pioneering experiment to introduce private investment into the sphere of educating children from poorer backgrounds; a task that was formerly the preserve of governments, philanthropic donors and non-profits. Known as a Development Impact Bond (DIB), it involves an upfront payment by Zurich-based UBS Optimus Foundationexternal link to Indian NGO Educate Girlsexternal link to enroll girls between seven and 14 and improve educational performance (in Math, English and Hindi) in around 160 government schools in Bhilwara district of Rajasthan. Up to 7,000 children in an area of 260 sq. km are covered. UBS’s investment will be repaid with interest if education targets are met or exceeded. The concept aims at attracting private players into the development sector and raise more money for worthy causes.

Map of project area

DIB payment structure

UBS Optimus Foundation made an upfront payment of $277,000 to Educate Girls in two installments. After a three-year period (in 2018), London-based Children Investment Fund Foundation (CIFF) pays the UBS Optimus Foundation only for successfully achieved educational outcomes (up to a maximum of 15% interest on initial investment).

Thus as an investor, the UBS Optimus Foundation bears the risk of losing money if education targets are not met and making a profit if they are exceeded. Educate Girls will also receive a part of the profit if it meets or exceeds targets. Third party assessor IDinsight evaluates close to 70% of the children every year to determine to what extent targets have been met.



DIB payment scenarios

New model

“Some people think it is all about making a profit but no investor would get involved in such projects if that was their only motive. It is for those interested in social impact first and foremost, with the addition of a result-based financial return,” says Maya Ziswiler, head of social and financial innovation at the UBS Optimus Foundation in Zurich. “The amount of interest on the investment is linked to the risk taken by investors upfront and any financial gain will be recycled into other projects.”

UBS already has around ten philanthropic projects running in India in the area of education, early childhood development, health and child protection. The DIB was a good fit as the foundation focuses on results and has experience raising money from high net worth individuals with an interest in philanthropy and impact investment. After the pilot project in India, UBS Optimus Foundation plans to go the full distance and launch a large-scale DIB that will raise money from private investors.

“We can attract investors by bringing in private sector efficiency, focusing on results, and demonstrating DIBs offer more value-for-money than other alternatives,” says Ziswiler.

children eating lunch outside school
The free midday meal offered in government schools is meant to encourage parents to send their children to study(

It is not just investors that needed convincing. There was some initial skepticism from staff at Educate Girls when the DIB partnership was announced.

This report was produced as part of En Quête d’Ailleursexternal link (Looking Beyond), an exchange programme between journalists from Switzerland and developing countries.

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