Tackling the Global Education Crisis: The UBS Optimus Foundation’s Use of Social Finance

• In Event: Philanthropy in Education: Cross-Cutting Issues, Social Finance and Impact Investors

Proposal

The annual financing gap of USD 39 billion to meet the SDG4 goals in low and lower-middle income countries by 2030 cannot be addressed solely by increasing funding from domestic resources and bilateral and multilateral aid. There is increasing recognition globally that tapping into the private investment capital–estimated at USD 218 trillion globally– has the potential to substantially contribute to SDG financing (United Nations Conference on Trade and Development, 2014). Social finance, an approach to mobilizing private capital for social development, has the potential to draw additional financing to education and offer new solutions that bring private capital market approaches of balancing risk and reward to maximize social impact. Social finance typically engages diverse actors – private investors, philanthropies, government, social entrepreneurs, etc. – with diverse interest in a partnership to achieve financial and social outcomes. Beyond provision of additional source of financing, the benefits of social finance are perceived on at least two additional fronts: (1) stimulation of innovation as it creates the space for experimentation that challenges the existing institutional logics and financial flows that are born by the dominant social structures and (2) support for social entrepreneurship and innovation by financing the project life cycle of development, adoption, implementation and scaling up (Moore et al., 2012; Nicholls, 2010). However, adoption of social finance within the education sector, given the divergent interests and logic of action of the various actors involved, requires a systematic process of adoption and long-term sustainability. This article presents UBS Optimus Foundation’s approach to social finance in the education sector through a description of existing initiatives (like Development Impact Bonds, Impact Loans) and programs the Foundation is supporting. Using the ecosystem-building framework, UBS Optimus Foundation’s approach demonstrates the potential of bringing private capital funding into the education sector that can catalyze innovations to tackle some of the complex problems within the sector.

Author

• Arushi Terway, NORRAG