Impact Bond Innovation Fund: Improving access and equity in early childhood educational services in South Africa

• In Event: Highlighted Session: Impact Bonds for Education: Does innovation in financing address equity and quality challenges?

Proposal

The Impact Bond Innovation Fund (IBIF) was the first Social Impact Bond focused on Early Childhood Development (ECD) in South Africa. Launched in 2017 as a proof of concept, the three-year project provided early childhood education services to more than 2000 children, between the ages of 3 and 5 years, in low-income communities of Atlantis and Delft in the Western Cape Province of South Africa.

Investment in ECD in South Africa is a fraction of what is required to provide access to quality services to 4 million children under 6 who live in poverty. In 2013/2014, more than 60% of the children between the ages 3 and 5 years in Western Cape did not attend registered ECD centred and therefore did not take advantage of the means-tested government stipend.

As a multi-stakeholder partnership with government, philanthropies, private investors, and non-governmental service providers, IBIF supported a home-based childhood education program for the target population. The Department of Social Development and ApexHi Charitable Trust entered a matched fund arrangement as the outcome payer. Standard Bank Tutuwa Community Foundation, LGT Venture Philanthropy and Futuregrowth provided the upfront investment to the IBIF Special Purpose Vehicle (intermediary), managed by mothers2mothers and Volta Capital. As the service provider, Foundation for Community Work (FCW) implemented the home visitation early childhood education program for the target group to achieve pre-agreed targets in recruitment/retention, attendance and learning outcomes. Despite challenges faced during the COVID-19 pandemic, FCW exceeded its targets for recruitment/retention and attendance. The final learning outcome targets were not achieved but showed some improvement throughout the program. By December 2020, investors had received three payments. The annualised return for the bond was 14%, with the shortfall due to the non-achievement of the learning outcomes target.

This research study examines the contribution of the financial and management arrangements within IBIF in achieving the results targets. It uses the existing secondary resources in the form of previous evaluations and case studies, along with additional interviews with stakeholders to identify the impact bond structure components that facilitated or hindered the achievement of results. The insights from this study would add to the growing literature on testing the theory of change of impact bonds for education.

Author

• Cynthia Rayner, University of Cape Town