Impact Bonds for Education: What have we learned?

• In Event: Highlighted Session: Innovative Financing for Education: Leveraging Private Capital

Proposal

Social and Development Impact bonds have gained popularity in the last decade as options for making additional finance available for education and improving the efficiency and effectiveness of the available financing. Impact bonds use results-based payment contracts between the service provider, private investors and the ultimate outcome payer, which could be the government, development agency or a philanthropic organisation. Private investors are engaged in impact bond structures to provide up-front capital for service delivery which has the potential to facilitate the sharing of financial risk of failure of the intervention between the public and the private sector. This financial risk sharing would theoretically save public funds that can be utilised in other spaces, hence increasing the total amount of funds available for education. Recent estimates show that approximately 130 impact bonds have been designed or implemented globally in various social sectors where at least one target outcome is related to education. To date, most education impact bonds have also achieved the minimum targeted results.

Typically, linking payments to achieved results, whether outputs or outcomes, means that significant resources and attention are given to measuring the results of interventions funded through impact bonds. Often, this involves an independent evaluator assuring all stakeholders of the credibility of the stated results. However, little research has been conducted to evaluate if and how innovation in the financing approach itself has contributed to achieving Sustainable Development Goal 4 (SDG 4), notably in improving inclusive and equitable quality education. Moreover, little empirical research has been conducted to examine the role and the influence of private investors in the impact bond financial structure.

In this presentation, we provide an analysis on private investor engagement in three impact bonds – Quality Education India Development Impact Bond, Impact Bond Innovation Fund, Haryana Development Impact Bond. The findings will provide contextual realities of the types of investors, their motivations and the role they played in these cases. It will also examine how the introduction of private investors may have influenced the approaches to education intervention delivery which may not have happened in a traditional grant funding approach.

Author

• Emon Nandi, Tata Institute of Social Sciences