Beats | July 17, 2018

Small bet, big outcome for UBS’ girls education development impact bond

Dennis Price
ImpactAlpha Editor

Dennis Price

In 2015, the UBS Optimus Foundation placed a small bet on a big idea: that nonprofit development organizations could tap private investors for working capital.

Such a “development impact bond” would be repaid by a third-party payer, with interest, if the organization achieved target educational goals. The foundation made a $270,000 loan to Educate Girls, an Indian charity tackling inequality in India’s education system, to improve enrollment rates and improve education for girls in Rajasthan, India.

The charitable arm of the Swiss Bank now says the bet paid off.

  • The results: Educate Girls enrolled 768 girls between six through 15 years old (or 92% of eligible out-of-school girls in the region), That was 116% of its enrollment target. Educate Girls helped students increase learning levels by 79% more than their peers, or 160% of the target.
  • Because impact targets were hit, UBS Optimus Foundation will earn a pre-determined return of $144,085, a 15% internal rate of return over the three-year investment. That principal and return will be paid by Children’s Investment Fund Foundation, the charitable arm of former hedge fund manager Chris Hohn and his wife, Jamie Cooper. Educate Girls will receive about one-third of the return; the rest will be used for programs at the foundation.
  • Innovation stage. More than 100 social impact bonds have raised more than $400 million in total and touched more than 700,000 lives in two dozen countries. (SIBs are similar to DIBs except the payer is generally a government). Ten projects have returned investors’ capital, with a return, and another eight have begun making payments. About 30 development impact bonds (in which the payer is a philanthropy or aid agency) are active or in development, including a UBS-backed maternal health impact bond in India.