ImpactAlpha, August 3 – Village Enterprise works to address extreme poverty in rural Africa by cultivating and supporting local entrepreneurship. The NGO has trained nearly 170,000 new entrepreneurs and helped launch 43,000 small businesses.
Now it’s launching the Village Enterprise Development Impact Bond to foster investment in its entrepreneurial training model. The outcomes-based funding scheme will use $3.5 million to train and mentor 13,800 rural Kenyans and Ugandans earning less than $2 per day, and help launch 4,600 new businesses by 2020. Outcome funders USAID and DFID will pay out as much as $4.28 million if Village Enterprise’s participants show an increase in asset ownership and consumption, which will be used as proxies for increased income.
Nine impact investors, including Delta Fund, the Bridges Impact Foundation, the Laidir Foundation, and the Silicon Valley Social Venture Fund contributed the upfront capital. Delta Fund committed $1 million alone.
“Eliminating poverty is a global priority, but funding is limited. Mobilizing private capital is critical if we are to achieve the United Nation’s number one Sustainable Development Goal of ending extreme poverty by 2030,” Village Enterprise’s Dianne Calvi said in a statement.
Development impact bonds, which are typically backed by development and aid agencies, are few in number relative to the number of government-backed social impact bonds that have launched worldwide.
But there are early signs that the model can be successful: a DIB in India focusing on girls education announced that it had exceeded its enrollment target and successfully improved learning levels of the girls enrolled. The UBS Optimus Foundation, which fronted the capital, will be repaid at a 15% internal rate of return by the bond’s backer, Children’s Investment Fund Foundation.