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How a Development Impact Bond is Alleviating Poverty in East Africa

Poverty in East Africa
Village Enterprise, an organization that aims to end extreme poverty in rural Africa, published the results of its Development Impact Bond for alleviating poverty in East Africa in November 2021. A development impact bond is a kind of financial security that is made of funds from private investors to finance development in low-income communities. Village Enterprise implemented the program in households across Uganda and Kenya from November 2017 to December 2020. IDinsight, the program evaluator, documented the success of the program.

Poverty in East Africa

Extreme poverty is prevalent in East African countries, with about 44.2% of citizens living on less than $1.90 per day in March 2021. About 41% of the population of Uganda in 2016 and 37% of Kenyans in 2015 lived below the international poverty line.

Countries in East Africa experience extreme poverty because of consistent droughts, conflicts and unstable economies. Data shows connections in these regions between poverty and a significant lack of clean water services, access to quality education, transportation, housing and energy.

Details of the Development Impact Bond

In Uganda and Kenya, the Development Impact Bond provided aid to 241 villages and gave no aid to 241 control villages in order to measure and compare the effects of the aid on household consumption and amount of assets. Consumption included purchases relating to food, transportation, social activities and other everyday spending and assets included household savings, livestock and business supplies.

Village Enterprise provided two phases of cash transfers and regular entrepreneurial training throughout the duration of the program. The program provided two grants to 13,839 households. The program focused on business skills and cash transfers as a combination of both has shown to be more effective at helping people raise enough money to lift themselves out of extreme poverty.

The results of the study considered various characteristics within each household. Some households started with more baseline wealth than others, about 30% of households had a woman head of household, about 47% of households reported at least one member with a disability and each household also reported their respective business types.

The study also aimed to provide results to aid and encourage similar organizations in designing and implementing future programs to alleviate extreme poverty.

Results of the Development Impact Bond

Results of the Development Impact Bond reported an increase in both the consumption and asset categories across households, with a 6.3% increase compared to the control group in consumption per household and a 5.8% increase in net assets per household. The program exceeded its goals, with a 140% benefit-cost ratio. The Impact Bond initially invested $5.32 million into the program and reports predict that the lasting effects of the program will generate quadruple this amount.

Although the program provided two different amounts of cash transfers to households, there was a similar increase in all household consumption regardless of the transfer amount. Households that received larger cash transfers reported more assets than households that received smaller cash transfers. Households headed by women started out with less baseline wealth than households headed by men but reported a similar percentage of improvement in both consumption and assets. There was no significant difference in the effects in households that had at least one member with a disability.

When comparing business types across households, households that ran crop businesses consumed less on average and households that had businesses that fell under multiple identifying categories consumed more. Households with livestock businesses and multiple-category businesses reported higher asset gains than other business types. Businesses that started with higher success levels reported an average higher in both consumption and asset wealth.

Overall, results from the Village Enterprise Development Impact Bond show significant improvements in the livelihoods of extremely impoverished households across Uganda and Kenya. Recipients all reported positive improvements in consumption and assets and provided data that organizations can use to build and improve similar programs in the future.

Success in Numbers (2017 to 2021):

  • About 4,766 businesses emerged.
  • About 14,100 beginner entrepreneurs received training with women accounting for 75%.
  • Exactly 481 business savings groups began.
  • There was a 6% average increase in household consumption and assets.
  • Estimates determined there was a $21 million “increase in lifelong household income.”
  • About 95,000 people benefited from the program.

It is clear that Village Enterprise has seen substantial success in alleviating poverty in East Africa. Through its efforts, people have been able to start businesses and improve their incomes, subsequently impacting their overall lives.

– Melissa Hood
Photo: Flickr

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Utkrisht Bond Aims to Prevent Maternal Mortality in India

Maternal Mortality in India
USAID and its partner organizations implemented the development impact Utkrisht bond in February 2018. Many believe this is an innovative and cost-effective solution to end preventable maternal and child deaths in India.

The Utkrisht bond is targeted to assist the State of Rajasthan, where 80,000 babies die annually from inadequate medical care. But proponents hope the model can be used throughout India, which accounts for 20 percent of maternal and child deaths globally.

The development impact bond was announced in November of 2017 by USAID Administrator Mark Green at the Global Entrepreneurship Summit in India. It is expected to provide 600,000 women with improved healthcare access and potentially save 10,000 moms and newborns.

The bond works as a public-private partnership. Investors grant providers of maternal care with upfront capital. Then, outcome funders pay back the investors their principal plus a return if pre-agreed metrics are achieved. The investor, in this case, is the UBS Optimus Foundation, which has committed about $3 million. The organization works with philanthropists to bring sustainable benefits to vulnerable children.

Up to 440 private health facilities will then be operated with assistance from Population Services International (PSI) and the Hindustan Latex Family Planning Promotion Trust (HLFPPT), which also are co-investors providing 20 percent of the required capital. PSI is a global health nonprofit and the HLFPPT is an Indian nonprofit that works with maternal care.

In order to maximize success, private facilities are the focus of the Utkrisht bond. They host more than 25 percent of institutional deliveries in Rajasthan and are used by women of all socioeconomic backgrounds, yet little has been done to improve their quality of care.

USAID and Merck for Mothers, a nonprofit with the goal to end maternal mortality, have each committed up to $4.5 million that will be paid if the heath facilities meet accreditation standards. This is a highly cost-effective method to save lives according to World Health Organization standards, which is particularly exciting to USAID.

“The pay for success approach ensures appropriate stewardship of U.S. taxpayer dollars, while unlocking both private capital and government resources for health,” USAID states.

While this is the first development impact bond targeted toward health, the future of the Utkrisht bond looks promising. If it is successful, more initiatives can be implemented that involve private-public cooperation and effective use of taxpayer money to save the lives of many women and children around the world.

– Sean Newhouse

Photo: Flickr