The Village Enterprise DIB is the first-ever outcome-based Development Impact Bond (DIB) for poverty alleviation in Sub-Saharan Africa
This $5.26M DIB will transform the lives of 12,000+ households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises over 3.5 years. This DIB is an innovative and performance-based financing tool that is designed to demonstrate how to scale a graduation out of extreme poverty program in a cost-effective way. Performance outcomes are based on recent positive results from Village Enterprise’s 6,300 household randomized controlled trial conducted by Innovations for Poverty Action.
The consortium of highly respected funders and international development experts backing the Village Enterprise DIB includes USAID Development Innovation Ventures (DIV), UKAID (DFID), an anonymous philanthropic fund, the Global Development Incubator, Instiglio, and IDinsight.
What is a Development Impact Bond?
DIBs are a new kind of funding mechanism to attract new sources of capital to solve global challenges. The DIB model differs from standard contracts for social programs by tying payments to clearly-defined and rigorously-measured outcomes.
Paying for performance provides incentives for a non-governmental organization (NGO) service provider to maximize impact. Investors provide the working capital necessary to execute the intervention upfront. Outcome donors’ payments are conditional on the service provider producing—or exceeding—desired outcomes. Ongoing rigorous measurement generates an evidence base for future efforts, and improves all participants’ learning and growth towards delivering ever-more effective programs.
How is the Village Impact Bond Structured?
In this payment-for-results model, USAID and DFID, along with an anonymous funder (outcome payers), agree to pay back Village Enterprise and its investors, the original investment plus extra if the agreed upon outcome targets are delivered by Village Enterprise (service provider). The outcome targets are based on how well Village Enterprise achieves increases in consumption and net assets , including savings. Impact will be assessed through an independent randomized controlled trial (RCT) over the course of the DIB conducted by IDinsight. Instiglio will provide project management support and will be the process evaluator. The Global Development Incubator (GDI) will serve as the trustee of the outcome fund.
“DIBs present a shift in how funds are spent and could provide an important accountability framework, given their focus on paying for results.”
Adva Saldinger, Devex Development Impact Bonds Gains Momentum
Why we are excited about this project
With positive results from our RCT conducted by Innovations for Poverty Action, we are creating a demonstration project on how to scale up a graduation model cost effectively while ensuring quality of implementation at scale.
The DIB is attracting new investment capital and giving outcome funders the assurance they are funding a poverty alleviation program that works based on measurable results.
Although the ideal location for the DIB in Uganda is Soroti, other regions may be incorporated if necessary. The map above highlights the targeted regions based on current reach of Village Enterprise’s program in Uganda:
Although the ideal location for the DIB in Kenya is Kitale, other regions may be incorporated if necessary. The map above highlights the targeted regions based on current reach of Village Enterprise’s program in Kenya