The Village Enterprise Development Impact Bond

The Village Enterprise DIB is the first-ever Development Impact Bond (DIB) for poverty alleviation in Sub-Saharan Africa

Selected by development impact bond partners from over 80 organizations based on the strength of our randomized controlled trial (RCT) results, Village Enterprise launched the first development impact bond (DIB) for poverty alleviation in Africa in November 2017. 

This $5.32M 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 ensure impact at scale as Graduation programs are being replicated.

Performance outcomes are an increase in consumption and net assets and set 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.

“It has been extremely exciting to witness Village Enterprise’s willingness and desire to innovate, especially with their enhanced adaptive management systems aiming at improving field program delivery. The VE DIB is a fantastic example of the potential of outcome-based funding to solve social issues.”

Radana Crhova, Development Impact Bonds Adviser, UK Department for International Development

Partners

What is a Development Impact Bond?

DIBs are a new kind of funding mechanism in developing countries 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. The impact will be assessed through an independent randomized controlled trial (RCT) over the course of the DIB conducted by IDinsight. Instiglio provides project management support and will be the process evaluator. The Global Development Incubator (GDI) serves as the trustee of the outcome fund.

Village Enterprise Development Impact Bond flow chart

“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

Village Enterprise sewing business

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 while ensuring the quality of implementation at scale.

Hands holding money

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.

Village Enterprise is contributing to learning via a rigorous RCT to:

  • Prove impact of a multi-country and multi-context intervention
  • Explore effects of outcome-based vs. traditional funding
  • Develop adaptations of the model for cost-effectiveness

DIB Implementation

To date, Village Enterprise has successfully launched over 3,000 small businesses and trained over 9,000 people living in extreme poverty. Internal, end-of-cycle results from the first cohorts of businesses who have graduated from our one-year program are very encouraging. The field team also reports improvements in the quality of businesses started. The first results of RCT that is being conducted by IDInsight will be available in summer 2020.  In this RCT, we are testing the impact on income of two grant sizes: $150 and $450 per three-person business groups.

The DIB has been transformative for Village Enterprise in many ways and has helped us to:

  • Increase the focus on performance and impact by strengthening our adaptive management systems and developing faster feedback loops.
  • Improve our training curriculum and mentoring, as well as implement more efficient delivery processes such as mobile money disbursements.
  • Strengthen organizational systems and procedures, including risk assessment, adaptive management, and safeguarding.
  • Tighten collaboration among all of the partners of the project.
  • Increase Village Enterprise’s visibility and thought leadership with multiple speaking engagements and case studies written about the project.

Map

The DIB areas of implementation are Soroti and Amuria districts in Uganda and Kitale and Bungoma districts in Kenya. The map above highlights the targeted regions based on the current reach of Village Enterprise’s program.

Village Enterprise Uganda Locations

Village Enterprise Kenya locations

To Learn More

Read the Village Enterprise DIB Public Memo written by Instiglio and the Case Study written by Ecorys and published by the Government Outcomes Lab (GO Lab) in Oxford.

Check out this article on Devex about our DIB Launch

Listen to our CEO, Dianne Calvi, explore impact bonds more in-depth on a panel at USAID’s Global Innovation Week here

Please contact carolineb@villageenterprise.org for more information.