Impact Bond Innovation Fund

The Impact Bond Innovation Fund study aimed to test a social impact bond (SIB) financing mechanism for ECD services, an application of which there are very few global examples. SIBs are collaborations between governments, NGOs, and investors to develop and implement social programmes. They allow private investors to provide upfront capital for social projects. If projects are successful, investors receive repayment plus interest from outcomes payers—government, sometimes in partnership with foundations or other outcome funders. If the programme does not achieve pre-set targets, the outcome funders pay a pro-rata portion for what has been achieved.

For IBIF the lead outcome funder was the Western Cape Department of Social Development, the Foundation for Community Work (FCW) was the implementing partner, and the co-intermediaries (providing technical support, bond management, financial oversight and reporting) were mothers2mothers and Volta Capital. The ECD programme delivered was Family in Focus (FIF), an established home visiting programme targeting children 0 to 6 years and their primary carers in several parts of the Western Cape.

IBIF focused on 3 to 5 years old children in the programme in Atlantis and Delft. Outcomes included recruitment, retention and attendance and a smaller component of child preparation for Grade R which was measured by the ELOM 4 & 5 Years Direct Assessment. ELOM was chosen as a locally standardised tool for measuring readiness for Grade R.

The target was for the cohort of 4 to 5 years old children to perform 0.2 standard deviations above the average score for quintile 2 children. This target was assumed to be a reasonable estimate of effect size for a home-based early learning programme by the ELOM team.

The first cohort of 170 children was assessed at the end of 2018 and did not meet the performance target.
As with many NGOs using ELOM, these results informed more rigorous training, implementation and monitoring of the FIF programme. Oversight was enabled by digital data collection. In addition, some changes were made to the programme by adding activities to support skills development in the different ELOM domains. A playbus experience was also introduced to give children exposure to socialised play and interactions with unfamiliar adults.

A second assessment was undertaken in late 2019. After data cleaning the final sample comprised 213 children in the 50 to 59 months age band. The end of 2020 assessment was cancelled due to COVID-19 and disruption to the programme.

While enrolment, retention and attendance targets were met in all three performance years, the development assessment target was not, though programmatic improvements were made. The setting of accurate targets for this kind of programme was difficult. By December 2020, investors had received three payments. The annualised return for the bond was 14%, with the shortfall due to the non-achievement of the ELOM target.

The full report on the ECD Impact Bond Innovation Fund can be accessed here.