The article by Adva Saldinger, explains that the results of a development impact bond (DIB) implemented by Village Enterprise in Uganda have been released, showing significant gains in household consumption and assets for program participants. The DIB, launched in 2017, was the first bond to focus on poverty alleviation in sub-Saharan Africa and involved major donors such as the U.S. Agency for International Development and the U.K. Department for International Development. Investors in the DIB, including the Delta Fund and the Bridges Impact Foundation, received the total payout based on the results, with an approximate 8% internal rate of return on their investment. The success of the DIB, despite challenges posed by the COVID-19 pandemic, highlights the effectiveness of the poverty graduation model and provides valuable lessons for future poverty graduation programs and DIBs.
Village Enterprise’s poverty graduation program provides training, a $100 grant, and additional grants for successful businesses to small groups of ultra-poor community members in Uganda and Kenya. A randomized controlled trial conducted by IDinsight found positive results in household consumption and assets among program participants, who spent around $10 more per month and had increased investments compared to a control group. The program’s impacts were estimated to generate over $21 million in lifetime impacts for communities, four times the overall project cost. The DIB’s success during the pandemic, despite disruptions and delays, highlights the resilience and effectiveness of the poverty graduation program and DIB model.
The experience with this DIB has provided valuable lessons and insights. The partnership between funders and implementers in the DIB allowed for an ongoing peer relationship and alignment of different development agencies around a common objective. The DIB also influenced how Village Enterprise operates and uses data, introducing an adaptive management system and customized dashboards. The flexibility of the DIB model provided greater control for the implementer and demonstrated its effectiveness as a funding mechanism. The success of this DIB may encourage donors to expand the use of similar funding mechanisms to address poverty and promote sustainable development.