Village Enterprise: Poverty Graduation Development Impact Bond

 

While global rates of extreme poverty have plummeted from 36% to 14% over the past 25 years, extreme poverty rates in Sub-Saharan Africa have declined at a much slower rate. As Africa’s Population continues to grow, the number of people living in extreme poverty has nearly doubled – reaching a staggering 415 million. This is more people than the population of the United States and Canada combined.

Evidence on Poverty Graduation programs shows that they can be effective in countering poverty, bringing sustained improvements in the income and living standards of the extreme poor.

However, results have been mixed – indicating that there are unknown contextual and management success factors at play. This variance and unknown success factors pose challenges for donors interested in scaling poverty alleviation results.

Village Enterprise implements a Graduation Model program to help people living on less than $1.90 a day, by equipping them with the resources to create sustainable businesses. Their approach seeks to help entrepreneurs launch and run a business, increase household income and savings, and improve their standards of living, all with the goal of permanently breaking the cycle of poverty.

The DIB is designed around this intervention, providing incentives and flexibility for cost-effectiveness and a 100% guarantee that donor money will be linked to meaningful improvements in poverty alleviation outcomes.

Instiglio provided the technical knowledge and project management oversight during the design of the DIB; aligning the three outcome payers and the service provider, as well as facilitating the selection of the outcomes evaluator and trustee. Instiglio worked together with all parties to create and negotiate important DIB design elements, such as the payment structure and evaluation mechanism.

As the VE DIB moves into its implementation phase, Instiglio will continue its project management role to ensure that the project functions work well throughout its lifecycle. We will also conduct a process evaluation to assess the overall effectiveness of the program, specifically surrounding the use of the DIB as an instrument for scaling up the VE program. This will be critical towards gathering key lessons learned for future RBF projects and for donors interested in learning from this experience to continue expanding RBF across their programs.

It is the first time that a DIB will be implemented for a Graduation Program, and the first time a DIB will be implemented in sub-Saharan Africa. It can serve as a blueprint for RBF for extreme poverty reduction by creating the first replicable and cost-effective DIB for poverty graduation. An outcomes fund will be set up around this first demonstration project to house more experiments that can scale outcomes funding in the poverty alleviation space, by engaging future outcome payers and future service providers.