Social impact investing offers a unique solution to India's quest to meet the UN's SDG goals, writes the executive Director of British Asian Trust. India has set itself an ambitious target to accelerate its economic growth beyond 7% over the next five years, while ensuring there is no trade-off between sustainability and development in order to fulfil its United Nations-mandated Sustainable Development Goals (SDG). Achieving this would be no mean feat. Adopted in 2015 by the United Nations General Assembly, the SDGs set out the ambition of ´Transforming our World: the 2030 Agenda for Sustainable Development'. The SDGs comprise of 17 main targets and 169 associated targets combating areas including: ending poverty and hunger, ensuring good health, quality education, gender equality, clean water and sanitation, affordable and clean energy, climate action and peace and prosperity for all. This comprehensive agenda correctly recognises that it is no longer sufficient just to focus on economic growth, but on a fairer and more equal society. India's SDG ambition is to be welcomed, however, the question arises as to whether there are the financial resources necessary to implement these policies and how the money is spent most effectively. One possible answer to both of these questions could be social impact investing. Indeed, an audit by the Comptroller and Auditor General (C&AG) to examine India's preparedness for implementation of India's SDGs has found several gaps that could hold back India from achieving the goals by 2030. The audit report expressed concern at the lack of proper mobilisation of financial resources and recommended that the NITI Aayog, the Indian government's premier think tank responsible for coordinating its SDGs, must make an assessment of the requirement and availability of funding for implementing the SDGs. On financial resources the CAG report said, “While it is recognised that projecting financial resources for achieving the Targets by 2030 is a challenging task, the finance ministry and state governments are yet to integrate the SDG related financial resources in national budgeting for implementing the SDGs”. The British Asian Trust was founded by HRH Prince of Wales and British Asian business leaders with the precise goal of eradicating poverty in South Asia. One key focus for the work we do is to help nations in the Indian Subcontinent to find innovative ways to fill in the funding gap and to ensure that funding is being spent effectively. One of the ways to achieve this is to bring in private sector capital and expertise to improve the efficiency and results of development programmes. Innovative finance from the private sector can bring with it a new approach to development, with a focus on outcomes and results rather than just activity. A good example of this is education; as per the United Nations Sustainable Development Goals 2030 a quality education is no longer a privilege but a basic right in itself. In India, despite having achieved a 99% rate of school access, the quality of learning has remained poor. Studies conducted by the Indian government′s primary research institution on education reports that a large percentage of students in rural and urban India are not able to display basic literacy and numeracy skills. A typical Indian student is at least two grades behind the level that is expected for their age. It is critical that the attention is now turned to improving learning levels. To address this issue, in 2018 we at the British Asian Trust launched the world's largest education development impact bond - Quality Education India Development Impact Bond (DIB). A four-year programme, the DIB aims to transform the way education is funded in India and focuses on the quality of education through the delivery of specific measured outcomes of improved literacy and numeracy among children in India, as opposed to simply measuring the number of children in schools.
We have done this in partnership with organisations from both the private and charity sector including the Michael & Susan Dell Foundation, UBS Optimus Foundation and Tata Trusts, together with the Comic Relief, the UK Government's Department for International Development (DFID), the Mittal Foundation, and British Telecom. The first close of fund raising for the DIB achieved $11 million with the aim to improve literacy and numeracy skills for more than 200,000 children. Already the DIB is starting to prove to be a success. In the first year since the launch, it has enabled 30% more students to overcome learning gaps and achieve basic literacy and numeracy skills. First year results also show that 40% of schools participating in the DIB programmes either met or exceeded their targets for literacy and numeracy skills when compared to non-participating schools. Working across four programmes in the states of Delhi and Gujarat, the DIB has helped to deliver at scale these programmes to 600 schools, reaching over 100,000 students aged 5-11 in year one. The ultimate goal is to create a rate card system that sets the standard for future funding of projects like this. Private funding can play a key role in developing proof of concept, which governments can then take on with funding and scalability. While traditional funding streams are under severe pressure, innovative financing mechanisms such as DIBs, are a complementary tool to attract new private capital and will play a major role in bridging the financing gap to achieve the UN's ambitious Sustainable Development Goals. At a conference during UK-India week back in June, I spoke about how India is beginning to emerge as a dynamic hub for social enterprise and entrepreneurialism, and how this climate of innovation is spreading to exciting collaborations between the development and financial sectors. New products like Development Impact Bonds (DIBs) create win-win incentives for both investors and NGOs to achieve specific, quantifiable development outcomes. Initiatives like the DIB also support broader conversation about the quality of education in India. In May this year the Government of India drafted the New Education Policy which has made some bold and welcome recommendations to shift the focus of the education system towards quality and improving student learning outcomes.
These days, public money can make a far greater impact by focusing on outcomes, working cross-sector with private and charitable organisations. Frequently money is spent with little understanding of the results that the investment delivers. The DIB is a vehicle to actively nudge the culture of philanthropy and development towards an outcome-based funding model that is based on results agreed at the outset. Outcome-based funding has the potential to unlock vast sums of funding from governments as well as private investors and foundations. The public-private collaboration enables investment in philanthropic programmes that would otherwise be neglected due to risks that the public sector alone would not be willing to carry. Given the private sector's CSR responsibilities, DIBs are an efficient and effective means of investment in philanthropic programmes and is the way of the future. If India and many other countries are serious about meeting the SDGs in 2030, then harnessing new and innovative ways of thinking and delivering programmes is essential. Abha Thorat-Shah is the Executive Director, Social Finance, British Asian Trust.