$3.5 Million Raised for Impact Bond to Reduce Poverty in Africa

$3.5 Million Raised for Impact Bond to Reduce Poverty in Africa

California-based Village Enterprise has closed an initial funding round for its Village Enterprise Development Impact Bond (DIB), the first impact bond designed to reduce extreme poverty in rural sub-Saharan Africa.

Launched in partnership with Colombia-based Instiglio, a pioneer in results-based financing, the DIB raised $3.5 million in working capital from nine impact investors — including the Delta Fund, the Laidir Foundation, the Silicon Valley Social Venture Fund, the Bridges Impact Foundation, and a number of individual investors — to help rural Africans living on less than $1.90 a day become entrepreneurs. To that end, Village Enterprise will provide seed capital, training, and mentoring to nearly fourteen thousand first-time entrepreneurs with the goal of helping start more than forty-six hundred small, sustainable businesses in rural Kenya and Uganda by 2020. If the effort improves income levels for the new business owners, outcomes funders USAID and the UK Department for International Development (DFID) will repay Village Enterprise and its investors up to $4.28 million based on a pay-for-success formula.

The Village Enterprise DIB leverages an "outcomes fund" hosted by Global Development Incubator (GDI), which will hold all funds in escrow and consolidate all contracting, cashflow, and processing through a single scalable platform.

"Eliminating poverty is a global priority, but funding is limited," said Village Enterprise CEO Dianne Calvi. "Mobilizing private capital is critical if we are to achieve the United Nations' [Sustainable Development Goal] of ending extreme poverty by 2030."

A randomized controlled trial conducted by IDinsight is under way to validate the development impact bond's outcomes. "As we have done with other high-profile DIBs, IDinsight is designing and implementing a randomized evaluation to independently and rigorously measure the impact of Village Enterprise's poverty alleviation efforts," said IDinsight CEO Neil Buddy Shah. "This evaluation will ensure that DIB payments are tied to robustly measured outcomes. IDinsight will also provide Village Enterprise with vital data to optimize program learning and improvement through the DIB."

For information about philanthropy's engagement in the global development agenda as it relates to the Sustainable Development Goals, check out Foundation Center's SDGFunders.org data portal.