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m2m: First Early Childhood Development Social Impact Bond is launched in South Africa

September 21, 2018

The outcome-based financing mechanism seeks to improve early childhood learning and development outcomes in the Western Cape. LGT VP is one of three investors.

Development Impact Bonds (DIB) aim to provide new sources of financing to achieve improved social outcomes in developing country contexts. Investors provide external financing and only receive a return if pre-agreed outcomes are achieved. Funds to remunerate investors would come from outcome payers, usually a government agency or a multi/bi-lateral aid agency or a private donor. Financial returns to investors are intended to be commensurate with the level of success.

mothers2mothers (m2m), Volta Capital, and the Bertha Centre for Social Innovation and Entrepreneurship (the Bertha Centre) have launched the Impact Bond Innovation Fund (IBIF), an innovative financing mechanism that represents the first Social Impact Bond focused on Early Childhood Development (ECD) to be launched in the Global South.

Aimed at improving outcomes in early childhood, a critical period that can positively impact global development goals, the IBIF is managed by the Intermediary partnership of m2m and Volta Capital, working closely with implementing partner, the Western Cape Foundation for Community Work (FCW). The transaction is led by the Western Cape Department of Social Development (DSD), in a matched funding arrangement with ApexHi Charitable Trust, and supported by a coalition of investors: The Standard Bank Tutuwa Community Foundation, Futuregrowth Asset Management, and LGT Venture Philanthropy.

Early childhood is a period of unparalleled opportunity for promoting and developing human potential. The period from conception through the first five to six years of life is critical for the development of a child’s physical, social, emotional, and cognitive wellbeing. These benefits are life-long – improving education performance, bettering careers and earnings performance, and health. The IBIF transaction will support a home visiting ECD programme targeting 3 to 5 year olds, delivered by FCW through its Family in Focus (FIF) programme). FCW has over 40 years of experience working within the ECD sector in the Western Cape and is a long-term partner of the DSD.

If successful, the IBIF model could be replicated across the Western Cape, and throughout South Africa, changing the way social interventions are funded and creating a new way forward for additional public-private funding opportunities.

Read the official press release here.