Designing Social Impact Bonds for Education and Microinsurance in India

Athena Infonomics TeamIDEV Practicum Client Presentation – April 27th 2018

The Client: Athena Infonomics

Athena Infonomics is a data-driven global consultancy based in Chennai and Washington. Athena is working to solve the most pressing development challenges of our times

through mainstreaming the use of data science in development processes.

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Why Social Impact Bonds?

3Graphic source: financematters.co

• Social Impact Bonds (SIBs) are a form of impactinvesting, and a new way of funding socialprograms by mobilizing private capital

• SIBs allow governments and other developmentactors to transfer the risks of innovative socialprograms to private investors, paying only forsuccess

• SIBs ensure focus on outcomes by making returnsdependent on achieving outcome targets

Our Process

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Defining Goals and

ScopeDetermining SIB Criteria

Selecting SIB Areas and Partners

Feasibility Assessment

and Program Design

Creating Financial models

Designing a SIB

Structure

Our Projects

Microinsurance Social Impact BondExpanding agricultural insurance coverage among

vulnerable farmers in Telangana and Andhra Pradesh

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Education Social Impact BondProviding high quality, low cost private education for

rural and peri-urban children in Lucknow

The Microinsurance Social Impact BondInsuring Vulnerable Farmers in Telangana and Andhra Pradesh

Indian Farmers are Vulnerable to Income Loss

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58%Rural households living off

agriculture

<25%Farmers insured over the past

decade

Source: India Brand Equity Foundation, an initiative of the Ministry of Commerce & Industry, Government of India. Ministry of Agriculture and Farmers’ Welfare, 2017 audit report on agricultural insurance schemes. Photo: Bioversity International/A.Gupta.

85%Of farmers are small / marginal

farmers (<1/2 hectare)

Improving Insurance Services is Key to Increasing Demand

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Lack of provider competition

Insurers have no incentive to

develop local networks

Farmers lack resources, access

and awareness

Farmers struggle to reap the benefits

of insurance Meeting with Mrs. Rajeswari Singh, Deputy General Manager of the Agriculture Insurance Company of India Ltd (AIC)

Our Solution: The Microinsurance SIB

• The goals of the SIB are to:

(i) increase crop insurance enrollment

(ii) improve the quality of the insurance services provided

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Photo: David Baxendale

Our Solution: The Microinsurance SIB

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Hire, train, equip, and deploy a local network of insurance agents

Help farmers document and submit claims

Improve transparency and

access to information

Gather data to improve farmers access to credit

Integrate service provision

Reach more farmers

Broaden the enrollment window

… solve the last-mile problem!

Risks

No break-even point - what happens once SIB funds run out?

Commercial firm with no experience in development projects

Must work within the confines of the government insurance scheme

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Way Forward

• ITUS has secured a tentative yes from thegovernment of Telangana as the outcomefunder

• Athena continues to advise ITUS ondeveloping the SIB and marketing to privateinvestors

• Realization in 2019?

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City Montessori School Satellite ProgramProviding High Quality Private Education to All Grace Chao & Rochana CooraySeptember 2017 – May 2018

The Opportunity

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There is a need for increased access to high quality private educational solutions focused both on academic and developmental outcomes.

The Opportunity The Client The Task Objectives &

Activities SIB Model Key Considerations

The Implementer

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City Montessori School Chain of highly successful private schools in

Lucknow, Uttar Pradesh. Currently the largest school in the world with a total enrollment of

55,000 students across 18 campuses.

The Opportunity

The Implementer The Task Objectives &

Activities SIB Model Key Considerations

Our Solution: SIB to Fund Three New Schools in Peri-urban Lucknow

• Bring intended implementer, City Montessori School, on board

• Design a program to be funded by the SIB structure

• Undertake stakeholder consultations

• Develop operational financial model for the SIB based on ground truth assumptions

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Opportunity The Client The Task Objectives & Activities SIB Model Key

Considerations

Program Objectives & Activities

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Objective 1: Increase education access to students from families

earning less than $5/day

Build/fund 3 schools in peri-urban Lucknow

Enrollment target – 1650 students per school

Affordable tuition starting at Rs. 180 or less.

Objective 2: Improve educational outcomes

Design Hindi-medium curriculum

Regular internal progress assessment

Teacher training, and professional development for teachers

Skill building through music, dance and computer curriculums

Character building through CMS moral education classes

The Opportunity The Client The Task Objectives &

Activities SIB Model Key Considerations

Risks

Unclear investor preferences

Complex governance and competing mandates

Governance

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Opportunity The Client The Task Objectives & Activities SIB Model Key

Considerations

The Way Forward

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• Most likely, the Indian government will notto be an outcome funder for this project.

• Athena is currently in discussions with CMSand potential investors regarding how tomove forward.

• Potential for replication in on other areas ofUP or India

• How do we measure the impact of the SIBs in a straightforward, cost-effective but reliable way?

• How do we convince investors that the implementing partner is committed to impact, when their business model is for-profit?

• Would other financing mechanisms be more appropriate?

Other thoughts:

• These tend to be complex public-private partnerships contracts – politics play a role

• Social Impact Bonds are new instruments that most people are not familiar with, which makes these projects difficult to comprehend for stakeholders

Hard Questions

Thank you

We thank our partners and the IDEV Department for their continued support of our project:Mr. Vijay Bhalaki, Director, Athena Infonomics Mr. Natraj Nukala, Director, ITUS Dr. Geeta Kingdon, President, CMS

Dr. Joshi, Athena Infonomics Mr. Ravindranath Babu Luke Kancherla, CEO, ITUS Mr. Roshan Gandhi, Director of Strategy CMS

Dr. Tanvi Nagpal, Acting Director, IDEV Program Mr. CV Kumar, Asst. Vice President, ITUS Akshansh Srivastava, CMS

Ms. Alison Harwood, Team Advisor Mr. Shashank Nanduri, Principal Officer, ITUS