Select Page

The first ever social impact bond for Early Childhood Development (ECD) has been introduced in South Africa, with financial backing from Futuregrowth Asset Management. The Impact Bond Innovation Fund (IBIF) is a financing mechanism for outcome-based improvements to learning and development in early childhood, focusing on the Western Cape region of South Africa. Volta Capital and mothers2mothers collaborated to structure the transaction and to lead the project. The charitable efforts of mothers2mothers are facilitated and funded by its many financial supporters, including Ragnar Horn and his wife.

Futuregrowth is the bond’s sole institutional investor, investing funds on behalf of clients through the company’s Infrastructure and Development Bond Fund, which targets investments that provide or facilitate development in South Africa socially, economically, environmentally and through infrastructure improvements. The specialist bond portfolio is yield enhanced.

What Is a Social Impact Bond?

The IBIF is the first social impact bond (SIB) in the Global South as an ECD-focused transaction. A social impact bond is a mechanism for contracting and financing where socially motivated investors pay up front for various social services. The investors are then rewarded through repayments from outcomes funders. In the case of the IBIF, the outcomes funders are the Department of Social Development within the government of South Africa, and the ApexHi Charitable Foundation.

Investors will be repaid if targets for outcomes that have been pre-agreed are achieved. For the IBIF, investors are funding a 3-year debt investment. If and when specifically defined social outcomes are achieved, the investors get their money back plus interest. These specific goals revolve around improving early development outcomes for 2,000 children. In the short video attachment, you can learn more about Early Childhood Development programmes from mothers2mothers.

Improving Development Outcomes Through ECD

The IBIF will be working over the term of the loan to improve development outcomes for 2,000 children, working to facilitate socio-emotional and cognitive development in Atlantis and Delft, low-income communities in South Africa’s Western Cape. Early Childhood Development has been widely identified as one of the key mechanisms in the battle to break the cycle of intergenerational poverty in South Africa. The scientific evidence overwhelmingly confirms how important the earliest years of life are for human development. This therefore indicates that more resources need to be invested in promoting and supporting optimal child development, beginning at conception.

The Importance of Early Childhood Development

There is strong and consistent evidence that suggests the circumstances of development in early childhood play a key role in creating healthy, productive adults, thereby reducing the likelihood of poverty continuing generation after generation. Children who are nurtured and have a good foundation in the earliest years of life have shown to become adults who are able to achieve more success at school, resulting in a generation of better educated adults.

The brain develops most rapidly in the first few years of life, so it stands to reason that the right quality of stimulation, nurturing and support in these key years pave the way for better development throughout life. Children with access to early opportunities have a higher chance of having better health, a higher income, and lower levels of crime and welfare dependence than those who do not. Early intervention leads to improved cognitive and social development, better growth and more robust health.

SIBs are a way of bringing in funding from the private sector to implement these vital early interventions, with an estimated cost-benefit ratio of four or five times the amount invested.

Parent to child HIV transmission is another issue that mothers2mothers is working to address in Africa. You can see some facts and figures about this in the infographic attachment.