Blended Finance
What Is Outcome Based financing?
Results-based, Performance linked or Outcome-based financing models are financing tools that direct money towards social programs that work by tying the funding of programs to their impact. Results-based financing approaches can play a critical role in the delivery of infrastructure and services. RBF has risen to the challenge of bridging the investment gap to achieve SDGs, growing to a market of over $25 billion in development spending as of 2019.
Why Is Outcome Based financing?
Through a range of mechanisms, outcomes-based financing helps deliver development outcomes, improves accountability, and drives both innovation and efficiency. Leveraging real-time data to inform decisions and adapt performance for service providers, creating room for innovation and flexibility, and assessment of whether the intervention has been successful or not through independent monitoring and evaluation are key features that build a strong case for outcomes-based financing.
- Education Skilling and Employment
- Healthcare and Wash
Education Skilling and Employment
Impact Linked Debt
India faces a significant gap in the availability of specialized medical technicians (~23 L by 2022) due to a dearth of financing options for high-quality, high-cost training in allied healthcare. Poor credit history, informal source of employment of the co-borrower, and limited access to professional networks and mentors restrict the access of training and associated employment to first-generation graduates. Impact Investors through the use of blended finance can provide loans at affordable rates to low-income students to access training whereas philanthropic Funders can effectively leverage their capital to de-risk the transaction through guarantee structures. Creating a market-led and scalable approach to healthcare skilling by creating the right financial incentives for all stakeholders can significantly impact the shortage of skilled allied healthcare professionals.
India Education Outcomes Fund
The India Education Outcomes Fund (IEOF), announced in October 2018 is a pooled-structure of an outcomes fund to commission impact bonds at scale with a focus on Education. Leveraging our thought-leadership in Blended Finance, Asha Impact Trust provided advisory support for the set-up of Social Finance India, part of the Social Finance Global Network, established with the support of the GSG Group to help operationalize the $1Bn pooled structure. Read more on our engagement with IEOF.
Bridging the digital divide in Education
India faces a significant gap in the availability of specialized medical technicians (~23 L by 2022) due to a dearth of financing options for high-quality, high-cost training in allied healthcare. Poor credit history, informal source of employment of the co-borrower, and limited access to professional networks and mentors restrict the access of training and associated employment to first-generation graduates. Impact Investors through the use of blended finance can provide loans at affordable rates to low-income students to access training whereas philanthropic Funders can effectively leverage their capital to de-risk the transaction through guarantee structures. Creating a market-led and scalable approach to healthcare skilling by creating the right financial incentives for all stakeholders can significantly impact the shortage of skilled allied healthcare professionals.
Healthcare and Wash
Strengthening Public Healthcare system
India faces a severe shortage of both infrastructure and talent coupled with under-investment in primary care. This disproportionate focus on curative care has led to a high burden on secondary and tertiary medical institutions as well as close to 60% out-of-pocket spending compared to an 18% global average. The quality of care offered in public health systems is abysmal, hindered by limited accreditation, and the adoption of basic technologies. Strong public-private partnerships coupled with the use of blended financing and pay-for-success instruments can address some of the structural challenges in healthcare. Read more about potential use cases of blended finance in healthcare.
Scaling up healthcare innovations to improve access and affordability
The COVID crisis has highlighted the need for the private sector and bilateral resources to galvanize healthcare innovations to meet COVID-19 response and other emerging public health threats. Blended Finance through grants and syndicated loans can ensure rapid and effective financing assistance for necessary innovations to improve the healthcare infrastructure in India. Soft grants are effective in providing financing for undertaking commercial validation, access to low-cost debt will fulfill the working capital requirements to scale these innovations. Together through a blended finance facility structure, the focus is on providing advisory support and financing to scale these innovations.
