British Asian Trust

Embracing social finance has transformed everything we do at the British Asian Trust and the way we think about development… We have also grown as an organisation, moving from being on the sidelines of development discussions to now being a thoughtful player within the sector. The biggest testimony to which was our ability to swiftly change and pivot our work as the world began to grapple with the impact of the Covid-19 pandemic.

Richard Hawkes, CEO, British Asian Trust

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About the British Asian Trust

The international and diaspora-led British Asian Trust (BAT) was founded in 2007 by His Majesty King Charles III and a group of British Asian business leaders to deliver high-quality development programmes in India, Pakistan, Bangladesh and Sri Lanka. Having begun their journey with conventional grant-making, supporting on-the-ground organisations in South Asia, they realised over time that these approaches could be complemented by innovative finance strategies. Today, the organisation is well known for its pioneering work in social finance and outcomes-based finance, through which the Trust has convened and coordinated large multi-stakeholder initiatives for better outcomes in the areas of education and skills-building.

What was the challenge?

Recognising the impossibility of closing the massive Sustainable Development Goal funding gaps, which were highlighted in a 2018 United Nations report, the British Asian Trust began to think more strategically about effective uses of existing social impact funding. The Trust felt it was important to supplement its grant-making efforts with innovative financial solutions to improve the efficiency and effectiveness of all funds spent on development, to yield measurable outcomes.

What was the response?

BAT trialled a new approach to development finance with the use of Development Impact Bonds or DIBs. The DIB offers an innovative strategy to secure tangible, measurable outcomes using donor payments, thereby ensuring that funding actually translates into real-world change. Within a DIB, a ‘social impact investor’ provides the capital to on-the-ground partners for a project’s implementation, while an ‘outcomes funder’ pays back the investor, with returns, if the project outcomes are found to be achieved and/or exceeded by a third-party evaluator. The model de-risks the investment for the outcomes funder, guaranteeing that funds are used more effectively and paid out on condition of success. 

The Trust arrived at this model in the midst of a more progressive philanthropic environment in India, increasing the presence of social finance initiatives in the UK and inspiring innovations in social businesses and microfinance by partner organisations like BRAC and Akhuwat in Bangladesh and Pakistan. In particular, BAT’s use of DIBs followed the success of a 2015 pilot DIB called Educate Girls in Rajasthan, which provided proof of concept to BAT and investors towards the undertaking of their larger-scale project, the Quality Education India Development Impact Bond (QEI DIB). 

The QEI DIB, which ran between 2018 and 2022, was BAT’s response to findings in the 2018 Annual Status of Education Report (ASER) showing that the average Grade V students in India were at least two years behind in grade-appropriate learning. Bringing together a number of partners – philanthropic, private and NGO – to design, finance, implement and evaluate the project, BAT’s coordination of the QEI DIB paid off, with the programme meeting and exceeding its educational outcomes over the four-year period. By 2022, the QEI DIB had improved learning outcomes for 200,000 students and achieved a 2.5x increase in learning gains as compared to non-DIB students. 

BAT’s embrace of the DIB model required some internal work. The work has been driven by a team of seasoned experts with diverse experience in development and finance, supplemented by a deep understanding of South Asia and its development sector intricacies. This, paired with the Trust’s global expertise and perspective, made these experts uniquely placed to champion the DIB approach. They also benefit from the leadership and guidance of a Social Finance Committee that brings expertise in social finance, along with collective experience in consulting, directing and researching at major global investment, social finance and development institutions. 

The Committee supports the social finance strategy for the Trust, giving direction and oversight. The team’s collective experience has enabled them to design DIBs specific to the South Asian context, mitigating some of the difficulties that come with these instruments, including high set-up costs and complex legal, management and technical challenges. It was important for the Trust to rethink the model in ways that meant most of the money would reach the NGO partners on the ground, who are responsible for implementing the projects. In the QEI DIB, BAT managed to make sure that 80% of the money reached those partners on the ground. 

BAT’s social finance function was established a few years before the launch of the QEI DIB, to work on the conceptualisation, launch, governance and management of these projects. As the DIB is a new model involving so many different actors, BAT’s social finance function team realised their work would go beyond implementation and into building capacity for outcomes-based approaches more broadly. First of all, they needed to demystify the DIB model and manage the various anxieties of all potential collaborators. BAT established the Outcomes Readiness Programme to build the capacity of non-profits in India that wanted to enter the arena of outcomes-based funding. The Programme – which recently launched a self-assessment online tool for non-profits to define, assess and enhance their readiness for outcomes – has helped organisations build numerous skills, including producing long-term plans towards achievement of outcomes, aligning their organisational strategies with outcomes-based approaches, managing risks during the implementation of their projects, and working with evaluators. 

For corporate or investment partners in India, the needs are different. BAT works to ensure that there are multiple, varied funding streams, and this means engaging corporate funders who may be put off by the complexity of DIB funding structures. For instance, in the case of complementary corporate social responsibility (CSR) capital, which must be spent by businesses annually, specific strategies need to be created for CSR-DIB partnerships, because DIBs are generally multi-year projects. Managing these issues means acknowledging and responding to the different needs of corporate partners and coming up with ways to meet the requirements of the regulatory environment. 

Since the primary focus of DIBs is achieving specific outcomes, BAT works with independent evaluator partners who can establish effective data collection and analysis systems to continuously assess the impact of the interventions. The performance manager (Dalberg, in the case of the QEI DIB) feeds actionable information to service provider partners, who constantly improve their service towards the meeting of the bond’s goals. In the QEI DIB, BAT found that many of its partners on the ground reported feeling trusted and enjoyed a greater sense of autonomy than usual in the carrying out of their work. 

The outcomes focus of a DIB (as opposed to the usual activities focus of grant-making) gives service providers agility in how they operationalise their funds to meet goals. They can quickly pivot in response to performance and evaluation data, as well as shifting circumstances, in whatever ways they see fit. For example, in the sudden crisis of the COVID-19 pandemic, which hit halfway through the QEI DIB, implementing partners were able to quickly shift their approach, making use of online and digital tools to respond to the new reality, unimpeded by external administration of funds. This level of trust balances out the often problematic power dynamic between funder and partner, redirecting all parties to the collective goal at hand: proven outcomes. Furthermore, the relationship with evaluators inevitably leads service providers to improve their approaches and services within and beyond the DIBs, creating potential for even wider-spread change. 

These new ways of working have not been isolated from the organisation as a whole. The intensive evaluation and feedback system of DIBs has spilt over into BAT’s institutional culture, bringing home the importance of evidence and data, and leading to improvements in internal monitoring and evaluation systems across the Trust’s programming. Within the QEI DIB, BAT was tasked with constantly capturing records and learnings. The team kept notes on every aspect of the DIB, including how to work with partners, what kinds of contracts to make, how to manage risk, effective processes to coordinate regular partner meetings, the flows of finances, and even what happens when a global pandemic hits. 

As a result of its success with the QEI DIB, BAT has embarked on two other DIBs, expanding the Trust’s partnership scope and enabling the implementation of key lessons from the first DIB. The first of these newer DIBs is a skills-development programme with a focus on women. Named the Skill Impact Bond (SIB) (2021–2025), it invests in employment outcomes – a first of its kind. 

As a result of BAT’s continuous advocacy efforts, as well as the success of the Educate Girls DIB and the QEI DIB, the DIB model has created significant waves in the sector, attracting not only corporate interest but also government attention. The SIB is the first of these DIBs to work in partnership with a government-adjacent body. The National Skill Development Corporation (NSDC), a major public-private actor under India’s Ministry of Skill Development and Entrepreneurship, has come on board as the investor, selecting as its implementation partners Learnet Skills Limited, the Magic Bus India Foundation, and the PanIIT Alumni Reach For India Foundation. The decision of a state actor to fulfil the role of the DIB’s investor creates a massive opportunity for success. Due to the NSDC’s unique position in both the skilling and governance landscape, it is able to be deeply involved in the DIB’s implementation, supporting the programme’s implementation partners and further improving their efficiency while lowering the risk of its own investment. The NSDC’s involvement has drawn even more government attention to DIBs generally, creating momentum and potential scope for more and bigger Impact Bonds with their support in future. 

The QEI DIB, along with LiftEd and the SIB, are three of the five DIBs that have so far rolled out in India, evidencing BAT’s massive involvement in this exciting new area. They also highlight the organisation’s increased partnership capacity, involving more corporate partners, and the beginnings of government buy-in. The significance of DIBs in the sector is demonstrated by numerous case studies, including one on the QEI DIB specifically, conducted by the UK’s Foreign, Commonwealth and Development Office (FCDO), which explores the DIB’s design, successes and lessons learned. Driving an approach focused on performance and outcomes, these new tools differ from traditional grant-making by promoting an internal culture of rigour and evidence-based work, as well as more agile relationships with implementation partners.

What have they learned?

1. Strengthen partnerships by having a common goal. Share a collective goal by reframing interventions using an outcomes-based, evidence-based approach. By focusing on outcomes, any problems faced in the intervention are forced to the surface quickly, as all efforts go towards monitoring the effectiveness of the programme. The positive pressure of this approach creates the conditions for partners across different sectors to collaborate efficiently. 
2. Build internal capacity for major social finance projects. Get social finance industry experts on the board. They can introduce, strategise and guide the implementation of social financing tools, providing experience and knowledge to the organisation and allowing it to grow by daring to innovate. Ensure team members are on the ground to strategise and implement new social finance tools. Invest in building the partnership and technical skills of the team from the beginning to ensure smooth implementation. The coordinating role of BAT requires the creation of robust internal structures to hold together these massive financial undertakings. The team’s intensive record-keeping allows these internal structures to continue to improve. 
3. Develop actionable monitoring and evaluation systems. Throughout this process, BAT has learned both the value and resource intensity of evaluation systems. Evaluators, both independent and internal, should work with metrics that are easily actionable in programmes. The collection of data should, in other words, be efficient and strategic and should lead to implementable action.  
4. Raise awareness and strengthen the capacity of your partners. Advocating for and demystifying innovative social financing instruments is just as important as producing them. Encouraging awareness and engagement from other potential stakeholders – donors, organisations, and so on – ultimately helps shift the ecosystem. Support of investors and initiatives like BAT’s Outcomes Readiness Programme have proven essential for building stakeholder and partner capacity and creating market readiness. 
5. Place trust in partners to allow for agile implementation. Allow service providers to adjust their programmes swiftly in response to changing contexts and performance feedback that helps to quickly expose both successful and ineffective approaches. This gives partners autonomy and the sense of being trusted, which creates conditions for better relationships and more effective work. Furthermore, this trust-building within partnerships creates an environment in which partners are invested in the overall success of the project, rather than seeing it as a purely financial transaction. Applicable beyond the context of social financing, the impact of trust-based approaches has been a crucial learning, one that has been applied to BAT’s more traditional grant-making programmes. 
6. Learn from alternative investment models. De-risk philanthropic investments by paying for outcomes rather than activities. The DIB model means that investors with the capacity to take on risk can provide the initial capital and are only paid back with returns if the programmes are successful. 
7. Create structures where partners can learn from each other. When working with multiple partners, find ways to bring them together to learn from each other. While working in a shared outcomes context, constantly subject to performance data, it is useful to be exposed to multiple approaches and possible solutions to challenges. Additionally, by assessing the health of relationships with and between partners regularly, everyone is more likely to benefit from the collaboration.

Key outcomes and impact indicators