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Why did the British Asian Trust decide to engage in social finance?

Tackling the root causes of poverty in a region like South Asia where 230 million people live below the international poverty line will not be solved through traditional philanthropy alone. At the British Asian Trust, it is in our DNA to think beyond traditional approaches; to be entrepreneurial and creative in our approach to achieve impact at a larger scale. 

We also bring the credibility and commitment of the South Asian diaspora – we have seen a real desire among the diaspora to embrace different ways of giving, to move beyond traditional giving to look at a blend of financial and social returns.

The not-for-profit space in India and across South Asia has changed dramatically in recent years – it is now much more entrepreneurial with a stronger focus on outcomes. We are at the forefront of developments in social finance that are very exciting and potentially transformative.

Give an example of an investment which the South Asian diaspora would be passionate about?

The South Asian diaspora has an enduring passion for education. They want to see children not just in school but actually learning. Therefore, our education Development Impact Bond (DIB) in India, with its emphasis on results, is a powerful vehicle to drive this change in learning.

While enrolment across the country stands at 97 per cent, the quality of learning has remained poor - children may be in school but they are simply not learning as they should be. The DIB will improve the education and learning outcomes of 200,000 marginalised children in India.

Why invest in social finance instruments like a DIB?

First of all, there is a ruthless focus on outcomes. In a well-developed DIB, there is a clear definition of success and how will it be measured with a greater emphasis on data and evidence. This is a critical part of its design which doesn’t always exist in other areas of development work.

Governments typically don’t have the finances or agility to drive the innovation needed to improve the effectiveness of their services. Outcome funders can play a critical role in helping to create workable models. 

And if a concept is proven to be successful there is the ability to take it to scale. For example, to pay only when education outcomes are met enables everyone to learn what led to that success. Evidence of success can be consolidated to promote models which work with governments and others who can adopt the approach and take it to scale.

Some people may be concerned about the financial returns earned by risk investors in the name of ‘doing good’. How would you justify this to philanthropists?

The only way that a concept like this can be successful is if someone takes the risk and invests upfront working capital.  We need to attract new money and so it seems perfectly logical that there should be a small return for taking the upfront risk. 

A key advantage for philanthropists is that you only pay for success. For the outcome funders to our DIB, this means that you will only pay for a programme that has achieved results and raised the education outcomes for children. 

Social finance is a key organisational priority for us. In addition to the $10 million education DIB in India, we are in conversations about other social finance initiatives in Pakistan and Bangladesh. We continue to grow our in-house expertise and ensure that we are providing the best possible opportunities to enable supporters to make a transformational change.

 

In Conversation: Richard Hawkes, Chief Executive of the British Asian Trust, with Aditi Banerjee, Advisor on Impact Investing and Social Finance

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