From PlayPumps to Social Impact Bonds by Bahar Ostadan

by tuftsigl
Sep 14

There are over 1 billion people living in poverty, according to 2011 World Bank estimates. Western intentions to address this figure range from post-colonial shame to altruism, and manifest in direct contributions or through multilateral organizations. The main challenges for international development in 2015 are threefold: (1) outdated models of aid that have trivially impactful or even actively harmful effects, (2) developing countries’ overwhelming pressure to compete in a globalizing world, (3) and insubstantial metrics for impact evaluation.

Last year, Americans alone gave $335.17 billion to philanthropic efforts. The last 50 years of net “official development assistance” (ODA) from developed countries sum to $3.5 trillion, a value three times larger than the entire economy of sub-Saharan Africa. The gap between well-intentioned motivations and measurable, sustainable impact is a catastrophic misfortune.

This “aid” often falls into the personal bank accounts of dictators, haphazardly bounces from one “KONY 2012” to another, forces local agencies to meet onerous donor requirements, and creates an unsustainable aid dependency paired with a Western culture of “poverty porn.”

Silicon Valley has made attempts at more sustainable, technology-based development solutions. In 2003 Kofi Annan challenged Silicon Valley gurus to bring their spirit and innovation to the developing world. In response, California-based masterminds devised “whiz-bang projects that look great on a PowerPoint slide, but often crash and burn in the real world.” Laura Bush and AOL co-founder Steve Case championed PlayPumps, a technology that leverages energy from children playing on merry-go-rounds to deliver water. Unfortunately it was found that “kids would have to ‘play’ for 27 hours a day to meet the target of delivering water to 2,500 people per pump.” Not to mention PlayPumps costs four times what a regular water pump does. PlayPumps is just one example, alongside One Laptop per Child, Soccket’s energy-harnessing soccer ball, and many more. These “solutions” get funding “on the basis of their appeal to donors and philanthropists in the West rather than consumers in Africa.”

It is clear that financial and technological solutions must be paired with “commitments to good governance, investments in people, and economic freedom.”

A second challenge for international development is the pressure on developing countries to compete in global markets. Globalization demands the diversion of resources away from development needs. As countries set institutional priorities to integrate themselves into a global economy, they divert resources that would otherwise be allocated to urgent development priorities such as public health, education, industrial capacity, and social cohesion. Globalization is not a shortcut to development. Foreign trade and investment, rather than development concerns, have become yardsticks for evaluating social and economic policies. For example, the U.S. treasury urged Mexico’s government to reduce violent crime because it drives away foreign investors. This has allowed power to accumulate in the hands of bond and equity traders rather than governments, causing countries to train bank auditors over secondary-school teachers.

Lastly, development work is plagued with insubstantial metrics for impact evaluation that track outputs rather than outcomes. For example, a program might measure the number of students enrolled or teachers trained in a given school. While attendance may have improved, “learning outcomes did not.” Measureable impact should be at the forefront of daily operations rather than a mere afterthought, piecing together impressive numbers to appease donors. The question remains: how do we measure social return on investment, and how do we make this process affordable, relevant, and respected? The answer seems to lie in nascent models such as Social Impact Bonds (SIBs).

      First introduced by the UK five years ago, a SIB (also known as Pay for Success Bond) requires public sector agencies to pay for an improvement in local social issues that ultimately save them money, such as prison recidivism in the U.S. or teen pregnancy in Colombia. Private investors bear the risk of these contracts, and receive a return on their financing only if pre-agreed outcomes are reached. SIBs symbolize a future of development in which quality implementation is held accountable.

Ultimately, the future of large-scale development must involve the public sector, private investment, and socially motivated non-profits in results-driven collaborations.





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