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Village Enterprise DIB
Key Facts and Figures
Village Enterprise DIB
Key Facts and Figures
Village Enterprise.jpg

The Village Enterprise DIB is the first-ever development impact bond (DIB) for poverty alleviation in Sub-Saharan Africa.

Key facts and figures

  • Launch date

    Nov 2017

  • Duration

    3 years

  • Maximum outcome payments

    $4,280,618

  • Target population

    Households living in extreme poverty (less than $1.90 per day) & geographically targeted

  • Outcome funders

    Department for International Development, UK (DfID); Development Innovation Ventures division of United States Agency for International Development, USA (USAID); an anonymous philanthropic fund based in USA

  • Provider

    Village Enterprise

  • Investors

    Total of nine, but not all publicly disclosed: Delta Fund; The Halls Family; ImpactAssets (gathering 3 private investors, incl. Silicon Valley Social Venture Fund (SV2)); Jay Friedrich; Brian Lonergan, The Laidir Foundation; Bridges Impact Foundation; Anonymous Philanthropy

  • Evaluator

    IDInsight

  • Trustee

    Global Development Incubator

Source: Sadie Zavgren (via YouTube)

Global levels of extreme poverty - defined as a person living on less than $1.90 a day (purchasing power parity - PPP) - have fallen significantly from 1.9 billion in 1990 to 736 million in 2015. However, the number of people living in extreme poverty in Sub-Saharan Africa has increased during this same period, from 278 million to 413 million, with current forecasts predicting this trend to continue. This rise is partially explained by the population of Sub-Saharan Africa doubling during this period. However, many other regions of the world have experienced similar population growth and yet have been able to reduce the number of people living in extreme poverty

Poverty is not only the deprivation of money, but of food, education and health care, amongst many other indicators. Ending poverty in all its forms everywhere is the Sustainable Development Goal 1, and a 2019 progress update on this goal shows that: 'The decline of global extreme poverty continues, but has slowed. The deceleration indicates that the world is not on track to achieve the target of less than 3 per cent of the world living in extreme poverty by 2030. People who continue to live in extreme poverty face deep, entrenched deprivation often exacerbated by violent conflicts and vulnerability to disasters. Strong social protection systems and government spending on key services often help those left behind get back on their feet and escape poverty, but these services need to be brought to scale.'

Source: United Nations Sustainable Development Goals Knowledge Platform.

The Village Enterprise Development Impact Bond (DIB) microenterprise development programme seeks to improve the income levels of at least 12,660 (estimated 13,830) extreme poor households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises. The Village Enterprise’s (VE) microenterprise development programme delivers support in the form of a cash grant as well as regular business mentoring and training - an approach that is commonly known as a graduation programme.  

A graduation programme recognises that poverty is complex and multidimensional, and that the extreme poor are generally excluded from social services as well as markets. A graduation approach provides a comprehensive time-bound set of integrated and sequenced interventions with the aim of graduating people out of poverty in a way that is sustainable. This approach was pioneered by BRAC in Bangladesh, 2002, and BRAC have reported positive impacts for the programme recipients as well as the broader economy

Village Enterprise DIB graduation programme 

There are 5 components to the programme: targeting, business savings groups, training, seed funding and mentoring. 

Targeting 

Poor households are identified using a hybrid combination of a community-based Participatory Wealth Ranking exercise and a survey using Grameen’s Progress Out of Poverty Index (PPI). Participatory Wealth Ranking uses consultations with community members, usually village elders, to identify the poorest households relative to the rest of the community. PPI attempts to establish a household wealth by using a simple questionnaire about household characteristics. For a detailed discussion of poverty targeting approaches see: Coady, Grosh and Hoddinott (2004). However, it should be noted that the effectiveness of poverty targeting is widely disputed (Sen, 1992Devereux and Sabates-Wheeler, 2004; and Kidd and Athias, 2019). 

The VE DIB is implemented in remote rural areas of Kenya and Uganda, East Africa where more than 50% of the population live in extreme poverty.  

Kenya: Kitale, Trans-Nzoia, Migori, Bungoma and West Pokot 

Uganda: Soroti, Hoima, Masindi, Kiryandongo, Nwoya, Gulu, Kitgum, Dokolo, Amuria, Katakwi, Kampala 

Business savings group 

Business savings groups (BSGs) are formed at the beginning of training, comprising of approximately 10 businesses (30 entrepreneurs) each. The BSGs create the platform through which VE carries out the training program. BSGs are also used to establish trust and respect between the participating community members. While VE expects programme recipients to participate in BSGs, they are self-generating and self-managed, with a personalised constitution. BSGs are a form of microfinance that allow members to pool savings and access loans. By pooling savings BSGs provide members with ongoing protection against financial shocks, as well as provide access to growth capital.  

Training 

Local mentors deliver a four-month training programme, with modules on financial literacy, business education, entrepreneurial skills, and resource sustainability. The aim of the training programme is to equip programme participants with the necessary knowledge to run a small business. Participants form groups of three and agree a plan for a microbusiness that they will launch together. The Business Mentors support and guide the participants in selecting a viable business. 

Seed funding  

Each group is provided a cash micro-grant to enable them to launch their business. The seed funding is in the form of a grant rather than a loan, meaning the businesses are not expected to repay the seed funding. The rationale for providing a grant and not a loan is that entrepreneurship is by nature a high-risk activity; therefore, a grant reduces the fear of the cost of failure, and incentivises innovative business ideas. In order to test the impacts of grant levels approximately 65% of business (group of 3 individuals from different households) will receive a $150 seed with the remaining 35% receiving $450. This means that each household receives either $50 or $150 

Mentoring 

The local business mentors provide continuous guidance to the participants for one year, coaching them in choosing the focus of their business, as well as how to grow and manage their business and finances, including saving in the BSGs. This is a critical capacity-building phase to ensure the sustainability of the business after the participants exit the programme. 

Source: Village Enterprise.

The VE DIB program seeks to improve the income levels of 12,000+ extreme poor households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises. Programme outcomes are measured against a Randomised Control Trial (RCT) conducted by IDinsight.  

The project is being implemented, and there are no interim results currently available.  

Outcomes framework

  • Outcome indicator 1: USD increase in monthly consumption per capita compared to control group (USD PPP 2016 units). 
  • Outcome indicator 2: USD per capita increase in assets stock compared to control group (in USD PPP 2016 units). 

Outcome payments are tied to the RCT conducted by IDInsight, with VE being paid approximately $1 for every $1 increase in household income. Household income will be measured against consumption and assets. The rationale is that growth in assets provides some evidence that impact of the programme will be sustainable over the long-run. Given a seed funding transfer to beneficiaries (either $50 or $150), the calculation is based on resultant increase in household level of a) consumption and b) assets above the initial seed transfer. 

The total budget committed by outcome payers for outcomes is capped at $4.28 million to VE. Payments for the seed funding of phase of the programme is capped at $1.2 million. There is an additional outcome payment cap of $265 per household.  

The payment formula closely follows the Village Enterprise DIB Theory of Change, as it seeks to attribute increases in household consumption and assets. The payment formula can be found here, pp 21-25.

Source: Instiglio (2018) Village Enterprise Development Impact Bond for Poverty Alleviation. Pp 18-25.

Timeline

Project insights

  1. The first DIB to be implemented in Sub-Saharan Africa 

    The VE DIB is the first DIB to be implemented in Sub-Saharan Africa and is seen as a way of increasing cost-effectiveness on poverty spending for donors. The DIB model is seen as a way of shifting focus and financial resources from monitoring outputs to measuring outcomes.   

    The VE DIB model has four potential advantages over conventional funding models:  

    • By tying funding to verified outcomes, the DIB ensures the interests of VE and their investors, and the donors are well aligned and focused on improving the same social outcomes. 
    • As the DIB requires measuring program outcomes, it makes those outcomes more visible, drawing the attention of the service provider to what really matters, rather than to the activities performed. 
    • The DIB offers flexibility and freedom to VE to pursue a range of strategies and adapt the program to maximize impact. The wide range of results observed for other graduation programs suggest that successful scale-up or replication of the graduation model would require that VE adapt their approach to the Kenyan and Ugandan contexts, and rapidly address challenges that they encounter. 
    • As donors only pay if social outcomes are achieved, the DIB ensures that every cent spent creates a real impact, providing a greater guarantee of value-for-money compared to pay-for-inputs funding. 

    Source: Instiglio (2018) Village Enterprise Development Impact Bond for Poverty Alleviation.

  2. Increased collaboration and innovation? 

    Some positive effects of the DIB mechanism have already been seen on this programme. At its outset, as a relatively new type of funding mechanism, it has created greater levels of collaboration between different stakeholder types, including outcome funders, the service provider, investors and the intermediary. Furthermore, the service provider has innovated, particularly by experimenting with different grant sizes, using mobile money and introducing new adaptive management techniques. 

    Although it is still too soon to put these innovations purely down to the DIB, stakeholders felt that the DIB helped to create an ‘innovation space’ to make it possible. This is a positive sign for the future.  

    Source: Ecorys (2019) Independent Evaluation of the Development Impact Bonds (DIBs) Pilot programme.

  3. Heavy lifting for the service provider 

    For this DIB, the service provider was responsible for approaching and bringing investors into the intervention. Although they were able to do this with success, stakeholders from Village Enterprise felt that this was a costly process and a challenge for them. 

    However, stakeholders hope that in the future Village Enterprise will be better equipped to undertake such a task and will do so more efficiently. 

    Source: Ecorys (2019) Independent Evaluation of the Development Impact Bonds (DIBs) Pilot programme.

References

Village Enterprise.

Instiglio - Village Enterprise Development Impact Bond.

BRAC (2017) Ultra-poor graduation programme

Coady, D., Grosh, M., and Hoddinott, J. (2004). Targeting of Transfers in Developing Countries. Washington, D.C.: World Bank.

Collier, P. (2008) The Bottom Billion: Why the poorest countries are failing and what can be done about it. Oxford: Oxford University Press.

Deaton, A. (2013) The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton: Princeton University Press.

Devereux, S., and Sabates-Wheeler, R. (2004). Transformative social protection. IDS Working Paper 232. Institute of Development Studies.

Ecorys (forthcoming) Independent Evaluation of the Development Impact Bonds (DIBs) Pilot programme.

Ecorys (forthcoming) Village Enterprise Development Impact Bond (DIB): A case study produced as part of the DFID DIBs pilot programme evaluation.  

Hashemi, S., and de Montesquiou, A. (2011) Reaching the Poorest: Lessons from the Graduation Model. Focus Note No. 69., CGAP.

IDinsight - Evaluating the Village Enterprise Development Impact Bond.

Innovations for Poverty Action - The PPI is business intelligence for those in the business of serving the poor.

Instiglio (2018) Village Enterprise Development Impact Bond for Poverty Alleviation.

International Policy Centre for Inclusive Growth. (2017). Debating Graduation. Policy in Focus, Vol. 14, Issue No. 2, July 2017

Kidd, S., and Bailey-Athias, D. (2019) Hit and Miss: An assessment of targeting effectiveness in social protection. Development Pathways.

OECD (2018) Purchasing Power Parities - Frequently Asked Questions (FAQs).

Sen, A. (1981) Poverty and Famines Essay on Entitlement and Deprivation. Oxford: Clarendon Press.

Sen, A. (1992) The Political Economy of Targeting. In D. van de Walle, and K. Nead, (Eds). Public Spending and the Poor. Washington, DC: World Bank.  

World Bank - Regional aggregation using 2011 PPP and $1.9/day poverty line.

World Bank (2015) FAQs: Global Poverty Line Update.

World Bank (2018) The number of extremely poor people continues to rise in Sub-Saharan Africa. 09 September 2018. Divyanshi Wadwha’s Blog.


Page last updated: October 2019.

Downloads and Resources

VE DIB - Data Template

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Village Enterprise DIB Case Study

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Independent Evaluation of the UK DFID's DIBs Pilot programme – Full Report

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