Better measurement of progress towards Sustainable Development Goal 4 (SDG 4), particularly to measure learning, has been hard to coordinate. There are many partners involved in a task that is large and technically complicated, with few measurement models in place.

The UNESCO Institute for Statistics (UIS) has managed to advance the measurement agenda, despite a lack of sufficient funding. A social impact bond (SIB) could be an innovative way to speed things up.

For those who are not familiar with SIBs: they enable to make up-front socially-important investments today that will have benefits in the future. The risks for the taxpayer are small as the SIB pays off only if and when the investment succeeds – according to pre-determined criteria.

How an SIB would work

Experts or an expert agency act as a third-party intermediary between the investors, the institution using the funds (typically a non-profit agency) and the public institution that ultimately repays the investors. A framework outlines all stakeholders’ obligations along with the criteria for success and is then used to monitor the process.

The closest analogy would be the use of vaccine bonds to finance immunization in the health sector. The Global Alliance for Vaccines and Immunization (Gavi) and its innovative finance partners “have raised over US$6.1 billion from investors, making large volumes of funds immediately available for Gavi programs. This saves more lives faster.”

Learning assessments for SDG 4 for low- and lower-middle-income countries (LICs and LMICs), where coverage and investment capacity are low, would be an ideal target for an SIB for the following reasons:

• Risks can be measured and controlled through the design and monitoring of the SIB.
• The task is technically complicated, yet it is not complex as no fundamental theoretical research or basic scientific development is needed and assessment models already exist.
• It is a one-off task, not a stream of services that must be sustainable or ongoing as intellectual property is created and put into the public domain (although this one-off scheme could be used to generate other ‘products’).
• It requires a complex partnership, but this can be organized by assessment non-profits without micro-management by the UIS, the donor or the investors.
• Each partner does what they do best.

For this to work, the task must be specific, i.e. just one or two of the SDG 4 learning areas should be targeted. Or it could be the development and trail of protocols for measuring learning outcomes in emergencies (such as COVID-19), refugee camps, etc.

The task must be doable and not require much “ideological” agreement, such as the measurement of digital skills rather than assessment of learning in civic and global values for instance. Also, it must fit with the criteria and technical documentation (various frameworks) established by the UIS.

As with similar investments, there would be four main actors who would partner for an SIB, as follows:

• The UIS would provide quality assurance, coordination and brokerage.
  The UIS would establish performance criteria with a panel of experts, create a panel to evaluate the results and certify to the payers whether the results have been achieved or not. As well as technical quality, the evaluating panel would examine cost and cost-effectiveness, and the extent to which the assessment is placed in the public domain, with the UIS monitoring and advising all parties.
• Investors are found to provide operational revenue for the assessment organizations to meet the cost of R&D and initial application.
  They would be re-paid if and when the scheme succeeds. This would require trust and investors could choose their own advisors to work with those of the UIS in establishing the criteria. While it would be tempting to have the investors micromanage the process, monitoring and advice should come from the UIS. The question is whether an SIB is too risky for investors. Yes, the investors take a risk, but the bond market is risky and private companies often go bankrupt in the normal course of businesses, and investors still invest anyway. In the case of an SIB, there is a social investment component – funded by donors – that does not demand a normal or market rate of return.
• A non-profit assessment agency or NGO (or a partnership of two or three) is chosen.
  Their operating revenue for the work would be generated by the SIB and the cost risks of the assessment entities would be minimized, although net revenue (which many non-profits do have) may be put at risk deliberately as an incentive. They develop the assessment and can be paid up front, or as they go. They could, perhaps, be required to partner with, say, three LICs or LMICs from the outset. If the assessment succeeds and provides useful information in these three countries, the investors are re-paid partially or in full. This can depend on whether the process did not succeed as a result of force majeure, for example. The assessment organization(s) would have incentives to perform that could come from two sources: a pure prize component (which can become net revenue for their further R&D purposes as they wish) and their own reputation as presumably there would not be just one bond.
• Donors are found to make the actual payment at the end.
  Clearly, the non-profit assessment organizations cannot be expected to re-pay the investors as they are mission-driven organizations and do not have much access to credit from the credit markets. However, the donors do not have to ‘tap’ the taxpayers of their countries until the end – and then only if the experiment succeeds. So, donors can view this very much as a public-private partnership that yields rapid benefits but that does not require payments until the investment succeeds.

Another advantage of this approach is that the mere fact of structuring this operation would increase the transparency of the assessment ecosystem. As argued in other blogs (here and here), the ecosystem or market for assessments is characterized by inefficiencies and inequities. Developing the criteria and cost structure for an SIB or similar mechanism for learning assessments would help to make the overall assessment ecosystem more transparent.

In the health sector, the same thinking around vaccination bonds or special funding for HIV/AIDS anti-retroviral drugs eventually lowered the cost (by spurring competition, creating advance commitments to purchase, providing technical advice and spreading good production techniques) and made the market for pharmaceuticals more transparent.

The possibility of an SIB or similar social contract to fund a key component of SDG measurement is attractive. However, these are complex mechanisms that have been used mostly in other sectors.

Given the potential of SIBs to yield a public good with relatively low risk, the UIS would be happy to discuss the potential of this innovative social contract with interested partners and stakeholders.