Throwing Good Money After Good (Project Syndicate)

Esther Duflo and Michael Kremer write about social innovation funds, characterized by an open, tiered, and evidence-based approach, and their potential as a powerful tool in reducing global poverty.

"...To mobilize investment in projects designed to assist those living in poverty, we helped establish social innovation funds in the United States and France. Development Innovation Ventures (DIV) at the US Agency for International Development, and the Fund for Innovation in Development (FID) at the Agence Française de Développement both take a page from venture capital’s playbook, but focus on currently underserved areas.

These funds identify innovations that can be scaled up, either by the agencies hosting them or by other governments, NGOs, or private companies. For example, DIV’s early, relatively modest investments in targeted instruction in India provided the necessary proof of concept that facilitated the Zambian government’s almost-nationwide expansion of the model, with assistance from the US government. It also proved instrumental in securing $25 million in complementary philanthropic support to help scale this innovation further. Millions of children in a dozen African countries now reap the benefits of these highly effective pedagogical programs.

This approach has been enormously successful. We recently analyzed the impact of the first two years of DIV investments, which included software to support community health workers in delivering basic services, water-treatment dispensers, and affordable glasses for presbyopia. Innovations funded by DIV during this period have affected more than 100 million people and generated at least $17 of social benefits for every $1 invested. This represents a social rate of return exceeding 143%, nearly ten times the initial 15% target set at DIV’s inception."

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