An investment strategy in the human interest

From the always interesting Fixes blog at the New York Times, a new idea for funding aid projects:

You are a health official in Uganda, and you’re watching a crisis unfold. Your people have long suffered from epidemics of sleeping sickness, one of Africa’s biggest killers. There is no vaccine and the only treatment is protracted and painful. Sleeping sickness, transmitted by the tsetse fly, is carried by cattle and also kills cattle, destroying the livelihoods of families who keep them.

There are two strains of sleeping sickness that affect humans; one is in West Africa and one in East Africa. Uganda is the only country that has them both. Worryingly, they are moving closer together as their cattle carriers move, and will likely meet in a decade. Once that happens, the disease will become even harder and more expensive to screen for and diagnose.

Their meeting can be prevented, and sleeping sickness can be controlled, by treating cattle and then periodically spraying them with an insecticide. But treating 3.5 million cattle, and then tracking them for smaller campaigns of re-spraying, would cost some $30 million. Uganda doesn’t have that money. So it will pay a lot more later — in money, in the lives of animals, and in human health and productivity.

Governments and international aid donors sometimes like to call the work they do to improve people’s lives “investing.” Uganda’s problem is an example. In a figurative sense, treating those cattle is an investment — a very good one. A small amount of money put in now will bring large rewards later. Of course, it’s not literally an investment.

But what if it were?

What if this project were treated like a business startup? You’d get people to put up the money. If the “business” doesn’t work, the investors are out of luck. But if it succeeds — if the cattle are treated and sprayed, and the gains are maintained — international donors would repay the investors with interest, using part of the money saved by reducing sleeping sickness.

If this idea sounds familiar, it should. The Development Impact Bond is almost exactly the same as the Social Impact Bond, the hottest idea in social-service provision (an oxymoron if ever there was one) of the last few years. One difference is who repays investors if the program succeeds. With a social impact bond, the government does. With a development bond, payment would fall to international donors such as foundations or government agencies such as Britain’s Department for International Development or the U.S. Agency for International Development.

Read the complete post here.

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