LONDON, Nov 30 (IFR) - UBS has today announced what it calls the world's first healthcare development impact bond, with the aim of reducing mother and infant deaths in Rajasthan.
Despite its name, the Maternal and Newborn Healthcare DIB - or "Utkrisht bond" - is not a bond in the traditional fixed income sense but rather a performance-based contract under which private investors provide capital to intermediaries and service providers.
UBS Optimus Foundation, a grant-making foundation established by the bank in 1999, will provide an initial US$3.5m of funding.
The money will be used by service providers to improve access to and quality of care in up to 440 private facilities in Rajasthan, supporting government efforts to reduce maternal and newborn deaths.
If the service providers meet pre-determined targets, investors will receive their funds back from "outcome payers" - USAID and MSD for Mothers - as well as an IRR of up to 8%, according to a UBS spokesperson.
The two parties have committed up to US$8m for outcome funding.
All implementation partners are also co-investors, contributing more than 20% of the capital required.
Interventions will be delivered by NGOs Population Services International and India's HLFPPT.
The bond could have a transformative impact on how development is financed, said Kim Bredhauer, CEO of Palladium Group - an international advisory and management business focused on social impact initiatives.
"Not only, if successful, does this first healthcare impact bond potentially unlock vast sums of private capital for other projects but it ensures accountability and full transparency in the process," said Bredhauer.
Palladium designed the structure and will manage implementation throughout the three-year term.
The success of the bond will be judged on whether healthcare facilities are able to achieve the new certification standard developed by the National Accreditation Board of Hospitals and Healthcare Providers and the Federation of Obstetric and Gynaecological Societies of India.
This means quality maternal care for the first time will be certified and fully transparent in private health facilities, according to UBS.
Rajasthan has one of the highest maternal and newborn mortality rates in India, with 244 maternal deaths per 100,000 births and 47 infant deaths per 1000 live births. The private sector accounts for over 25% of hospital births in Rajasthan. (Reporting by Merle Crichton, editing by Alex Chambers, Julian Baker)