Social Impact Performance Bonds
- Crime prevention
- Employment
- Financial services and markets
- Youth development
- Microfinance
- Public policy
- Social enterprise
Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.
Renee
Lee
, OTA
Non-profit/NGO/Citizen-sector Organization
, OTA
$6-10 Million.
We target multiple providers with a combined turnover $NZD 15,000,000 or in $USD $10,000,000
5-24.
7: NZ is a nation of SME's 98% of all business here have less than 20 employees
Pilot Round: 24 months
Invested in 5 - 7 firms (including new entity)
Total | $2,750,000
Range | $50,000 - $750,000
Mean | $250,000
Providers of
Programmes & Outcomes | $2,000,000 - $2,250,000
New Investment Entity | $250,000 - $400,000
Technology Innovation | $100,000 - $150,000
Research& Performance | $150,000 - $200,000
Operating for less than a year
Besides goodwill there are few incentives for our people to invest in improving social outcomes. Instead we pay taxes to the government to deal to the resulting social problems via our justice system.
Each year the Government establishes a budget and allocates millions of dollars to spending on justice: including imprisonment.
By funding social impact programmes that quantifiably (%) reduce the numbers of people imprisoned (within a defined time and place)we will save the government dollars, and free up funds budgeted for imprisonment.
We seek to leverage these saving to 1) provide the incentive and reward for social investment 2) expand the funding available for social impact programmes.
We ask that the government share with communities the dollars saved in order to establish a new sustainable and scalable funding model for community developed social services.
In terms of community "public" intervention we are looking to leverage models for micro investment "by the community for the community". Local people investing small amounts to enable the expansion of social programmes that 1) improve social outcomes for the community in which they live and in doing so 2) provides a return on their investment.
Lack of financial capacity, Unavailability of financial products tailored to SME needs, Lack of competition / incentives for financial intermediaries to serve SMEs, General barriers to SME development related to investment climate.
Lack of financial capital | Social Impact Performance Bonds provide an additional source of funding to both charitable and for profit social service contractors.
Unavailability of financial products tailored to SME needs | We do not have a private social development investment body. We remain to reliant on the Govt. to improve social outcomes. Communities need the means to select and fund social problems from within.
We hope to leverage online micro-finance tools to encourage and enable individuals, families and communities to invest in improving local social outcomes, investment "by communities for communities" (Community Resilience vs Govt dependence).
Investment Incentives | Social Impact Performance Bonds provide incentive and reward social investment.
General Barriers of Investment Climate | The "kiwi love affair with property investment" means not enough small private investment goes into growth business' let alone the social sector.
Current Spending by Example based loosely on UK Social Impact Bond project
Government Spending on Repeat Offenders
Group released from Jail after 1 year term 3,000
Percentage expected to return in 1 year 60%
Actual number of people expected to return 1,800
Cost per DAY to jail 1 repeat offender $300
Cost per YEAR to jail 1 repeat offenders $109,500
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Total Annual Cost to Jail 1800 repeat offenders` $197,100,000
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Goal of Social Investment Bank (SIB)
Decrease Repeat Offender by a total of: 10%
Number of people that do not return to jail 300
Saving Generated by intervention $32,850,000
Commitment by Government to Share Savings
50/50 on all savings create by SIB 50%
Savings generates for Government $16,425,000
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Financial Picture of Social Investment
Performance based Revenue from Govt $16,425,000
Private investment to achieve outcomes $7,500,000
Profit to Social Investors $8,925,000
Initially the pilot project may include up to seven collaborative, contracted SME organisations. Provided outcomes are achieved we will then have additional funds available to invest with a growing number of social service & technology contractors.
Pilot Round:$2,750,000
Corporate & Private Investors | $2,000,000
Charitable Trust & Foundations | $700,000
Individual Micro-Investment | $50,000
It is hoped that bonds (bills &/or notes) could be available for investment beginning April 2012.
Yes
Critical Success Factors: Government Backing of Performance Bonds
It is potentially a high risk investment until such time as we can quantify (reduction in youth re-offending rates over 24 months) and attribute impact to our programmes.
I believe our local youth service providers are world class and that they already impact immensely upon youth offending. This project is an effort to re frame their success in a compelling enough way so as to:-
1) save & divert government spending on imprisonment toward preventative and rehabilitative community developed programmes
2) to provide incentive and reward for private investors and communities to invest in achieving their own social outcomes
Private Investment: Which could include a mix of Corporate Private Investors, Charitable Investments, Community Investment (societies trusts) Local Govt & Individual Micro Investors.
The time frame measuring repeat offending in NZ is 12 & 24 months so it is at these points that our performance against benchmarks would be defined. The first set of Performance Bonds would be trialled from April 2012 - March 2014.
At this early stage of venture development we can only provide an indication based on our understanding of:
1) similar trials in the UK which suggest that given only a portion of the money saved by keeping people out of prison we can expand social impact and establish a high growth social enterprise.
2) Information available on adult offending and imprisonment
In NZ terms
Cost per prisoner per annum $90, 885
Average length of sentence 4 years
Average cost per person sentenced & imprisoned $363,540.
Re imprisonment rates:-
Within 12 months 27%
Within 24 months 36%
If there are 500 people released from NZ prisons statistics indicate re-imprisonment of 180 people within 24 months. 180 people equals a minimum quantifiable cost to community of < 65 million
If we can raise $2,750,000 and invest the majority of this capital in preventative and rehabilitative programmes that prevent 25 people from returning to prison then we reduce govt spending by $9,088,500.
If Govt. is willing to share savings on 50/50 basis then $4,544,250 would provide both ROI to investors as well as profit on which to build a self sustaining entity through which to support and expand social impact programmes.
The question here regards graduating from dependence on public finance, which I take to mean Public Sector/Govt finance?
This project is the first step towards Community Resilience vs Govt Dependence. It is a much needed option to the current status quo which is almost 100% reliant on Charity and Government Funding.
As a catalyst for action now, the Govt recently allowed for foreign corporate privatization of our prisons. While privatization may prove to help rehabilitate people it also removes accountability and responsibility for rehabilitation and reintegration even further from the local community? There is of course the potential to work together.
Without funding we can not expand social impact programmes, we can not initiate "by community for community" micro investment or develop this social investment model.
Without a large private funding body the current system remains. A few great organisations making a difference in peoples lives, unfortunately limited by the funding they can access from charity and government,awash in the rising tide of social problems.
Social Service providers will remain in competition with each other over a limited supply of funding. We propose instead a model that requires collaboration with access to funding on the basis of collective purpose and shared outcomes
Government backing is critical in order to provide investment incentive & reward.
Private investment is critical in order to establish the investment vehicle and provide initial funding to social impact service providers.
Collaboration is fundamental.
Undoubtedly. Political, legal, social, cultural which is exactly why we work to research & plan development of this social enterprise.
As Aristotle says "...For the things we have to learn before we can do them, we learn by doing them..."
We aim to trial the service here in Dunedin and when successful expand the funding/investment model throughout Aotearoa and to any other global communities that could benefit.
It is a model that can be applied as a public/private funding catalyst to address many different social & economic outcomes ~ from education, employment and health to aged care, environment and new enterprise.