Around the world, governments, non-profits and private investors are teaming up to solve social problems. Social impact bonds fund social programmes to address problems such as homelessness, reoffending rates, and mental and chronic health issues. The government initiates these bonds, the private sector funds them, and non-profits and social workers carry out the work. Investors only receive a return if the fund has proven to improve the outcomes for these vulnerable people.
GovInsider shares case studies of four countries that have launched their very first social impact bonds, and how this money is going towards social causes that can eventually improve lives.
1. Addressing chronic health issues
Japan’s first social impact bond in Kobe city will seek to address chronic kidney disease. In the programme, 100 patients will receive health guidance, and investors will receive annual interest of up to around 5% depending on the results of the programme, reported Reuters. The intent is to save the public healthcare system some of the cost of medical care for these patients.
The report said that investors are set to invest some 30 million yen (~US$271,000) in the programme. The investors will be working together with the Japan Social Impact Investment Foundation (SIIF), which launched the bond last month. “Unlike gifts of money, we are expecting this to give an impetus to private-sector investment and give an incentive to the project,” CEO of SIIF Mitsuaki Aoyagi was quoted as saying. However, the report notes that it is “unclear” how popular such a programme will be in Japan. The complexity of social impact bonds have led to slow uptake among municipal government, the report said.
2. Reducing reoffending rates
The world’s first social impact bond in the UK sought to reduce the rates of reoffending by short-sentenced prisoners. The Peterborough Social Impact Bond funded rehabilitative interventions for a thousand short-sentenced prisoners for a year after their release from the Peterborough prison. Since 2010, when it was launched, the bond resulted in a 9% reduction in reoffending – exceeding the target of 7.5% set by the country’s Ministry of Justice.
17 investors, which included various private trust funds, had provided a total of £5 million (~US$6.61 million) to the bond, and will now receive payments following its current success. These payments come from government thanks to the savings that the results have achieved for the British taxpayer. This first bond kickstarted a movement among other countries, and there are currently 89 social impact bonds in 19 countries, with a combined investment of more than £300 million (~US$ 396.5 million).