Three fascinating reads today. Up front, great news from that county I had never heard of until they entered the SIB realm, Cuyahoga – with a welcome and encouraging update on their approach. Second we have NPQ weighing in with some Canadian research which having not had time to read fully yet (I am in London this week) I shall refrain from commenting on. Last but by no means least, a happy marriage of interests for me as the nexus of Crowdfunding and Social Impact Bonds are discussed (late last year I launched a community crowdfunding platform “HanzaTrade” in Poland). Happy scrolling and enjoy the read:
Impressive Cuyahoga Collaboration Led To Nation’s First County-Level Pay for Success Program
Cleveland
Cuyahoga County’s Partnering for Success, the first county-led program in the country to use the Pay for Success model, is flipping the previously accepted approach on its head, paying for services only if they work.
The wonderful collaboration that brings together private and public investors, a variety of social service agencies and a university has created a program that is well worth watching. If successful, the five-year, $5 million program, which was embraced by former County Executive Ed FitzGerald, could help more families while saving money — and then be replicated.
Under the new program that began this month, five investors – the Reinvestment Fund, George Gund Foundation, the Nonprofit Finance Fund, the Cleveland Foundation and Sisters of Charity Foundation of Cleveland — ponied up a total of $4 million to provide 135 such families with services ranging from temporary housing to mental-health services. The county set aside $1 million a year to guarantee the investments.
Frontline, the Cleveland-based nonprofit running the program, has lined up temporary housing through the Cuyahoga Metropolitan Housing Authority and others. If Frontline can significantly reduce the number of days those children are in foster care, investors can get their money back with a 2 percent profit.
Canadian Research Center Explores Limitations Of Social Impact Bonds
Rick Cohen – NPQ
As Social Impact Bonds have spread in terms of their acceptance in a variety of nonprofit, investment, and government circles, there are more reports from policy research centers (as opposed to SIB promoters and institutional investors) exploring the potentials and limitations of the tool. One recent report is from the Manitoba office of the Canadian Centre for Policy Alternatives. The brief report, co-authored by John Loxley and Marina Puzyreva from the Department of Economics at the University of Manitoba, provides useful data on SIBs and some provocative ideas to consider.
On the data side, Loxley and Puzyreva count 23 SIBs in five countries either being implemented or close to being implemented. Fifteen are in the UK, but the four U.S. SIBs they write about involve much more funding: The four U.S. SIBs add up to $57.1 million in comparison to the 15 UK SIBs, accounting for only $54.5 million. Social impact bonds addressing recidivism among people released from prison account for nearly 44 percent of the SIB dollar investments, programs on children 29 percent, and employment 13 percent. Thirty more SIBs are in the works.
Hello, Crowdfunding! Meet Social Impact Bonds
Rick Cohen – NPQ
One thing that cannot be denied about Social Impact Bonds is the creativity of SIB enthusiasts, exploring venues in which SIBs might be deployed and mechanisms through which they can be funded and subsidized. On the former, one interesting idea from the UK has Streetkleen Bio, a social enterprise focused on reducing the social and environmental impact of dog waste, exploring SIBs to fund its PooPrints DNA program, with the potential social cost benefit of community health and well-being.
On the financing side, Erdem Ovacik is a SIB promoter who is also committed to expanding direct democracy. His idea is “to make [the] number of persons invested in the SIB a success-parameter in the procurement of SIBs. In other words, making the number of citizens on the SIB a part of the SIB scoring, and preferring to accept SIB contracts that involves [a] greater number of citizens.”
As he notes, the current array of SIBs have been funded in the UK by foundations, special social impact funds, and pension funds, and in the U.S. by big Wall Street investment banks like Goldman Sachs. The attraction is, in part, the “7-15 percent annual return based on the track record of SIBs so far,” according to Ovacik, a return that is a lot better than most alternative investments and, if focused on SIBs that are pretty much sure bets (like Goldman’s investment in early childhood education SIBs in Salt Lake City and Chicago), not particularly risky.
Ovacik suggests that citizens “do not have access to fund or affect these (SIB) instruments at this time.” He believes that broader citizen engagement and investment in SIBs would be beneficial in ways that institutional investors such as foundations or Wall Street can’t deliver, including generating broader public support for the SIB projects, providing potential volunteers, participating in the board meetings of the SIB implementing agencies, and “reporting] back to [the] public about challenges and successes achieved by the SIB.”
The mechanism for this could be crowdfunding. Ovacik suggests that crowdfunding platforms such as Ethex, MicroGenius, Abundance, and Trillionfund possess “the technical capability and access to investors with social profile to facilitate the crowdfunding process.”