We conclude a bumper week with 3 great stories demonstrating the breadth of the inclusive SIB opportunity. From children to any religious or ethnic minority, the PFS structure can deliver benefits for everybody. Have a great weekend…
Can A Creative British Banker Get Israel’s Ultra-Orthodox To Work?
Yoav Fisher – Times of Israel
Back in 2010, England’s Peterborough Prison faced a problem of repeat offenders. The prison, located 140 kilometers north of London, had proven that rehabilitation services could decrease this rate, but required broad public funding over an extended period of time. This time, instead of waiting for governmental grants, Peterborough initiated an unprecedented experiment and issued a Social Impact Bond (SIB) to pay for rehabilitation services.
The prison’s SIB bond, which was backed by the government, offered a simple tradeoff: Rehabilitation services would be covered by private investors, who receive subsequent dividend payments from accrued long term savings. Success is measured against a control group and services are provided by experienced third party organizations.
The ingenious idea was the brainchild of Sir Ronald Cohen, the founder of venture capital group Apax Partners, who is commonly referred to as the “Father of Social Investment.”
Through Social Finance Israel, where Cohen is co-founder and chairman, an SIB to encourage employment of ultra-Orthodox (haredi) men is currently being explored.
Although they make up 11 percent of the Israeli population, the economic status of haredi Jews in Israel is meager. According to the Central Bureau of Statistics, of the estimated 950,000 ultra-Orthodox, nearly 60% live below the poverty line.
‘Social-Impact Bonds’ For Nonprofit Hospitals
Robert Whitcomb – The Huffington Post
My physician and other colleagues and I at Cambridge Management Group have been ruminating that as outpatient populations continue to fall, nonprofit hospitals may have to increasingly turn to such private-sector innovations as “social-impact bonds” to finance physical-infrastructure projects. Those projects will include constructing more hospital-related outpatient facilities.
For that matter, they may have to turn to them to cover regular operating costs.
With these bonds, investors get a decent rate of return, though not as high as they might get elsewhere, and the satisfaction from helping projects and institutions that address important, indeed crucial, public needs.
Given the new economic and other pressures on hospitals, they’ll have to get a lot more creative in financing their projects, including many more collaborations between nonprofit and for-profit organizations as well as money from federal, state and local governments.
Reflections On Universal Children’s Day: How The U.S. Is Paving The Way By Thinking Outside The Box
Brookings
On the 60th anniversary of Universal Children’s Day, a day dedicated to the promotion of child well-being, we reflect on the state of children around the world and what is being done to improve their lives. While great gains have been made, for example, in reducing child mortality by nearly half over the last two decades, great disparities persist both across countries and within them between the privileged and disadvantaged. These persistent challenges are forcing some policymakers to think outside the box when it comes to financing and delivering interventions that ensure better life outcomes for young children. The United States is paving the way when it comes to thinking creatively about how to provide quality early childhood development (ECD) interventions to more poor children.
Just last month, an announcement was made in Chicago of a project, the second of its kind in the United States, which expands access to high-quality preschool to a greater number of disadvantaged children. This project, funded via a relatively new financing mechanism, a social impact bond (SIB), or pay for success (PFS) financing, as it is generally referred to in the United States, is a way to leverage philanthropic and other private capital to deliver better outcomes of social services. In this case, a $17 million investment from Goldman Sachs, the Northern Trust Company and the J.B. and M.K. Pritzker Family Foundation, allows for risk to be reduced for the government and tax dollars to be spent more wisely since the government only repays investors if agreed-upon outcomes are achieved (as measured by independent evaluators). A key benefit is that, by using data-driven performance management processes, service providers are able to provide better services allowing for an alignment of the interests of a multiplicity of actors who might not otherwise be working together.