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The first social impact bond trial in Scotland has launched, one of six projects across the UK set to be supported by sponsoring agency the Department of Work and Pensions.
The social impact bond project in Scotland will fund Perth-based YMCA’s charity work with young people. It was announced at a social impact conference in Glasgow last week. Jill McGraith, the YMCA’s acting chief executive, said: “We thought there would be a couple of big investors but what happened was small individuals and businesses came forward.”
Social impact bonds also attracted political attention in Scotland last week, with Liberal Democrat MSP Alison McInness calling on the Scottish government to introduce social impact bonds to fund prisoner rehabilitation in Scottish jails. She said social impact bonds would help “revolutionise” rehabilitation with the help of charities.
Justice Secretary Kenny MacAskill, responding to McInness in Parliament, pledged to look at the idea.
The very first social impact bond trial in England is being piloted at HMP Peterborough, where private investors are funding prisoner rehabilitation through the One Service – a coalition of mostly charitable organisations, led by Social Finance, providing intensive help to 3,000 short-term prisoners throughout their sentence and when they leave prison.
If reoffending amongst this group is reduced by an agreed target with the Ministry of Justice, investors will get a return from government. But if the target is not reached, the investors will get nothing back.
‘NEET’ social impact bond
One of the six social impact bond projects to be supported by the Department of Work and Pensions (DWP)is a social impact bond led by the Private Equity Foundation (PEF).
The social impact bond has been commissioned by the DWP’s Innovation Fund, and is being backed by PEF and Big Society Capital with £900,000 in investment.
It will fund charity Tomorrow’s People’s ThinkForward project which will place ‘super coaches’ in ten schools in Shoreditch in East London, to tackle the number of young people not in education, employment or training (NEET).
If the programme in the ten schools meets a list of targets agreed with the DWP Innovation Fund, PEF and Big Society Capital will get a financial return.
Other social impact bonds to be supported by the DWP include one to be led by Triodos Bank to fund a programme of job creation in Bristol
Manchester social impact bond
Elsewhere, Manchester City Council has voted to pilot social impact bonds to fund intensive foster care for children currently living in residential care homes.
The Council plans to enter into a partnership with an ethical investor who will be contracted by the Council to both underwrite the scheme and provide the service itself on behalf of the Council.
The pilot scheme, called the multi-systemic treatment foster care project, will involve eight children and young people initially.
Manchester City Council was involved in a six-month feasibility study with Social Finance last year along with Liverpool and Essex councils to investigate the potential for social impact bonds to fund services targeted at vulnerable children, young people and their families.
By Vibeka Mair, civilsociety.co.uk
Here is an example of NGOs development in dynamics:
Interpretation (see Fig. 1):
In June 2011, three NGOs with similar activities, rating and capitalization (NGO No. 1 – 4, NGO No. 2 – 2.4, NGO No. 3 – 2) passed all the formal administrative procedures and financial checks – i. e. IPO. In September, two organizations (NGOs No. 1 and NO. 3) altogether announced the launch of new project (in both cases market capitalization rose to 5 points). In December 2011 it became clear that the new project of NGO No. 3 was interested in the mainstream media (that took interviews, videos, etc.) and the organization has attracted some larger investor’s attention (capitalization rose to 8 p.), and by March 2012 NGO No. 3 received an additional funding that expanded the organizational possibilities for further development of the project (market capitalization rose – up to 15). On the contrary, NGO No. 1 faced a lack of qualified personnel in an organization that could implement this project and put it at risk the future of the project (market capitalization fall to 3.5 pts.). Then it turned out the cost of the services of qualified personnel exceeds the amount provided by the project’s budget, and this trend continued (to 3 pts.). Immediately after the IPO NGO No. 3 launched an internal reorganization, which led to a change of project manager and replacing it with a more efficient, but expensive one (market capitalization rose to 6 pts). The new appointed manager initiated a profound reform of the project, which didn’t get approval from the organization’s board, which led to an open conflict of interests (market capitalization fall to 1.8 points). Later, an independent mediator was connected to settle the conflict, who offered the decision that was acceptable to both sides (market capitalization rose to 2.6 pts).
N. B. The “weight” of parameters:
The weight means value and the quality index, which will give an idea about the organization in a particular aspect. Each of the indicators should be evaluated with a 10-point scale. For example, parameters concerning an “effectiveness of social program”, and a “quality/quantity of the target group” should be of greater importance (and, accordingly, should be placed higher in the scale: for example – 9.5 points) than a “PR and rate of mention in the Media” (for example – 5 points). A “ratio of total budget of the organization and its actual impact on the target group”, we think, should have the highest weight – 10 points. Similarly we should score the other parameters. The sum of all indicators, taking into account their “weight”, will mean a real market weight (“capitalization”) of the organization.
MARKET INDEX – “GLOBAL INDEX OF KINDNESS” (KINDEX)
“Index of kindness” – is the most important indicator of happy life in a social state, since it will show the ultimate dynamics of the quantity/quality of charitable activities of the nation. It will help understand the real level of comfort in this social community. The global index of kindness will be calculated by the total “market weight” (see above) of all the NGOs divided by the number of participating non profits organizations. Other factors affecting the index: General situation in the charitable sector inside the country and abroad. Macroeconomic factors in the country. Macroeconomic factors in the world. Political events as well as other non-economic events (wars, diseases, etc.).