The Challenge of SIBs for Social Enterprises
Tuesday, 13th November 2012 at 1:25 pm
Social enterprises taking on the challenge of Social Investment Bonds (SIBs) will become more common in the future, according to a summary report from The Centre for Social Impact (CSI) at the recent Inaugural Social Finance Forum in Sydney.
Peter Shergold, Chair of the NSW Social Investment Expert Advisory Group, predicted that SIBs would continue to be developed in Australia.
“I do believe that performance-based contracting by governments, which is itself increasing year by year, will increasingly take the form of Bonds,” he said.
“In the best of the possible worlds, this can be a win for the private sector, a win for the public sector, and a win for the community sector.”
But Graham Neal, Director, Business Development and Infrastructure, UnitingCare Children, Young People & Families said who is currently involved in a Social Impact Bond expressed caution for potential Not for Profits or social enterprises considering entering the Impact Bond market.
“The Social Benefit Bond is the most expensive and complicated way to do it,” he said.
“If there is a simpler way of funding your project, go for it!”
The Centre for Social Impact (CSI) says the way a SIB works is by a bond-issuing organisation raising capital from investors, based on a contract with government, to deliver improved social outcomes that generate future government costs savings. As well as repaying the principal, investors are paid a reward if the agreed outcomes are achieved.
More than 100 delegates attended the conference including international speakers to discuss the latest moves and developments in Social Investment Bonds in Australia and overseas.
The paper reported that David Hutchison, Chief Executive of UK organisation Social Finance observed that Australia is home to larger charities than is common in Britain, so some of the skills and experience offered by Social Finance (UK) to their charity partners may be available in-house in large Australian charities.
Jocelyn Bell, Project Manager Business Development, The Benevolent Society listed the challenges facing the SIB model as:
- developing a financial product that does not yet exist in Australia,
- to sell to a market of investors that does not yet exist
- to fund a service that the market does not yet understand, where no independent experts exist to advise investors with returns based on evidence of service effectiveness that is limited to non-existent
- paid on the basis of government savings that will be modelled rather than actual.
“We’ve got our work cut out for us," she said.