Social Impact Performance Bonds

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Social Impact Performance Bonds

New Zealand
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Our social investment entity raises money from private investors & contracts social service providers to deploy innovative social programmes to measurably (%)reduce youth crime & imprisonment. NZ Government saves money (>NZ$360K pp) on imprisonment costs & allocates 50% of savings back to investors to create Social Impact Performance Bonds: the incentive for private investment in social sector SME

About Project

Solution: What is the proposed solution? Please be specific!

Our people: talented, passionate collaborators; world class social services, research & education providers. We work to develop a solution that will involve local communities,Runaka & Iwi. National & Local Government. We work to establish a sustainable, scalable funding/investment model, the first investment entity of this kind in Aotearoa NZ, focused on social innovation & development. A model which will leverage available public finances to provide incentive and reward for private investment in the social service sector. We propose: 1. A new, independent entity focused primarily on raising private investment for the social service sector. 2. To establish government backed Bonds (bills & notes), as the incentive& reward for social investment. 3. To compliment& maximise existing funding. 4. To apply leading technologies for education & work & to facilitate micro-investment "by communities for communities" Why Dunedin to trial this project? 1)we significantly exceed the national representation for people in our target population 15-24 yrs 2) Social Services is the largest employment sector in our region. Benefits & perspectives:- Government: • If the new entity solves a problem, the government saves money. • Lowest possible risk: if unsuccessful the government does not pay. • Money & people focused on improving social outcomes, without expansion of government budgets • Only when the venture is a success & the government has saved dollars then the government pays a % of the savings to the new entity. Social Investment Entity: • We raise money from private investors. • We use the money to fund social impact programmes which measurably improve social outcomes • we collaborate with Govt. to prove impacts attributable to our programmes • We quantify the money saved& receive a % of savings to provide a ROI & expand Investors: • Feel good factor • ROI & possible tax break
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

<strong>The principal Youth Court judge says a report shows the justice system is failing the country's serious young offenders.</strong> <a href="">Source: Radio NZ News 16 February 2010</a><p> In general, offenders who commence their offending careers during their teenage years are considerably more likely to become persistent offenders, particularly if their initial crimes are ones that result in a prison sentence. For the 2002/03 prison release cohort:</p> • about half of the prisoners were first imprisoned under the age of 20. • About 75% of prisoners were first imprisoned at the age of 24 or under. • 57% of Maori prisoners were first imprisoned at the age of 19 or under. • 80% of Maori prisoners were first imprisoned at the age of 24 or under <p>The link between early onset and later persistence is even more pronounced when the figures for convictions and community sentences is examined. The figures indicate that, of the 2002/03 prison release cohort</p> • about 68% were first convicted (not necessarily imprisoned) at the age of 19 or under. • About 85% of offenders were first convicted at the age of 24 or under. • 76% of Maori prisoners were first convicted before age 20 • 91% of Maori prisoners were first convicted by age 24 or under. <p>Re-offending rates and re-imprisonment rates have not improved and it is time for our communities to take a more active role. Keeping young people (under 24) out of prison through preventative and rehabilitative support is the debt we owe for having already failed them. It is worth so much more than millions we can save the taxpayer. Its is about family and community supported youth development</p>
About You
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Your Organization
About Your Organization
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Organization Type

Non-profit/NGO/Citizen-sector Organization

Your solution
Country your work focuses on


If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:

Range of turnover in your target firms, in USD

$6-10 Million.

Average turnover in USD of your target firm

We target multiple providers with a combined turnover $NZD 15,000,000 or in $USD $10,000,000

Number of employees in your target firms


Average number of employees of your target firm

7: NZ is a nation of SME's 98% of all business here have less than 20 employees

Specify the size, average and range of expected loans or investments in each target firm

Pilot Round: 24 months
Invested in 5 - 7 firms (including new entity)
Total | $2,750,000
Range | $50,000 - $750,000
Mean | $250,000

Providers of
Programmes & Outcomes | $2,000,000 - $2,250,000
New Investment Entity | $250,000 - $400,000
Technology Innovation | $100,000 - $150,000
Research& Performance | $150,000 - $200,000

What stage is your solution in?

Operating for less than a year

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

Besides goodwill there are few incentives for our people to invest in improving social outcomes. Instead we pay taxes to the government to deal to the resulting social problems via our justice system.

Each year the Government establishes a budget and allocates millions of dollars to spending on justice: including imprisonment.

By funding social impact programmes that quantifiably (%) reduce the numbers of people imprisoned (within a defined time and place)we will save the government dollars, and free up funds budgeted for imprisonment.

We seek to leverage these saving to 1) provide the incentive and reward for social investment 2) expand the funding available for social impact programmes.

We ask that the government share with communities the dollars saved in order to establish a new sustainable and scalable funding model for community developed social services.

In terms of community "public" intervention we are looking to leverage models for micro investment "by the community for the community". Local people investing small amounts to enable the expansion of social programmes that 1) improve social outcomes for the community in which they live and in doing so 2) provides a return on their investment.

What barriers does your proposed solution address?

Lack of financial capacity, Unavailability of financial products tailored to SME needs, Lack of competition / incentives for financial intermediaries to serve SMEs, General barriers to SME development related to investment climate.

If you checked any of these barriers, describe how your solution addresses them

Lack of financial capital | Social Impact Performance Bonds provide an additional source of funding to both charitable and for profit social service contractors.

Unavailability of financial products tailored to SME needs | We do not have a private social development investment body. We remain to reliant on the Govt. to improve social outcomes. Communities need the means to select and fund social problems from within.

We hope to leverage online micro-finance tools to encourage and enable individuals, families and communities to invest in improving local social outcomes, investment "by communities for communities" (Community Resilience vs Govt dependence).

Investment Incentives | Social Impact Performance Bonds provide incentive and reward social investment.

General Barriers of Investment Climate | The "kiwi love affair with property investment" means not enough small private investment goes into growth business' let alone the social sector.

Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

Current Spending by Example based loosely on UK Social Impact Bond project

Government Spending on Repeat Offenders
Group released from Jail after 1 year term 3,000
Percentage expected to return in 1 year 60%
Actual number of people expected to return 1,800
Cost per DAY to jail 1 repeat offender $300
Cost per YEAR to jail 1 repeat offenders $109,500


Total Annual Cost to Jail 1800 repeat offenders` $197,100,000


Goal of Social Investment Bank (SIB)
Decrease Repeat Offender by a total of: 10%
Number of people that do not return to jail 300
Saving Generated by intervention $32,850,000

Commitment by Government to Share Savings
50/50 on all savings create by SIB 50%
Savings generates for Government $16,425,000


Financial Picture of Social Investment
Performance based Revenue from Govt $16,425,000
Private investment to achieve outcomes $7,500,000
Profit to Social Investors $8,925,000

How many firms do you expect to reach?

Initially the pilot project may include up to seven collaborative, contracted SME organisations. Provided outcomes are achieved we will then have additional funds available to invest with a growing number of social service & technology contractors.

What is the volume of private SME finance you aim to catalyze?

Pilot Round:$2,750,000
Corporate & Private Investors | $2,000,000
Charitable Trust & Foundations | $700,000
Individual Micro-Investment | $50,000

What time frame will be required to reach these targets?

It is hoped that bonds (bills &/or notes) could be available for investment beginning April 2012.

Does your solution seek to have an impact on public policy?


What would prevent your solution from being a success?

Critical Success Factors: Government Backing of Performance Bonds

It is potentially a high risk investment until such time as we can quantify (reduction in youth re-offending rates over 24 months) and attribute impact to our programmes.

I believe our local youth service providers are world class and that they already impact immensely upon youth offending. This project is an effort to re frame their success in a compelling enough way so as to:-

1) save & divert government spending on imprisonment toward preventative and rehabilitative community developed programmes
2) to provide incentive and reward for private investors and communities to invest in achieving their own social outcomes

List all the funding sources that are required for the sustainability of this solution

Private Investment: Which could include a mix of Corporate Private Investors, Charitable Investments, Community Investment (societies trusts) Local Govt & Individual Micro Investors.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The time frame measuring repeat offending in NZ is 12 & 24 months so it is at these points that our performance against benchmarks would be defined. The first set of Performance Bonds would be trialled from April 2012 - March 2014.

At this early stage of venture development we can only provide an indication based on our understanding of:

1) similar trials in the UK which suggest that given only a portion of the money saved by keeping people out of prison we can expand social impact and establish a high growth social enterprise.
2) Information available on adult offending and imprisonment

In NZ terms

Cost per prisoner per annum $90, 885
Average length of sentence 4 years
Average cost per person sentenced & imprisoned $363,540.

Re imprisonment rates:-
Within 12 months 27%
Within 24 months 36%

If there are 500 people released from NZ prisons statistics indicate re-imprisonment of 180 people within 24 months. 180 people equals a minimum quantifiable cost to community of < 65 million

If we can raise $2,750,000 and invest the majority of this capital in preventative and rehabilitative programmes that prevent 25 people from returning to prison then we reduce govt spending by $9,088,500.

If Govt. is willing to share savings on 50/50 basis then $4,544,250 would provide both ROI to investors as well as profit on which to build a self sustaining entity through which to support and expand social impact programmes.

The question here regards graduating from dependence on public finance, which I take to mean Public Sector/Govt finance?

This project is the first step towards Community Resilience vs Govt Dependence. It is a much needed option to the current status quo which is almost 100% reliant on Charity and Government Funding.

As a catalyst for action now, the Govt recently allowed for foreign corporate privatization of our prisons. While privatization may prove to help rehabilitate people it also removes accountability and responsibility for rehabilitation and reintegration even further from the local community? There is of course the potential to work together.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

Without funding we can not expand social impact programmes, we can not initiate "by community for community" micro investment or develop this social investment model.

Without a large private funding body the current system remains. A few great organisations making a difference in peoples lives, unfortunately limited by the funding they can access from charity and government,awash in the rising tide of social problems.

Social Service providers will remain in competition with each other over a limited supply of funding. We propose instead a model that requires collaboration with access to funding on the basis of collective purpose and shared outcomes

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Government backing is critical in order to provide investment incentive & reward.
Private investment is critical in order to establish the investment vehicle and provide initial funding to social impact service providers.
Collaboration is fundamental.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

Undoubtedly. Political, legal, social, cultural which is exactly why we work to research & plan development of this social enterprise.

As Aristotle says "...For the things we have to learn before we can do them, we learn by doing them..."

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

We aim to trial the service here in Dunedin and when successful expand the funding/investment model throughout Aotearoa and to any other global communities that could benefit.

It is a model that can be applied as a public/private funding catalyst to address many different social & economic outcomes ~ from education, employment and health to aged care, environment and new enterprise.