Around the world, governments, non-profits and private investors are teaming up to solve social problems.

Social impact bonds fund social programmes to address problems such as homelessness, reoffending rates, and mental and chronic health issues.

The government initiates these bonds, the private sector funds them, and non-profits and social workers carry out the work. Investors only receive a return if the fund has proven to improve the outcomes for these vulnerable people.

GovInsider shares case studies of four countries that have launched their very first social impact bonds, and how this money is going towards social causes that can eventually improve lives.

1. Addressing chronic health issues

Japan’s first social impact bond in Kobe city will seek to address chronic kidney disease.

In the programme, 100 patients will receive health guidance, and investors will receive annual interest of up to around 5% depending on the results of the programme, reported Reuters. The intent is to save the public healthcare system some of the cost of medical care for these patients.

The report said that investors are set to invest some 30 million yen (~US$271,000) in the programme. The investors will be working together with the Japan Social Impact Investment Foundation (SIIF), which launched the bond last month.

“Unlike gifts of money, we are expecting this to give an impetus to private-sector investment and give an incentive to the project,” CEO of SIIF Mitsuaki Aoyagi was quoted as saying.

However, the report notes that it is “unclear” how popular such a programme will be in Japan. The complexity of social impact bonds have led to slow uptake among municipal government, the report said.

2. Reducing reoffending rates

The world’s first social impact bond in the UK sought to reduce the rates of reoffending by short-sentenced prisoners.

The Peterborough Social Impact Bond funded rehabilitative interventions for a thousand short-sentenced prisoners for a year after their release from the Peterborough prison. Since 2010, when it was launched, the bond resulted in a 9% reduction in reoffending – exceeding the target of 7.5% set by the country’s Ministry of Justice.

17 investors, which included various private trust funds, had provided a total of £5 million (~US$6.61 million) to the bond, and will now receive payments following its current success. These payments come from government thanks to the savings that the results have achieved for the British taxpayer.

This first bond kickstarted a movement among other countries, and there are currently 89 social impact bonds in 19 countries, with a combined investment of more than £300 million (~US$ 396.5 million).

3. Helping the homeless

South Australia’s first social impact bond is supporting the homeless. The programme will help 600 people to learn life skills and find employment, Pro Bono News Australia reported.

The AU$9 million bond (~US$7.13 million), which began on 1 July, is a partnership between Social Ventures Australia, the South Australian government, and not-for-profit organisations, the report said.

“The Aspire SIB targets a cohort of 600 people in metropolitan Adelaide who have some history of homelessness, and [aims to] improve outcomes in their lives, particularly in the areas of hospitalisation, convictions and the use of acute homelessness services,” SVA Executive Director of Impact Investing Ian Learmonth was quoted as saying.

The programme provides case worker care for three years, which is longer than “conventional” homelessness approaches, Learmonth said. “But in addition to that, the programme also provides other services around allied health and employment,” he added.

If the programme proves successful at delivering positive financial and social outcomes, then other governments could follow this example, Learmonth went on to say. The programme was also launched in Melbourne and Sydney, according to him.

4. Getting the mentally ill on their feet again

New Zealand’s first social bond wants to get about 1,700 people with diagnosed mental health conditions back to work.

APM WorkCare, a company which delivers rehabilitation services and management and which works with the Ministry of Social Development (MSD), is providing services and funding for the six-year programme. Private investors and funds also provided a combined total of NZ$1.5 million (~US$1.11 million), reported Interest. The programme hopes to get about 43% of these people into, and retained in, work for five years.

The report quoted Finance Minister Steven Joyce as saying that MSD and successive governments had “struggled” to get people with “medium-level” mental health issues back to work, and the trick was to get them “the right services at the right time”.

“One of the difficult challenges in getting people off benefits and back into work is how best to help people with mild to moderate mental health challenges and achieve sustainable long-term results,” Social Investment Minister Amy Adams said in a joint statement with Joyce.

Adams added that this programme can help “utilise private sector skills and innovations to help participants into paid employment, so they get off welfare and improve their mental health”.

Governments around the world are increasingly operating on a dime. Through social impact bonds, private investors can come in and fund projects that reduce taxpayer costs, ease the strain on government systems, and give vulnerable people a little boost to help them on their way.

Image of Kobe city by Johnny LaiCC BY 2.0