Social Finance Israel aim to utilize the innovative Social Impact Bonds to encourage results-oriented educational services
A Social Impact Bond (SIB) is an innovative financial mechanism, in which a commitment is made by the government to pay for improved social outcomes that result in public sector savings. This form of financing allows the government to partner with innovative and effective service providers and, if necessary, private foundations or other investors willing to cover the upfront costs and assume performance risk to expand promising programs, while assuring that taxpayers will not pay for the programs unless they demonstrate success in achieving the desired outcomes. SIBs operate as a structured product on a fixed period of time and repayments to investors are contingent upon specified social outcome being achieved.
The idea was originally envisioned by a UK national task force, chaired by Sir Ronald Cohen, and in 2010 the first SIB was issued in the UK to finance a prisoner rehabilitation program and reduce recidivism. Since then the concept has expanded to other areas such as health, welfare and education, and to other countries including Australia and several of the US States. In 2013 and in order to bring this idea to Israel and to adapt it to the local circumstances, Ronald Cohen has created Social Finance Israel (SFI), a non-profit organization, which aims to issue social-financial products in order to raise new capital for the most effective non-profit organizations in Israel, while delivering monetary returns to investors.
In discussion with Cohen and his CEO, we explored the possibility of utilizing SIBs to encourage results-oriented educational services to expand the number of students graduating high school with an advanced science and mathematics major. After meetings with the Minister of Education and his team, as well as with the Minister of Finance, who expressed interest and willingness to participate, SFI is now proposing a 15-month development process to check feasibly and then plan a financial model and work plan for use of SIBs in this field.
The planning stage will involve some deep research into the economic consequences of the matriculation in the sciences in order to define clear and measurable indicators. It will also include mapping of existing programs and organizations active in the field in order to identify the key candidates. Negotiations with the government will strive to reach an agreement on its partnership in the emerging scheme. If and when these conditions are guaranteed, the second stage of development will commence, by creating a financial model and a work plan, recruiting investors and convening a steering committee.
* The text above shows the grant as approved by the Foundation’s Board of Directors / Grant 137