Date
20 July 2019
A file photo shows street sleepers in Hong Kong. Social Impact Bond programs can help boost financing for social and public services, easing the burden on the government. Photo: HKEJ
A file photo shows street sleepers in Hong Kong. Social Impact Bond programs can help boost financing for social and public services, easing the burden on the government. Photo: HKEJ

Why HK should pursue Social Impact Bond programs

I am rarely in favor of the recommendations put forward by the Our Hong Kong Foundation and, in fact, never did support any of the think-tank’s proposals in its four-year history. However, recently I found myself agreeing with the organization wholeheartedly on one idea: issuance of Social Impact Bonds (SIBs) to help finance social and public services.

As the think-tank has pointed out, SIB is a form of tripartite investment bond that blends together the government, investors and social service providers.

It works like this: first, the government formulates a fund-raising project based on specific social issues. Second, it would recruit private investors to inject money into the project, and then commission either non-profit organizations or charities to carry out specific duties.

The sum of investment returns would depend on the accumulated cost-effectiveness of the project itself or the service it provides. If the service providers meet agreed-upon outcomes, investors are rewarded. But if the project fails to achieve the expected results, investors may sustain financial losses.

Our Hong Kong Foundation has given several overseas examples on SIBs. For instance, in the United Kingdom, where the idea of SIBs originated, social investment projects spearheaded by the government often cover aspects such as child care services, youth employment, support services for street sleepers, ex-cons, etc.

In support services for ex-cons, for example, the recidivism rate among recipients within a specific period of time is often used as an indicator to measure the efficacy of the project.

Law and order in society would substantially benefit if such “investment projects” can achieve the intended results.

Moreover, these initiatives, if successful, can also help save government spending on law enforcement and correctional services in the long run.

Besides, SIBs can draw individual investors among society to embark on long-term investments in social welfare projects, thereby giving these initiatives a stronger community and public mandate, as well as assisting the initiatives in their long-term and stable development.

Also, SIBs can allow members of the public to fulfill their civic rights and responsibilities in the capacity as creditors or small “shareholders”, and provide collective oversight of these projects as well as facilitate their progress and efficacy.

In Hong Kong, Prof. Stephen Cheung Yan-leung, who left his post as chairperson of the Social Innovation and Entrepreneurship Development Fund Task Force several months ago, had previously called upon authorities to issue SIBs as soon as possible. 

Now that the Our Hong Kong Foundation has also weighed in with the same idea under the impressive slogan of “pay for success”, it wouldn’t be hard to imagine that the government would finally answers the calls and launch SIBs in the short run.

At present, the government already operates quite a number of funds related to innovative technologies, environmental conservation, social enterprises, etc.

These funds might appear irrelevant to one another, but they can be seen as different types of venture capital funds aimed at promoting startups in Hong Kong that can benefit the society and the natural environment.

As such, in order to allow these funds to continue to grow and flourish, the government, apart from injecting money directly into the funds or providing subsidies, should open up those relevant projects to both individual and institutional investors, and give the investors returns based on the assessment of the efficacy of the projects.

In my opinion, instead of keeping on issuing the iBond every year without any solid purpose and agenda, the government should consider launching SIBs as a means to facilitate livelihood, environmental protection and tech development in the city.

This article appeared in the Hong Kong Economic Journal on Dec 24

Translation by Alan Lee

[Chinese version 中文版]

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JC/RC

Member of the Shadow Long Term Housing Strategy Steering Committee, a non-governmental organization

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