Social Finance introduction
Social finance is an approach to mobilizing private capital that delivers a social dividend and an economic return to achieve social and environmental goals. It creates opportunities for investors to finance projects that benefit society and for community organizations to access new sources of funds.
Individuals or organizations may invest in:
- affordable housing projects;
- social enterprises such as a café that employs youth at risk;
- social investment funds; and
- Social Impact Bonds.
Definition of Social Impact Bond (SIB)
There are several models of SIBs. In one model, a SIB is a contract between a government and an external organization, in which the government identifies desired social results and commits to pay the external organization an agreed-upon amount of money if these results are achieved. Typically, investors provide the money to finance an organization to deliver a service. If the agreed-to results are achieved, investors may receive up to 100 percent of the original investment as well as a financial return. If the results are not achieved, the government does not pay.
Government of Canada involvement
In Budget 2012, the Government signaled continued support for social finance initiatives by exploring new instruments such as Social Impact Bonds.
Social and economic challenges such as homelessness, youth crime, chronic poverty, skills shortages, and persistent unemployment continue to exist in Canada despite the various initiatives taken to address them. New thinking, methods, partnerships and approaches are required to make progress.
Human Resources and Skills Development Canada (HRSDC) is changing how the department supports community organizations to improve economic and social outcomes for Canadians. HRSDC is doing this through projects that are piloting innovative funding arrangements, such as:
- rewarding organizations that deliver pay-for-performance agreements that bring new approaches to addressing social challenges;
- matching taxpayer dollars with non-government contributions to extend the impact of not-for-profit organizations; and
- simplifying access to government funding for community organizations.
Call for Concepts (closed)
Via the National Call for Concepts for Social Finance, Canadians were asked to submit ideas on how for-profit organizations, not-for-profits, charities, foundations and individuals can fund programs to help families, seniors, and at-risk individuals in Canada. The 154 responses to the Call showed that there are many innovative and collaborative solutions being developed by citizens, businesses, charities and other groups to resolve a wide range of societal difficulties.
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