Investment: Outside The Box

"I would have had to give up school just to be able to provide for my son, and if I wanted to stay in school, maybe I would have had to have given him to someone else."
Chantal McLaren, Sweet Dreams, Saskatoon, Saskatchewan

L-R: Social Services Minister June Draude, Mayor Don Atchison and Chantal McLaren cut the ribbon to the new supported living home for at-risk single mothers called “Sweet Dreams” at 600 Queen Street in Saskatoon on May 12, 2014. Photographed by: Michelle Berg, The StarPhoenix

"I know that when you raise taxes, you're affecting low-income taxpayers as well. We need to make sure we keep as much money as possible in the pockets of individuals and let them [decide] how they would like to spend their money."
June Draude, Minister of social services, Saskatchewan

"It's in vogue at present for governments who don't really want to invest in social services. There's no real need to pay 20% [in interest] to some bank or some financier to fund social programs."
"What's happened is these financiers have inserted themselves in the social contract and they're acting as middlemen. They don't take on any particular risk, but they're paid the middleman markup."
David McDonald, senior economist, Canadian Centre for Policy Alternatives, Ottawa

"Governments are not always best placed to solve the most pressing or persistent social and economic problems. There are Canadians who possess innovative solutions to these problems and there are others who are willing to fund 'social entrepreneurs' in meeting these challenges."
Eric Morrissette, Employment and Social Development Canada

Sweet Dreams group home -- Eagle Feather News

While Mr. McDonald, as a policy think-tank economist sneers at the lack of risk taken by private financiers of public programs benefiting society, the truth is somewhere in between. Such investors are risking their money, since there is no assurance the enterprise they are funding in the hopes that a social benefit will accrue from inspiring and encouraging people to do the best for themselves despite despairing circumstances, will meet success, and they do so for the best of all possible reasons.

A new kind of public-private partnership that was pioneered in 2010 in the United Kingdom, to turn around the high rate of recidivism at the Peterborough prison, was so successful that it is being used as a template by other governments in other countries. A group that organized itself and is now called Social Finance U.K. formulated a plan that had one group of people paying for interventions reflecting best practices.

It worked very well, resulting in a significant decrease in recidivism by prisoners released to society, having been given a hand up through a joint program. In Canada, the federal Office of Literacy and Essential skills is plotting a pilot program testing elements of the Social Impact Bond model, as it is called, hoping to impact on labour market outcomes; low literacy rates equal low employment opportunities; turning it around is essential to the well-being of workers and government alike.

Saskatchewan represents the first province to try out the new funding model for important socially-innovative programs within Canada. The EGADZ Youth centre, which operates the group home designed to support single moms and their children, keeping them together and giving the mothers the opportunity to find their niche through continued education and well-paid employment, lauds the introduction of the Social Impact Bond, freeing up centres such as theirs from trying to secure funding on an ongoing basis.

A tour of the new supported living home for at-risk single mothers called “Sweet Dreams” at 600 Queen Street in Saskatoon on May 12, 2014.

Photographed by: Michelle Berg, The StarPhoenix

The private investors' presence has done that, while adding a layer of accountability leading to higher motivation to succeed. Rather than hoping for government funding, grants and charitable donations to launch needed social programs, the new funding model in support of community development projects attracts funding by private investors; people, banks or corporations. Their significant amount of cash investment over a three-to-five-year term does have a catch.

They will be paid their investment back in full, plus interest at an excellent rate if the program happens to be successful. Should the project lack in succeeding to reach its goal, there will be no pay-back, no interest, their investment will not be reimbursed.  Regina-based Conexus Credit Union invested $500,000 in the Sweet Dreams home operated by EGADZ Saskatoon Downtown Youth Centre.

A Saskatoon couple matched that amount. Five years hence, by 2019, Sweet Dreams hopes to have 22 children and their mothers leave the home, remaining an intact family unit for at least six months. A portion of their investment will be returned to investors if 17 to 21 children are not placed in foster care, along with 5% interest, a realized profit of $25,000. Should fewer than 17 children remain with their mothers, there will be no reimbursement whatever.

The object is for government to save the expenditure of foster care for these children. The goal is to keep families intact and healthy, a benefit to the families, to their communities, and in the end, to the investors both through satisfaction of having invested wisely, and having achieved a profit in the process. In the United States, the Obama administration's 2014 budget gave support for "pay-for-success" programs offering states and municipalities the opportunity to open their own SIBs.

The skeptics, like Mr. McDonald, envision the taxpayer "almost certainly" paying more later, and that other social programs stand to be "cannibalized" to enable the three or five year targets of those tied to Social Impact Bonds to be realized. "One of the major misconceptions is that somehow governments are not meeting historic obligations to fund these social services. That's not the case at all", noted Bill Pinakiewicz, vice-president at the Nonprofit Finance fund, a U.S. consultancy based in New York City.

Some of the first programs that get cut or defunded when governments find themselves under fiscal pressure are those planned to meet a long-term, preventive goal; like that of Sweet Dreams, there to aid single mothers become contributing members of society, capable of raising their children and imbuing them with foundational social values.

Massachusetts recently revealed its intention to use a Social Impact Bond model to cope with youth crime. That quite specific $18-million bond has been backed by Goldman Sachs, The Kresge Foundation and others. It will become the largest Social Impact Bond in U.S. public service history, to date.

One of the investors in the Saskatoon Sweet Dreams project sees her involvement as an "intriguing" opportunity to help an organization she and her husband have supported in the past, to make a lasting difference in society. "I sometimes think we just give money to organizations and nobody reports back results. Now you've got some skin in the game."

She appreciates the opportunity to see a return on her investment as the women and their children in whom she and her husband are investing, will take their own opportunity to blossom into contributing members of society. Contributing on either side of the spectrum appears to create a winning situation for all concerned.