SIBs

The paper is in! Assignment complete!

So what have I been researching and writing about for these past few months? Ladies and gents, the answer is (drumroll please), Social Impact Bonds.

Melanie, what the heck is that?

Well, I'm so glad you asked.

A Social Impact Bond is a funding device designed to for not-for-profits who wish to run a program with minimum risk to funders, in particular, government agencies.

Did your head explode? Well, hang on, I'll explain.

In the current economic landscape when government agencies are being scrutinized for wasteful spending and need to gather data and analytics to prove the tax payers monies are going to fruitful enterprises, the Social Impact Bond or SIB is one way to tick the boxes. Not-for-profit agencies can experiment with new and unproven programs and get a pledge of funding from government agencies, or, trusts and foundations, who may also be keen to minimize risk. The SIB brings in an investor or investors who takes the financial risk. Much like a commercial business investor, the SIB investor agrees to supply the upfront capital needed to launch and run an inaugural program. If the program is a success, the investors capital plus interest is reimbursed by the funder, which may be that government agency I mentioned. If the program fails the investor, just like in the commercial business world, takes the financial hit and loses their money.

When the SIB is arranged, the three major parties involved; the non-profit organization or service provider, the funder, and the investor(s) design an agreement to qualify what constitutes a successful outcome for the program. During the course of the program the service provider, or, if agreed, an outside analytics agency, will process all the data and metrics gathered during the program. This can take years so, it's not a quick process. For a theatre company, this would not be the best way to raise money for a single production but, this could work if the company was looking to begin a new division or augment an existing program, for example, outreach and education. A SIB at a theatre might look something like this:

Theatre Company X wishes to build an education program to visit schools in underprivileged areas and introduce students to Shakespeare’s plays with a goal to improve engagement with and understanding of his work. Arts Council England or ACE (England's version of the National Endowment for the Arts) is willing to fund the program pending successful results and proof of achievement of the goals set forth in the SIB agreement with Theatre Company X. A High Net Worth Individual (HNWI) (e.g. a wealthy individual) has agreed to be the investor in the SIB agreement and provide the upfront capital to produce the program. If the program is successful, then ACE will pay the HNWI the amount of their original investment plus interest. The program will take six months to build and book into schools. There will be another ten months of initial trial within the school system. Students active in the first year of the program will be monitored for the following two years to determine if their engagement with and understanding of Shakespeare’s plays has improved. This will be calculated through whichever means is established in the SIB agreement. This may include test scores, trips to the theatre, participation with theatre groups, or other activities. After four years, the inaugural results will be clear and program success and recoupment of investment determined.

So that's a SIB. They were introduced in 1988 but have only really been in use in the past 10 years. SIBs first gained traction in the social sector and have been used for programs relating to an assortment of social concerns, for example, prisoner rehabilitation, education in underprivileged areas, and homelessness to name a few. Shakespeare's Globe in London is the first arts organization to initiate a SIB. They launched theirs in 2015 as a capital campaign to extend their education and research facilities and program. It is too early to tell The Globe's SIB is a success but as the Arts sector's need for new ways of fundraising continues to grow, our eyes will be on the Globe's SIB to monitor their progress.

The course is still in full swing and I am on to my last two assignments due at the end of June. Full steam ahead as I design a professional development plan and write a reflective essay on my scholastic experience. I'll keep you posted!

Take care!
-m