Social Finance launches Social Impact Bond
by editor on Sat 03 Apr 2010 01:00 AM BST | Permanent Link | Cosmos
London-based social investor, Social Finance, has launched a Social Impact Bond , with backing from the UK Ministry of Justice (MOJ).
The initial issue will fund social organisations working to reduce re-offending rates of short sentence male prisoners leaving Peterborough Prison. Social Finance targets to raise up to £5 million to fund the Peterborough Prison pilot.
“The Social Impact Bond has the potential to unlock an unprecedented flow of finance for social sector organisations,” said David Hutchison, Social Finance’s chief executive. “By focusing returns on outcomes, these organisations will be incentivised to develop innovative interventions to tackle ingrained social problems which weigh heavily on our society and our national purse.”
The bond is structured such that the MOJ pays returns of up to 13% to investors if re-offending is reduced below the targeted 7.5%.During the pilot period, social sector groups such as St Giles Trust will provide support to 3,000 short-term prisoners over a six-year period to help them resettle into community.
“Reducing re-offending is one of the Government’s highest priorities. Between 2000 and 2008, the frequency of adult re-offending fell by 15.9 %,” said Jack Straw, Secretary of State for Justice at MOJ. “But we are always looking at new ways of further reducing reoffending that provides value to the taxpayer.”