Social impact bond could not only help at-risk moms, but give Manitoba's government a chance to shine

Manitoba's first social impact bond offers an opportunity to show the rest of the country that this model, if used well, can result in significant cost savings — and in this case, may help at-risk expectant mothers and kids in care in the province, says the University of Regina's Iryna Khovrenkov.

Province's 1st SIB offers an opportunity to show the rest of Canada that the funding model can be effective

Manitoba's first social impact bond will fund a two-year pilot project to connect at-risk moms with Indigenous doulas, who will provide emotional and physical support before, during and after childbirth. (Jeremie86HUN/Shutterstock)

As Manitoba's government enters the world of social impact bonds, it will face a widespread criticism of that funding model — namely, that social impact bonds are a way for governments to offload responsibility.

On the contrary, Manitoba's first social impact bond offers an opportunity to show the rest of the country that this model, if used well, can result in significant cost savings — and in this case, may help at-risk expectant mothers and kids in care in the province.

On Jan. 7, Manitoba became only the second province in Canada, following Saskatchewan, to launch a social impact bond (SIB) — a funding model that asks private investors to fund social services projects. If the project meets certain targets, investors get their money back from the province, plus a return.

The province's first such bond will be used to fund a two-year project called Restoring the Sacred Bond

Under the project, Southern First Nations Network of Care, a Child and Family Services Authority, will pair 200 at-risk expectant mothers with doulas from Wiijii'idiwag Ikwewag, an Indigenous doula group, with a specific goal – to reduce the average number of days (by 25) that Indigenous children are in the welfare system.

What is a social impact bond? Listen to a May 2016 explainer:

Is there a better way to help the poor, reduce crime, and educate our children? As Blair Sanderson explains, governments are experimenting with "social impact bonds" - which let private investors put money into social service projects. 3:59

According to the province's December 2017 Review of Child Welfare Legislation, Manitoba has the highest rate of children in care among other provinces and the rate is continuously rising.

And so does the cost of caring for these children. The province is currently paying about $47,000 annually per child in the welfare program, according to the province's review — a number that has increased by four per cent every year for the past four years. If successful, the new social impact bond will create almost seven per cent  in annual savings per child in the program.

Even if we assume that each of the 200 women has only one child, the savings could be quite significant!

An opportunity to test new approaches

Since reducing the number of Indigenous children apprehended into the welfare system is a challenging social issue, it is a costly one too.

Social impact bonds allow governments to test new programs by targeting complex social issues without an upfront financial commitment, remaining mindful of taxpayers' dollars because an investor assumes the risk.

And if a pilot program is successful, the government can then, hopefully with its constituents' support, offer continuous funding out of its own budget.

Manitoba Families Minister Heather Stefanson announces the province's first social impact bond on Jan. 7, 2019. Old approaches to reducing the number of children in care haven't always worked, she said. (Lyzaville Sale/CBC)

Manitoba's government has agreed to strike a deal with an investor, who will be repaid up to $3 million with 4.1 per cent interest if the goal is achieved, up to 5.5 per cent  interest if the goal is exceeded, and nothing if the goal is not met. These are fairly reasonable returns on investment (ROI).

The big question is, who is the investor? It came as a surprise that Manitoba's social impact bond currently has no one committed to funding it, which is unusual.

Who will invest?

Over the next four months, the government will work with the Toronto-based social finance consultant MaRS Centre for Impact Investing to choose an investor. 

This raises another question — how firm is the government on the announced interest rates?

It is important for the government to remain committed to its proposal. As the province attempts to the assist the most vulnerable group (at-risk mothers and babies), it also needs to be cautious about the motivations of the investor — to profit, or to genuinely help with the problem.

Manitoba's government, with its SIB partners, has the opportunity to showcase the transparency and clarity of not only the investor selection process, but also its commitments, which will ultimately pave the way for other jurisdictions thinking about SIBs.

Will we see more SIBs in the future? Yes.… Manitoba and Saskatchewan are setting examples for other provinces.- Iryna Khovrenkov

As the representatives from the MaRS Centre work on securing a funder for this SIB, it is critical for the government, Southern First Nations Network of Care and Wiijii'idiwag Ikwewag doulas to ensure that the agreement is clear, open and transparent around the repayment structure, the terms of selection of at-risk expectant mothers and any assessments following the two-year pilot.

Fleshing out all the details is extremely important because they are key to a successful execution of a social impact bond.

Will we see more SIBs in the future? Yes. Canadian government is highly supportive of the social finance strategy to address complex social problems. The question is about the quality of SIBs.

Manitoba and Saskatchewan are setting examples for other provinces thinking about implementing social impact bonds and contribute to forming impressions about the overall culture of social financing in Canada.

If this one is done well, it will create necessary trust moving forward, and as a bonus, will give Manitoba's government a chance to shine.

This column is part of CBC's Opinion section. For more information about this section, please read this editor's blog and our FAQ.

About the Author

Iryna Khovrenkov is an assistant professor with the Johnson Shoyama Graduate School of Public Policy at the University of Regina. She is an economist with research interests in economics of charities, applied microeconomics and public policy.


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