In an increasingly challenging funding environment non-profit organisations and corporates must find innovative, collaborative and sustainable ways to work together in their efforts towards social development. A panel discussion on funding innovations, held at The Trialogue CSI Conference on 24 May 2016, introduced delegates to three innovations in funding, viz. social impact bonds, social enterprise and social impact insurance.
Innovative funding models require a shift in headspace, said Susan de Witt of The Bertha Centre for Social Innovation, speaking on the panel. De Witt works in the field of social impact bonds, a financing model that is well-established in the USA, the UK and elsewhere, but relatively new to South Africa. She explains that the model essentially funds outputs, rather than inputs. “A government or corporate donor might identify a set of outcomes that they would be willing to pay for – job placement of an unemployed youth, for example. An outcomes based contract is set up with a service provider, who is paid in arrears, based on success.”
She believes that this sort of model encourages flexibility and innovation and can be helpful in piloting new approaches: “There are certain outcomes that we traditionally agree on – kids to pass matric, for example – but how we get there involves a lot of innovation.” The idea is that funding goes where impact is demonstrated.
Ian Ross of Hollard Insurance spoke about social impact insurance for NPOs, under the banner of HUGinsure. He posed the question, “What role can insurance play in development? How can our disciplines – risk identification, mitigation and management – apply in the development space?”
We tend to think of insurance as something in case of disaster, but Ross made the point that an insurer is an enabler, not a responder. “With insurance as an enabler, you realise that the insurance industry can step up and change the flow of funds to NPOs, to identify and spread the risk associated with the funding of social impact organisations, and help funders assess the creditworthiness of social projects and organisations. This could potentially unlock funding.”
Different projects and organisations require different funding models, said Andrew Millson of Community Capital Africa, a strategic consultancy in the field of impact investment and social enterprise. “Those working with the most vulnerable in our society need social funding, what is sometimes referred to as “free money”. For seed funding or research, grant funding might be necessary,” he said.
Social development investment means working with organisations who have the potential to create their own income. Social enterprises may partner or collaborate with the corporate sector, who can open up supply chains and new markets for the social enterprise sector. “As corporates, you need to be asking, how can I use my CSI funds to support those organisations that can move from being NPOs to social enterprises?” he said.
The CSI sector will be watching with interest the impact bonds due to be launched next year. Says de Witt: “We are hoping that the whole is greater than sum of the parts, and that this structure will drive greater impact.”