Create a capital market to support social programs--sib into emerging markets.

A few dusty, isolated villages in the Indian desert continent-La Rajasthan-seem unlikely to be the most cutting-edge experimental plots of the new international development model. But in the second half of the year, a joint group of global Investors and Indian charities brought the "social-benefit bonds" project to the developing economy for the first time.

"Social-efficiency Bonds" (abbreviated as SIB, social Impact bonds) in fact, in the Anglo-American policy circle has quietly become a fashion concept. It invests these funds in a range of targeted social development projects by acquiring private investment, whether through philanthropists or through commercial banks or other corporate institutions, and once those projects are successful, the government will pay for them (and thus the original private investors would be rewarded accordingly). Clearly, SIB aims to achieve a win-return on business investment and social benefits through innovative use of financial leverage.

SIB social development projects are often targeted at a more prominent and intractable social problem in a region, such as preventing the recurrence of crime by ex-convicts, eliminating the harm caused by serious diseases such as tuberculosis, reducing the number of homeless people, etc. And the project in Rajasthan, India, is aimed at improving the education services for young women in the region.

The social needs of the project are evident: nearly 4 million per cent of girls of school age are unable to access educational opportunities throughout India, leading to a high rate of illiteracy and dismal economic output. The phenomenon of girls dropping out of school is particularly acute in several sib Rajasthan villages, which show that about three-fourths of girls in the area are child.

The SIB model was first invented by the British. A non-profit advisory body called Social Finance signed a social-benefit bond agreement with the Department of Justice in 2010 to reduce the return rate of prisons in the Peterborough region of Cambridge County. The project received 5 million pounds of money from 17 investment institutions, such as the Rockefeller Foundation, to support the provision of services for inmates and their families. The agreement stipulates that investors will receive returns if the rate of return to the district prisons is reduced by 7.5% per cent over a certain period of time, and that if the prison return rate is effectively controlled lower (i.e. "better performance"), investors can get higher returns based on "performance".

Soon, SIB's innovative model of "creating a capital market to fund social programs" has been emulated and replicated by Americans. The New York government has teamed up with Goldman Sachs, the country's leading investment bank, to launch the first SIB bond in the United States, with $9.6 million trillion in a pilot project in the New York Island region to support a social program to reduce the incidence of repeat crime among young inmates. New York's social-benefit bonds are now the world's second-largest SIB benchmarking project, thanks to a big-name endorsement by Goldman Sachs Group. So far, governments around the world – and countless local governments – in Canada, Ireland, Scotland, Iran, Colombia, Ghana and so on, have also begun to implement SIB or explore the feasibility of introducing SIB projects.

However, when financial innovations such as SIB become more and more accessible to developing countries, can it effectively change the pattern of aid development that has been dominated by government and charitable donations? and investment in emerging economies symbiotic high risk will make SIB encounter "acclimatized"?

A Instiglio social enterprise focused on the introduction of SIB in emerging countries and combined "Stanford Social Innovation Review" to track and study SIB projects in emerging countries. A series of important issues and core concerns about whether "SIB can succeed in developing countries" has also surfaced-

According to a report published in the Stanford Social Innovation Review, the most important success factor for SIB in developing countries is the need to overcome the challenges posed by compliance. Many local governments are interested in SIB, but the uncertainty is whether the model matches local regulations. Many times such fears are understandable--the public service's budget allocation process is already fixed, just imagine how innovative it would be to have policymakers accept the concept of "spending the year on the budget to finance this year's (Social development) project" ... Not to mention, according to the characteristics of the SIB itself agreement, the process of allocating the next budget is very likely (because the project has not completed the "performance") encountered "dial" but there is nowhere to "pay" the embarrassment!

Second, the sib of innovation and "performance-related returns", which, while making the previous government's wasteful funding of social projects ineffective or changing, means additional costs because of the need to scientifically assess the effectiveness of the project. In developing countries, if the "Implementation and execution" (human) cost of social development projects is lower than that of developed countries, its "evaluation" cost is much higher than that of developed countries, for lack of corresponding administrative data and a sound assessment and evaluation system. In this context, policymakers in emerging countries need to have a visionary vision of the long-term rewards of SIB (including the socio-economic benefits of this) in order to overcome the "high cost" of SIB projects in developing countries.

Third, the implementation of SIB in developing countries will test the capabilities of service providers and give them greater opportunities to stand out. This is because, different from the developed countries have a sound third sector, the various institutions of professional division of labor clear, resource advantages, and in emerging countries, it is very likely that a SIB service provider itself to provide from financing, to project design and implementation, and then to investor relations management, such as a full cycle, all-round services; SIB projects are also likely to have a greater weighting of capital than their institutional capital, and the service providers themselves have a stronger desire to "hit" in Sib projects, with a view to replicating and expanding SIB projects in the future. In other words, SIB has a better chance of nurturing a number of outstanding professional service providers in emerging countries.

Of course, the most fundamental success factors of the SIB model of developing social projects, whether in developed or developing countries, in order to attract private capital, continue to receive investor support. So, since the investment returns can not constitute a great temptation to investors (after all, if the project is not effective, investors are empty-handed risk), what could designers improve?

"Sib needs to be further reformed to make it more likely to become a debt instrument," said Nick Hurd, Minister of civil society at the British government.

This change of voice is becoming a reality. At present, in Britain and the United States, SIB innovation has roughly two directions, one of which is to Sib "escort" by large charitable organizations as collateral. For example, in the New York SIB project, in addition to the endorsement of Goldman Sachs, there is a guarantee from the personal foundation of New York Mayor Michael Bloomberg. If the project fails to meet expected results, the Bloomberg Foundation will pay for the bulk of the $9.6 million private investment.

Another direction of change is to make the SIB and fixed-income assets investment in the appropriate proportion of graft. For example, the British Social investment Agency, Allia, launched a SIB project in August this year for the first time with a fixed-rate return on property loans to each other, to promote private investors. Investors invest 1000 pounds, of which 780 pounds as a loan to a provider of social housing construction, and the remaining 200 pounds (because the handling charge occupies 20 pounds) as a social-benefit bond to a project to improve health services for poor children in Essex. In this way, the fixed income of the former is grafted with the latter's floating return, aiming to bring the expected return to the investor. "This article is written by China International Writer, published in the world of IT manager, October 20, 2013." 】