Social impact bonds a concern for Winnipeg service groups

How's this for an investment opportunity? Cough up a few million dollars towards a housing for homeless program. Wait for it to succeed, then collect that cash back in your pocket plus a cool 20 per cent in interest fees.

Welcome to the world of social impact bonds, which the federal government is considering to help the private sector fund the public sector.

It's a plan that appeals to some cash-strapped social service agencies, but worries others.

"They're a fashionable idea that is being oversold," says John Loxley, a professor of economics with the University of Manitoba.

"You don't need social impact bonds … you need smart public-sector accountability, and I think it [already] exists."

Specifically, the bonds would work like this: some organization or large business funds a specific social service program.

'Pay for performance'

If that program succeeds in its goals — for example, reducing youth crime, or creating homes for the homeless — the federal government will not only reimburse their initial investment, but pay out a hefty interest rate on top of that.

"It's like 'pay for performance,'" said Sharon Taylor, the executive director of Wolseley Family Place.

"That really scares me because I never want to put a dollar [value] to a person."

Furthermore, if the agency does not succeed, the investor loses that money. And therein lies another problem, Loxley said.

The investor will want a say in how the program is run, how the money is spent, and what risks are worth taking -- all in a business bottom-line effort to make sure they score a profit.

That means programs that are helping the most vulnerable Canadians, with the toughest challenges to solve, could lose out on the funding.

"I mean, put yourself in the position of a funder," said Loxley.

"They don't get their money back unless targets are met. So they will have a key role in determining those targets and being satisfied that those targets are ones that they think are attainable."

How can success be measured?

But not every success can be so easily measured in dollars and cents.

Adam Blanchard is the executive director of the Manitoba Association of Friendship Centres, which represents 11 centres through the province that provide cultural and social support for our aboriginal population, especially the youth.

Blanchard said he likes the idea of social impact bonds — his group is chronically struggling for federal funding — but he wonders how they would measure the success of their programs.

"They're asking to … demonstrate how youth getting cultural teachings or going to summer camp, how do they relate to the economy?" Blanchard said.

"It might make you participate better as a Canadian citizen, but what does that really mean for the economy?"

That's what federal Human Resources Minister Diane Finley wants to find out.

Last fall, she put out the word that she was looking for investors, be they foundations, charities, co-ops or the private sector, with ideas about social service programs they'd like to invest in. More than 150 submissions landed on her desk.

Her office has now narrowed down those submissions and is reviewing them. In a few months, they hope to launch "investment-ready pilot programs" based on these proposals.