Increasing number of public sector offices, policymakers and
philanthropics have come to realise that the social sector is transforming.
Increasing budget gaps and pressure on government spending is shrinking the
traditional sources of government grants to the public institutions. The gap
has created a new market for funding, which is filled in by private banks and
other financial services institutions investing in social ventures that scale.
The way social ventures have been structured making it
difficult to evaluate their impact and reach more people. This is primarily
because of the way government grant programs have been structured earlier. Such
inefficiencies in the model hinder their ability to successfully get a
commitment from private sector for more than a year – primarily because of
strict KPI’s and preferences of such donors.
In order to create transparency in the entire social funding
structure, we saw the rise of social impact bonds in the market. Such bonds
channel government funding to institutions that show tangible progress in the
market. The funding is made after the social commitments have been achieved.
Similarly this also provides the private investors to pitch in the initial
funding for the social venture. Private investor makes the initial commitment
and gets paid later with modest returns if the venture realizes its goals. This
kind of model has been of particular interest in terms of preventive diseases
where tangible social impact could have been assessed.
