Author: Michael Belinsky

Justice Project Pakistan wins the Echoing Green fellowship

I am so excited that Sarah Belal, founder of Justice Project Pakistan, won the Echoing Green fellowship this past month. As a member of the Echoing Green Social Investment Council, I had the pleasure of meeting Sarah several times during her application process.

JPP defends death row inmates in Pakistan, combating cruel and usual detention (in poor conditions and in secret prisons), interrogation by torture, and wrongful conviction. It distinguishes itself in the Pakistani context by having an investigative team, interviewing the inmates it defends, and operating as a woman-run legal shop in a male-dominated legal culture. I personally think that Sarah is doing important and impactful work.
I called Sarah to congratulate her last week. She was in the Pakistani mountains (a less dangerous feat that I imagine, I was assured), but her happiness at winning the award was apparent even through the choppy reception. Before the fellowship, she was being funded in part by two Open Society Institute grants, and hopes that the fellowship will increase her ability to secure grants from organizations that fund criminal justice activities worldwide.

Imitator protests: Hong Kong, Middle East, and elsewhere

There have been many political protests over the past twelve months, from the Middle East to Wall Street, from Russia during the elections to swearing in of the new Hong Kong chief executive. The reasons for these protests are several and different across the political contexts. Russians feel cheated by Prime Minister Putin’s pass-the-baton dance around the country’s constitution. Many hoped that Putin would eschew the presidency. Egyptians are upset that the country’s military leadership is tending toward dictatorship as it stripped the newly elected prime minister of much of his political authority. Yet many had hoped for a better slate of presidential candidates so that breaking up with Hosni Mubarak didn’t mean entering into a relationship with the Muslim Brotherhood. And, in a microcosm of the anti-Communist wave in China, the people of Hong Kong are lashing out against their newly elected chief executive, a “close ally of the Communist party,” much like the mainland politburo lashed out against the Bo Xilai, the Community party-affiliated governor who wire-tapped Hu Jintao.
These protests, however, have not accomplished their political goals. Putin has assumed the presidency seemingly unscathed. The Egyptian military authorities have ignored the (confused and confusing) political demands of the recent protests. And the Leung Chun-ying, the Hong Kong chief executive, will start his job protests notwithstanding. Not to mention Occupy Wall Street, which apparently fizzled out.
Perhaps this recent wave of protests are insufficiently large, insufficiently motivated and lack a coherent agenda. Russian wanted recounts, disliked the typical corruption of their electoral process, and were generally upset at Putin. But the alternate candidate was uninspiring. They did not necessarily want him; they just didn’t want Putin. The current Egyptian throng is a shade of the previous protest movement that ousted Mubarak and transformed Egypt. And Hong Kong is one of China’s pressure valves: You protest on its streets because you cannot protest on the mainland, you circumvent the mainland’s one child policy in Hong Kong hospitals, and you enjoy the city’s several distinct freedoms.
So maybe we are seeing the rise of imitator protests, ones that are sparked by the large successful movements in Egypt and elsewhere, but lack their strength, direction and perseverance.

SEC wants vote on money market mutual fund regulation

It’s interesting that SEC Chairwoman Mary Schapiro is only now increasing regulation of money market mutual funds. MMMFs are mutual funds that hold fixed income assets, usually short-term (less than one year) assets like commercial paper. Their liability side has a fixed value claim of $1. When Lehman collapsed, Reserve Primary Fund, a large MMMF, broke the buck, meaning it lowered its share price below $1. This caused a run on the Fund, and subsequently a general run on money market mutual funds. The government had to step in and guarantee all existing MMMF claims.
Now Schapiro is proposing several regulations:
– capital buffer against the assets in the MMMF portfolio
– limit amount of shared that can be redeemed at any one time
– or, in lieu of the limit, make funds float their net asset values, meaning they will no longer be fixed to $1
The limit on the number of shares is curious since, as I understand, money market mutual funds can already hold money back for 90 days, although they rarely do this. Also, I am not sure how the limit-or-float mechanism would prevent an imitator run like the one that happened in 2008 when Reserve Primary Fund broke the buck. Presumably the limit prolongs the run, but the float encourages it, as a falling share price may spook investors and spark a run.
The capital buffer is also curious. I presume, although I have not checked, that the size of the 2008 run exceeds the size of the capital buffer than Schapiro is proposing. This means that her proposed regulation would not have stopped the 2008 run from occurring. A friend recently mused that financial regulation is always designed to avoid the previous crisis. Well, it should do at least that.
Source: http://professional.wsj.com/article/SB10001424052702304898704577482994218057410.html?mod=WSJ_business_whatsNews&mg=reno64-wsj

Update on social impact bonds in Australia

The New South Wales government in Australia has made some progress with its social impact bond program. NSW started looking at SIBs about a year ago. Here are some details on their work so far.

SIB 1: Foster Care
Size: $10 million
Population: 550 families
Duration: 5 years
Target outcome: Number of days that children spend in foster care
Government: NSW, Australia
Nonprofits: Benevolent Society
Investors: Westpac Corporation and the Commonwealth Bank of Australia
Intermediary: Mission Australia and Social Finance (different organization from Social Finance UK)
SIB 2: Foster Care
Size: $10 million
Population: Unknown number of children up to 5 years old and their parents
Duration: 7 years
Target outcome: Number of days that children spend in foster care
Government: NSW, Australia
Nonprofits: UnitingCare Burnside
Investors: Westpac Corporation and the Commonwealth Bank of Australia
Intermediary: Mission Australia and Social Finance (different organization from Social Finance UK)
SIB 3: Youth Recidivism
Size: $7 million
Population: 500 young adult repeat offenders
Duration: 6 years
Target outcome: Unknown 
Government: NSW, Australia
Nonprofits: Unknown
Investors: Unknown
Intermediary: Mission Australia and Social Finance (different organization from Social Finance UK)
Sources:
http://afr.com/p/national/westpac_cba_embrace_social_bonds_myi01zs3Mzr2EVCbfTJrkM#
http://www.csi.edu.au/news/Successful_bids_for_Social_Impact_Bonds_in_NSW_announced175.aspx

Social impact bonds in international development

Elizabeth Littlefield of OPIC (and previously head of CGAP at the World Bank) recently chaired a Steering Committee discussion on the application of social impact bonds in international development. Key questions, of course, are 1) who plays the role of the payer in this model, 2) how are social impact bonds different from Cash on Delivery, and 3) what’s the right intervention for this model? One intervention that has already been analyzed is for malaria (see Dalberg report). And the Gates Foundation, whose key achievement (and starting point for the foundation) has been with respect to polio, is interested not only in that, but also in family planning.

Instiglio has put out some preliminary research along the same lines: “Social Impact Bond Applications in International Development.” 

Social impact bonds on YouTube

Here are some recent and earlier videos about social impact bonds.

1. An old announcement of the launch of the Peterborough social impact bond. Link.

2. A Centre for Social Impact video featuring Dr Alex Nicholls from the Skoll Centre for Social Entrepreneurship at Oxford and Professor Cheryl Kernot from the Centre for Social Impact. Link.

3. A short video by McKinsey describing the SIB concept. Link.

4. A webinar by McKinsey on SIBs. Participants include Tracy Palanjian from Social Finance, Professor Jeffrey Liebman from Harvard Kennedy School, and Laura Callanan from McKinsey, and moderator Matt Miller from the Washington Post. Link.

EU and social impact bonds

Social impact bonds seem to have caught the attention of the European Union. According to this website, the EU’s Employment, Social Affairs and Inclusion division is soon holding a seminar to explore funding strategies for addressing homelessness. The second seminar theme, titled Diversification of Funding Resources, includes “the potential of social impact bonds.”

OMB May 18 memo on pay-for-success

In a May 18 memo titled “Use of Evidence and Evaluation in the 2012 Budget,” the Office of Management and Budget describes pay-for-success contracts. One key message of the memo: “Agencies should demonstrate the use of  evidence throughout their Fiscal Year (FY) 2014 budget submissions.” The memo covers:

– Proposing new evaluations
– Using comparative cost-effectiveness data to allocate resources
– Infusing evidence into grantmaking (the pay-for-success model is mentioned here)
– Using evidence to inform enforcement
– Strengthening agency evaluation capacity

The pay-for-success message is: “OMB invites agencies to apply a pay-for­-success model for programs funded by either discretionary or mandatory appropriations. Agencies should also consider using the new authority under the America COMPETES legislation to support incentive prizes of up to $50 million.”

Excepted language on pay-for-success:

     Pay for Success:  Taking the principle of  acting on evidence one step further, the
Departments ofJustice and Labor will be inviting grant applicants to use a “pay for
success” approach, under which philanthropic or private entities (the “investors”) pay
providers upfront and are only repaid by the government i f  certain outcomes are met.
Payment amounts are based, in part, on the amount that the Federal, State, or local
government saves.  A pay-for-success approach is appropriate where: (i) improved
prevention or other up-front services can produce better outcomes that lead to cost
savings at the Federal, State, or local level; and (ii) foundations or others are willing to
invest.
     To date, the Administration has focused its Pay for Success planning on programs
financed with discretionary appropriations.  OMB invites agencies to apply a pay-for­
success model for programs funded by either discretionary or mandatory appropriations.
Agencies should also consider using the new authority under the America COMPETES
legislation to support incentive prizes ofup to $50 million.  Like Pay for Success, well­
designed prizes and challenges can yield a very high return on the taxpayer dollar.

Source: http://www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-14.pdf

McKinsey’s report on social impact bonds

McKinsey’s Social Sector Office has continued their work with social impact bonds. Yesterday, they issued a 68-page report that analyzes the nascent market for social impact bonds in the United States. This report is part of their larger work on SIBs, which includes:

  • “Will social impact bonds work in the United States?” –  a brief overview of SIBs issued in March 2012.
  • “From Potential to Action: Bringing Social Impact Bonds to the U.S.” – This report, issued on May 15, 2012. 
  • Rapid Sustainability Assessment – A toolkit aimed to help potential funders, providers, and intermediaries determine their organization’s suitability for participation in the SIB ecosystem. Publication date is TBD.
  • Capabilities Due Diligence – A more thorough evaluation for each of the stakeholders. As I understand, this will focus on due diligence analysis of potential service providers. Publication date on this is also TBD.