THE Treasury is looking into the feasibility of using an experimental financing mechanism, social impact bonds, to help boost small businesses and job creation.

In a global environment where donors are shifting or cutting back on funds, governments are looking for novel ways to pay for services that have often been provided by non-governmental organisations that are dependant largely on grants.

Social impact bonds are usually structured so that a government enters into a contract with a bond-issuing organisation that raises capital from investors such as banks and foundations and then hires and manages a non-profit organisation to provide services.

The government repays investors with a return that is calculated on the savings it gets as a result of the programme’s success."

The Treasury and the Flanders Development Agency have commissioned a feasibility study from a consortium comprising the Bertha Centre for Social Innovation and Entrepreneurship at UCT’s Graduate School of Business, Genesis Analytics and an organisation called Social Finance which pioneered social bonds in the UK with a programme aimed at preventing former prisoners from re-offending.

The Bertha Centre’s Aunnie Patton said there were currently no social impact bonds in place in developing countries. Africa’s first social impact bond, aimed at tackling malaria in Mozambique, is expected to be launched later this year.

There are now 14 social impact bonds in the UK, and similar programmes in the US and Australia, said Social Finance’s International Director Jane Newman. "There is potential use of the model in the healthcare sector," she told delegates to a two day healthcare innovation summit hosted by the Bertha Centre.

Examples of projects that were exploring the feasibility of social impact bonds health included the early diagnosis and management of diabetes, and programmes to help prevent elderly people from becoming socially isolated, she said.