Governments across the world are trying to innovate in the social sector, but can they can move fast enough to accommodate innovators?
That’s one of the biggest problems facing “pay for success,” known as social impact bonds abroad. The idea is to get private investors to front money to social services providers, only to be paid back by government if certain success metrics are met.
Pay for success has been around since 2011. Since then, governments across the world, especially in the U.S., have been interested. Pennsylvania is getting ready to launch two pay for success initiatives, and the city of Philadelphia has been flirting with the idea for a few years.
In New Zealand, a three-year-old, $29 million pay for success initiative just flopped.
“The government is inviting innovation, inviting propositions that will change the way that we do things, but yet we go through what appears to us, from the community sector, as tedious bureaucratic slow processes that kill things before they’re even born,” the chief executive of a New Zealand-based provider network told Radio New Zealand.
Omar Woodard, the ambitious 32-year-old executive director of venture philanthropy nonprofit GreenLight Fund Philadelphia, believes it can — as long as the city is prepared to tweak certain processes. He has a vested interest in pay for success: Center for Employment Opportunities, a nonprofit GreenLight has invested in, has been selected by the state to participate in one of two pay for success projects.
So, Woodard is hopeful.
“It gets to the issue that nonprofits are ready to innovate, the private sector is ready to innovate but once again, it’s government that’s unable to change it’s process,” said Woodard, who, earlier this year, axed his campaign for state senate for similar reasons. “There’s a reason why businesses and nonprofits hate contracting with government, and it’s because it takes too long to get a check cut.”
Major cities across the country are tracking how long it takes to pay contractors. Philly, Woodard said, is one of the worst offenders.
“This is really about government not being able to be as nimble and flexible as it should be for this type of transaction,” he said. That means philanthropy and the private sector will need to work with government to streamline processes if pay for success is going to work.
It will take a collaborative effort.
“Every dollar really counts,” Woodard said. “That will be the big challenge with pay for success at a local level.”
Tony Abraham is Generocity's lead reporter. Formerly a reporter with sister-site Technical.ly, Tony also occasionally writes for Red Bull Amaphiko and WHYY Newsworks. Though he lives on his Twitter timeline, the Temple University alumnus calls Fishtown home.