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Accelerating the Impact Economy: How Government Can Get Us Into Gear

Have you ever wondered whether government has a role to play in the impact economy? Deloitte has, and they believe that everyone from impact investors to social entrepreneurs should understand what government can do to grow the space. For this special bi-weekly series, the Skoll World Forum and Forbes have partnered with Deloitte to discuss policies, politics, and possibilities for government to accelerate the impact economy.

 
 

An Important New Task for the U.S. Government

Sonal Shah

Senior Fellow, Case Foundation

Jitinder Kohli

Director, Public Sector Practice, Monitor Deloitte

Setting the Table: Who’s Who in the Impact Economy

Shrupti Shah

Director, GovLab, Deloitte Consulting

Ross D. Rocketto

GovLab Innovation Fellow, Deloitte Consulting

Rob Terrin

GovLab Innovation Fellow, Deloitte Consulting, LLP

 

What is the Impact Economy Anyway?

Shrupti Shah

Director, GovLab, Deloitte Consulting

Ross D. Rocketto

GovLab Innovation Fellow, Deloitte Consulting

Rob Terrin

GovLab Innovation Fellow, Deloitte Consulting, LLP

 

The Impact Economy Abroad: What the US Can Learn From the UK, India and Australia

The Impact Economy Abroad: What the US Can Learn From the UK, India and Australia

Ross D. Rocketto

GovLab Innovation Fellow, Deloitte Consulting

Rob Terrin

GovLab Innovation Fellow, Deloitte Consulting, LLP

Shrupti Shah

Director, GovLab, Deloitte Consulting

November 5, 2013 | 1238 views

 
  • Problem: The US Impact Economy faces three major challenges that will need to be addressed before it can scale.
  • Barrier to Progress: The three problems are: lack of investment capital looking for organizations looking to address social ills, lack of infrastructure, and lack of impact focus in many domestic programs.
  • Solution: Government can look to other countries' for examples of how to solve some of these issues.

The last post in this series provided an overview of the actors in the Impact Economy. Before we look abroad, let’s discuss what’s happening at home.

The US Impact Economy faces three major challenges that will need to be addressed before it can scale. First, there is a lack of early stage capital for organizations looking to address social ills. Additionally, America currently lacks robust infrastructure to support the Impact Economy, which might include clarified and streamlined regulation and standardized impact measurements. The final challenge is that many existing programs often do not achieve their intended effect.

While the US is moving in the right direction with programs like the White House’s National Impact Initiative, the Social Innovation Fund, and the Small Business Administration’s Small Business Investment Company it is important to also look abroad for examples of how other countries are addressing some of the same challenges to accelerating the growth of the space. In this article we look at examples of how three other governments are addressing the major challenges to growth:

Incentivizing private sector investment for good in the United Kingdom (UK)

Big Society Capital (BSC), the world’s first social investment bank was launched in April 2012 by the British government and capitalized with ₤600 million ($950 million) from unclaimed bank assets and contributions from four large British retail banks. Its mission is to play a key role in ‘growing a sustainable social investment market in the UK…by investing in social investment finance intermediaries, developing their capacity to provide social sector organizations with access to new, appropriate and affordable sources of finance to increase their social impact’. BSC intends to catalyze social investing by increasing the amount of capital by ₤7 for every ₤1 the bank invests. Additionally, in its first nine months of existence, BSC invested ₤56 million (~$90 million) and plans to invest between ₤75 (~$121 million) and ₤100 (~$161million) million during 2013.

Building Impact Infrastructure in India

In India, there are 15 million households that earn between $160 and $400 per month, and rent rooms in small, cramped houses, with deplorable sanitary conditions. They do however, aspire to live in, and can afford to buy, small houses in the suburbs at market prices. These houses – while commercially feasible – were not being built, while individuals were left unable to access mortgages. In 2006, a group of colleagues sought to find a private sector solution to the problem. With the support of multinational institutions and foundations, they have been working with developers, financers, and government officials to develop and pilot new business models that could provide a private sector solution to the problem. Their business models and efforts have proven tremendously successful. To date these efforts have been successful, with more than 150 developers building over 80,000 apartments in the $5,000 to $16,000 in the last 5 years. Below are some ways the government played a role in supporting the private sector in their efforts to bring housing to low income Indians:

  • Mandating developers to make housing for Low income people
  • At a national level recommending that States zone land for low income housing
  • Providing subsidies and creating an enabling environment so developers produce more housing for low income groups
  • Offering lower cost refinancing and subsidies and reducing stamp duty and registration charges to low-income customers to improve affordability, and
    • Setting standards to facilitate the market.

Developing new programs and repurposing old ones to maximize impact in Australia

In an effort to examine place-based impact investing, the Australian Government commissioned a series of reports. One of the key findings is that programs often developed to address a particular problem may often deploy resources without much attention to the needs of the targeted population.

The report points out that the government must focus more attention on achieving their proposed impact. To do so, they can engage with communities to define their specific needs with a focus on outcomes.

For example, Australia’s National Rental Affordability Scheme (NRAS) was created in 2008 to address the shortage of affordable rental units. A typical program might have only tracked the number of units developed, but the NRAS chose a different approach. By looking at the number of occupied housing units they were able to see whether low and moderate income individuals were actually getting placed. While this may seem like a subtle nuance, it allows the Australian Government to measure the true impacts of the program, and make adjustments if needed.

Moving Forward

The examples outlined in this article demonstrate the benefits of incentivizing investment, building social business infrastructure, and developing new programs as well as repurposing existing ones to focus on impact. By looking abroad to what works, the U.S. Government can learn lessons that can help accelerate the growth of its domestic Impact Economy.

 
 
 

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