News

Allia to develop a retail social impact bond

Finance | Vibeka Mair | 23 Jul 2012

Allia is developing a bond which will give retail investors access to social impact bonds and other payment-by-result social investments.

To date, retail investment in payment-by-result projects has been low – generally these types of products are inaccessible to the ordinary retail investor due to strict regulation around these types of financial products. Retail investors can also be put off by the level risk - in some social investments, investors risk losing all their money since they will only be paid if outcomes are achieved.

Phil Caroe, chief operating officer at Allia, told civilsociety.co.uk that it is working on developing a route for retail investors to become involved in social impact bonds, which pay investors a financial return on social outcomes.

Retail investors will gain access to a social impact bond through an adaptation of Allia’s existing bond programme which invests in social housing.

Allia bonds lend part of the funds invested by an individual at fixed interest to a very low risk social housing provider to create homes and provide services that meet social needs. The repayment of the loan plus compound interest at the end of the bond will exactly match the amount invested, meaning that investors can have a high level of certainty of receiving back at least what they put in.

Using a £183,000 grant awarded from the Big Lottery Fund’s Next Steps: Supporting Social Investment in England fund, Allia plans to create a pilot bond, where part of the funds it raises from individuals goes to a social impact bond for children in care.

If the plans go ahead, these funds will be used to provide interventions to reduce the number of care placement days for 11-16 year olds at risk of entering care or who recently entered care. A successful reduction in placement days will trigger payments by the council and give investors in Allia’s bond an additional return above principal.

Caroe said: “The goal is to try and expand the social investment market and provide learning around whether there is interest among individuals in this type of product.”

Social Finance, which launched the first UK social impact bond in Peterborough, is also exploring ways of making social investment products accessible to retail investors.

A spokeswoman said it has seen a lot of interest from the UK and abroad since the Peterborough launch in 2010, a social investment project centring on recidivism.

BIG announced grant funding to 12 social investment projects last week – for more details on some of the projects see the map below –

Directory: Social Finance