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Applying the SIB model to child welfare projects for the first time in Asia

Author: Jinhwa Park, Secondee
Published Date: 29 March 2016

Seoul Metropolitan Government (SMG) has adopted the Social Impact Bond (SIB) to the field of child welfare for the first time in Asia. SIB not only serves as a breakthrough model to solve welfare problems and to intensify preventative welfare, but also encourages the participation of the citizens, which will help minimize the expenditure of public finances. SIBs support projects based on private investments, and when the project finishes, the government assesses the results and outcome to reimburse the cost based on how successful the project was. It is a new model of executing the public budget, which started in the United Kingdom. The United States of America, Australia, and Germany have already adapted SIB and SMG followed for the first time in Asia.


SMG can minimize its loss or waste of administrative budget since the reimbursement is made only after the project is proven to be lucrative. The investors are also more actively involved in the project and take a greater responsibility in making their project work. When the projects succeed, the investors get not only the reimbursement but also incentives. 


The first SIB project of SMG – Special Education for the children in child welfare facilities


The first SIB project of SMG is for the children who are intellectually and developmentally challenged. If a child’s IQ is between 71 and 84 they are considered ‘slow learners’ and need specific care and consideration at school and at home. They tend to encounter challenges such as bullying, insecurities, slow learning and maladjustment. However, it is extremely hard for them to get any government support since they are not technically disabled or physically challenged. It is hard for those who are taken care of by their families, but for those who have no choice but to stay in childcare facilities, the situation is a lot worse.


SMG decided to help these children as its first SIB project. SMG wished to provide proper and adequate education chances for those children in a hope that they can grow into well-educated and self-supporting individuals. The project aims at improving the livelihood of these children but also works to prevent social problems arising in later life. If over 32 children improve to the standard of the average child, SMG can save up to 370 million won of the social cost.


For this project, 100 intellectually or developmentally challenged children were recruited from 62 child welfare facilities throughout Seoul. Welfare facilities mentioned here are group homes where children who need care and protection are grouped with two guardians to make a home. SMG has been assisting these group homes rather than offering individual support, by supporting their living and operating expenses and labor costs. Now SMG is assisting them in a different ways by providing education programs specifically designed for those intellectually or developmentally challenged. These special education programs are to help children be more independent and assist their returning to their own families.


SMG expects this 3-year SIB project to enable these children to grow into healthy, independent individuals. The project aims to provide proper intervention programs, which can help the children overcome their challenges and improve their sociability, which will in turn improve their intellectual capacity. When one’s intellectual capacity reaches that of a regular child after the project, it is considered as a success.


When SMG picks a general management agency to serve as an overall coordinator, this agency recruits private investors and the agencies that can carry the project out. The general management agency keeps track of how the investment is made and how the project flows. When the project is over, an agency which has no relationship with any of the agencies involved in the project, assesses how successful the project was. A professional and objective evaluation of the project is made. When the project is proven to be successful, SMG reimburses the expenses and pays incentives.


The first SIB project of SMG did not go swimmingly from the beginning. In September 2014, when it was proposed at the city assembly for the first time, a rejection followed. A second attempt was made a month later, which drew no attention at all. Finally in April 2015, the agreement was made and SMG became the first city government who tried the SIB model in Asia. From the following month, SMG started to recruit the management agency and invited public participations for two months. In July, Pan-Impact Korea was chosen as the general management agency. On October 21st, Pan-Impact Korea and SMG signed the agreement, which finally made an official start of public-private partnership.