OXFORD, United Kingdom — The Rockefeller Foundation and UBS Optimus Foundation are backing a new financing tool to bring clean water to 1.4 million Ugandan school children, saying the model can potentially be replicated across other countries and sectors.
Official development assistance for the issue is now about $8 billion a year.
In this first pilot of the SSN model, the UBS Optimus Foundation will provide a $500,000 loan to Impact Water, a social enterprise, to expand its work installing low-cost UV-based water purification systems in schools across Uganda.
Impact Water will pay back the loan after five years and the rate of interest will go down if certain outcomes are achieved.
“The social business gets financing adequate to what they need and keeps them aligned to their social mission,” Bruysten said.
To support their initiatives, social businesses need continuous funding and I hope the Social Success Note becomes the leading instrument to fulfill this need.” The SSN is one of a string of results-based financing mechanisms that have emerged in recent years, including the development impact bond, a variation of the social impact bond pioneered in the United Kingdom in 2010.
She added that the SSN has a simpler structure than a DIB, to reduce transaction costs and time; and that complex impact metrics are avoided in favor of simple key performance indicators linked to the number of water systems installed.
However, some at the session said using installation-based key performance indicators as the outcome measure would not ensure sustainability in the long run — a problem that has dogged water projects in developing countries in the past.
In response, Bruysten said social businesses focused on the poor still face major challenges in accessing capital and paying interest and returns, meaning such subsidies are still needed.
“While the business model is really a relevant tool, we still think this subsidy … can be instrumental in making these types of social businesses sustainable in the long run,” she said.