The rise of social impact bonds in Japan

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Originating in the U.K. in 2010 and expanding to 100 projects in 20 countries, social impact bonds have been increasingly attracting public attention as a new method of social investment.

Social impact bonds (SIBs) have been increasingly attracting public attention as a new method of social investment.

The first batch of SIBs in Japan were launched in three municipalities during 2017 and 2018 following the themes of severe diabetes prevention in the city of Kobe and colorectal cancer screening in the city of Hachioji and Hiroshima Prefecture.

Although the size of the funds were relatively small — ¥24 million and ¥9.7 million, respectively — the involvement of major banks as investors, such as SMBC and Mizuho Bank, indicated that this could be another social investment product for mainstream investors.

SIBs originated in the U.K. in 2010 and have expanded to 100 projects in 20 countries with a total investment of over $400 million as of 2018.

SIBs are unique programs providing investment opportunities in preventive social programs with the aim of bringing medium- to long-term benefits to both beneficiaries and government.

The first SIB was structured by the U.K. government for a prisoner rehabilitation program to prevent the high costs involved when ex-offenders return to prison, allowing investors to gain financial return based on the success of the social outcomes. In Japan, the focus of SIB programs has been health care.

In 2015, the Ministry of Economy, Trade and Industry started a pilot program for health care SIBs focusing on dementia prevention as its first theme.

The Ministry of Health, Labor and Welfare followed this in 2017 by launching a grant program for the research and development of Japanese SIBs. The significance of this trend is reflected in the “Future Investment Strategy,” led by the Cabinet […]

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