Social Finance Israel — a financial intermediary that aims to provide both social and financial returns to investors – recently launched a social impact bond venture that aims at preventing at-risk Israelis from getting Type 2 diabetes at the same time as making a profit for private investors.
Social Finance Israel and the Swiss bank UBS will sell $5.15 million of social impact bonds — a type of impact investment designed to raise private sector capital to expand effective social service programs— to domestic and international investors.
The new initiative aims at preventing 2,250 Israelis who are at-risk of Type 2 diabetes from getting the disease through the sale of social impact bonds. If a success, the health funds and National Insurance Institute (NII) will save nearly NIS 50 million in healthcare and disability costs.
The health funds say the annual cost of treating diabetics runs between NIS 8,000 to 10,000 per person. NII allowances run approximately NIS 20,000 annually.
Israeli health maintenance organizations (HMOs) – Clalit and Leumit – together with the government’s NII will use the social impact bond funds to run preventative programs. If the programs are successful, the HMOs and NII will repay the investors from savings made by reduced healthcare costs.
According to statistics, some 500,000 Israelis suffer from type 2 diabetes. Globally, 415 million people suffer from this disease.
The Israeli bond is a pilot initiative. Mexico, India and other countries have articulated interest in similar initiatives.
In November 2015, Social Fininance Israel launched a social impact bond to finance support for computer science students and thereby reduce the number of dropouts.
“We are leading a paradigm shift and a switch to the concept of social investments, in an effort to mobilize the private sector in favor of increased engagement in priority social issues through tools they recognize from the investment world,” said Social Finance Israel CEO Yaron Neudorfer. “We believe that this approach, which is proving successful elsewhere around the world, will be essential in boosting the magnitude of investment in social issues in Israel. There is no doubt in my mind that the coming years will see more and more social impact bonds being issued in Israel on a variety of issues, and that these will draw economic planning, new capital and advanced management tools toward the social arena in Israel.”