Significance of Social Impact Investment on CSOs and Government System

Abstract

Civil society organizations (CSOs) are recognized as embodying the potential to shape social capital and provide innovative services. This article shows an excessive dependency of CSOs on government-funded NPOs, resulting in vulnerability under recent budget constraints. On the other hand, social enterprises are currently on the rise, which could help strengthen NPOs, making better use of the business minds and skills that run NPOs. However, it is also difficult for these entities to stand alone in a pure market mechanism because of their nature to seek social benefits. Private donations, led by the tax-exemption system, are expected as part of the income stream, but we should recognize that such donations are a trade-off for government budget expenditures. Under these conditions, social investment represented by the Social Impact Bond is an attractive scheme; a system that lures funds from private investments to CSOs. This system is based on Social Return on Investment (SROI), a method that makes project impact more visible. This type of investment effort has been spreading throughout the world, especially in the field of prevention programs such as job training. This has the potential not only to provide other sources of funding for CSOs, but to change the government system as well.