34. Social Impact Bonds Cases On and Off the Chain - Taipei 2023

[Music] hello my name is Joe um this is my uh third time I think to typ a and um I've been coming here for a lot of impact conferences this is the first time come to a a blockchain one um just to give a little background about me I um I've been in the nonprofit space for maybe um a dozen 15 years or something like that and I've I've worked in the United Nations um then transferred over a little bit to the blockchain space but also to the K-pop space and so I actually we um started three years ago our own um K-pop label next year our um our team is going to debut in the United States so if you ever hear about them yeah but uh they're not they're not on nfts yet nor are they on um on blockchain so but um today I want to talk to talk to you about something that's uh a big passion of mine which is um to see more effective problem solving in um the impact space because I've been working in nonprofits for a very long time and I've been frustrated not not because there are bad people in the impact space but because we lack resources to solve the problems that we we need to solve together so um one item and one model that I've been looking into I I know that um there was a talk on social impact Bonds in the morning we've been doing social impact bonds about five times in Korea and I wanted to share a little bit of my experience perhaps some insights and and perhaps opportunities for the blockchain space to bring in essential resources for blockchain to be used in the real world in a way that solves um real problems so let's get into it sorry it's a little wardy um but just to get started um why why do we need sibs okay so um sibs before I explain what it is there are problems in this world that need a lot of attention super important problems but they're unprofitable and so nobody really cares about them the most experienced the most talented the the the best solution providers cannot stay in that space for a long time because it doesn't make money right that's the problem and it's very similar to uh retr pgf that we're talking about um the challenge is how do we make doing something good for everyone else profitable enough so that people are could continue to work in the space for a very long time time it's a sustainability issue okay and so we're trying to solve this through a very unique model called sibs and sibs very different from retro pgfs depend their source of money on tax money okay so what sib really is in my understanding is decentralizing the way you use tax money to make it much more effective in delivering the results that we all want all right how do we do that um I know it's a very complex model just three steps quick and easy how do sibs work we get invested we we um we propose a prop proposal we're going to be doing X andx and we ask somebody a rich person or a philanthropic Foundation or an investor to invest in the project and we use that money to deliver a result but we had a promise we already made a promise with a certain government or a certain um institution saying if we meet a certain result you'll pay us right and that's why we got investor money and so with the success of the project we're able to give back the original invested money plus interest okay um that's how sibs work how is it different to retr pgfs for sibs we use investors money for retr pgf usually you use your own money to um get a project done and get the results that were promised and then you get the money back and you keep the money for yourself okay that's that's basically the model for retr pgs all right so these two models how do they Faire um they hinge on on and and many speakers already uh uh beat this subject down but sibs and rpgfinal Because unless we're able to measure impact we cannot go to a government entity and say um we're going to take your money because um there's an example here one of the latest um projects that we uh got off the ground is on suicide prevention in Korea okay Korea is number one in suicide rates we're not proud of it and we needed something to do about it but nobody I mean it's not a profitable space at all and so nobody could really work in that space to prevent uh suicides there are many volunteers who are willing to talk to people who are depressed and having a difficult time but the best professionals who were able to help are not in that space and so we made a social impact project um where we brought in a whole system an online system where we allowed people to anony we act um we got into anonymous spaces and we picked out keyword that are dangerous and they're funneled in so that they could get um counseling now we had to get money to do this so uh we went to a government entity we showed them oops sorry about that we showed them an indicator which was alleviation of depression that was our um success indicator we said there is a tool called phq9 which is the the the indicator used by everyone around the world on how to measure depression it's used in on on all hospitals and we said we did our calculation it took 70 pages of calculation by the way on how much Social cost you're able to save if we're able to go up one tick on this phq9 scale okay phq9 is a nine question questionnaire you take within like two minutes and at the end it asks you how many times have you thought about suicide in the last month now it categorizes you into low risk medium risk high risk and every time you're in the highrisk R category and if you're bumped to a medium risk category the social cost is about $110,000 but if you're bumped up all the way to a not depressed category then the social cost savings is about 110,000 per person who is bummed up and through experience we saw that many people who got counseling for over eight sessions were able to get bummed up one notch or another so we said we went to a government entity and said hey let's say was Soul city they're we're going to be approaching 500 people who are high risk and we're going to be trying to get them to a better place um by you know the the end of the year and we're going to be measuring them before and after intervention and we're sure that we're able to re reach about $18 million of social cost savings this is our first project so it's a pilot one so if we're able to save at least $18 million worth of uh social cost savings you're going to be paying the project money plus 14% per year of interest to us and they said well how much are we actually going to pay we said you're going to be paying $750,000 and that's it and they're like really for for having saved $1 18 million in Social cost we said yes because we do our job better than what the government does right and so they couldn't say no because it was a good deal by the way if we if we do not achieve the $18 million um they have they could pay less and if we don't if we achieve under $800,000 they don't have to pay at all we're saving taxpayers money for them so the government is like well this is a no loss deal for us so we currently have convinced 19 different government entities in Korea to do this and um they're like lined up right now to work with us on social um impact bonds what is important though in or in order to take tax money to to do sibs number one measurement needs to be easy phq9 takes two minutes and we could get accurate results number two the measurement needs to be publicly recognized everybody uses phq9 around the world and lastly the social cost calculation needs to be agreed on by the aom payers or the alcome payer right okay so what are some notable sibs around the world uh just very quickly um sibs were uh 2010 I'm sure you heard of this already but um they did this in the UK um it's it's it's a five-year program five 5 million pounds and when succeeded uh the investors would get about 3% of Interest per year which is very measly um what happened then let me just go because of time um is in Korea we translated this model and we put it on blockchain why do we put it on blockchain for many reasons number one once people are are tied into an investment of five years they can't get the money back for five years and there's a liquidity problem so what we did was we took the whole process we put it into smart contracts in the ethereum um using solidity and um everything got automatic and secondly uh we were able to tokenize the contracts themselves and um made it able to be traded unfortunately our users or our our uh previous our investors were not too familiar with blockchain so we never got traded throughout the whole five years but again um this is only because we're not we are not uh this model has not been developed closely with the blockchain community and I'm I'm here presenting this in hopes that uh we're able to connect to um potential Partners who can further develop this to introduce it the right way to the blockchain community so that it could we could have U more liquidity um actual uh trade trading of the contracts uh that are being done through us now another thing is um nobody really traded it for us but once it could get traded we could do crossb uh Investments and we don't have to be restricted to just Korean investors in Korea who um institutional investors are looking at this and going this is a very new product I don't know they're very conservative by the way and so we do need to have access to other types of money that is interested in um doing social impact so what kind of projects did we do so far we had three projects that well two projects that ended successfully one that is ending next year and they're on track so it's going to be a success High highly likely we have two projects um that were created post 2010 2020 unfortunately we had some um the whole Korean economy had some issues in money being moved around and uh uh that's that's postco and so we actually don't have the Investments we have all the money um from the governments set up ready to be deployed they're in our banks just no investors so we have one one project on youth employment second on the suicide prevention that is and if you look at the interest rates we were able to raise it much higher than the global um average and even higher on the last one because uh we were having some I mean the interest rate hike was so high that we needed to uh also uh push up ours it's 14% per year for us that is I think the like a global High I've never seen it that high now this is the last page and I wanted to um emphasize the opportunity and the potential for the growth of sibs sibs are an incredible Innovative way to Sol solve social problems that hinges on the fact that the government is doing their job incredibly inefficiently we are banking on the fact that the government is not going to do their job well and this is just a fact I've worked in the United Nations I worked with 193 governments around the world and most of them if not all of them could be labeled as inefficient okay now there's a lot of reasons for that but what is important is that sib is able to take the same government tax money go to the government and say listen there's a better way to do this with better people better incentives in a decentralized way where we could we could solve real problems in a measurable way and only pay tax money when the results are delivered okay so when we look at the average State the way they're doing it goal setting quite vague yeah it it is set on paper but it's still vague incentives I say misalign because um usually uh governments just really want to spend the money instead of getting the results out um executions could be satisfactory or not it's a it's a risk it's a gamble measurement some I mean most of the time these in improved States they're measured but the measurement is also quite arbitrary the reason I say it's arbitrary is because the the extent that we go to create our measurement calculation we went we went 70 Pages 80 pages into one measurement this is I mean that is not the level that governments are going to um set in their indicators for every project that they do and so um I'm not trying to say sib is the best thing for the world I'm just saying it's a much more efficient way to be able to spend government money um and total Global government expenditure is 35.6 trillion dollars um and that's not for the four years it's because data doesn't exist doesn't exist for many countries in many years so um global global expenditure is 35.6 trillion um it's about 40% of GDP in most countries sib um could utilize a lot of Diversified funding sources including uh utilizing uh the monies that have interest in the blockchain communities um we do need to further establish sib as an asset class because it's not something that has been introduced to the markets yet um once we get governments to lock in the money the money needs to be stored somewhere and we would love that money to be stored on blockchain so that it could be trusted it could be put on escro and once conditions are met that it could be released calculated and released automatically we actually have um looking back oops oh no I'm out of battery okay so we actually have um uh all of that programmed and open open sourced for everyone to use so if you sorry the slide's not moving if you Google smart sib source code then you could get it um it's it's already open for all of you to use um and and utilize you could you could customize it for your own use uh but but we've done it we've used it um and uh we're releasing it for everyone else but if you I I I'll stick around after this talk I'd love to connect with any of you who are interested in the details also if you have if you know um of anyone in this space who I should be talking to very happy to be connected thanks [Music] everyone