Piloting Pay-for-Success in Hong Kong

To facilitate public-private partnership which enables the government to leverage private investments for improved social outcomes

Pay-for-Success (PFS), also known as Social Impact Bond (SIB) and Social Benefit Bond in other places, is an innovative financing model for social services which has been gaining widespread interest across the globe. According to Social Finance UK which launched the first ever SIB back in 2010, "a SIB is a contract with the public sector in which it commits to pay for improved social outcomes. On the basis of this contract, investment is raised from socially-motivated investors. This investment is used to pay for a range of interventions to improve social outcomes. If social outcomes improve, investor will receive payments from government.  These payments repay the initial investment plus a financial return. The financial return is dependent on the degree to which outcomes improve".

In a nutshell, PFS is a public-private partnership which funds effective social services through performance-based contractual arrangements and enables governments to partner with high-performing service providers by using private investments to develop, coordinate or expand effective programmes. It is a series of contractual arrangements, typically facilitated by an Intermediary, which involve Investor(s) providing up-front the required funding for a programme to improve social outcomes, and the Commissioner/Outcome Payer (typically government agencies) paying the investor(s) the amount injected to the programme, possibly with financial returns, subject to and depending on the social outcomes achieved by the Service Provider(s) as assessed by an independent Evaluator. It leverages investors’ risk-sharing to enable funding of more innovative or preventive programmes which are currently not yet covered in the government budget. To understand more about the concept of PFS and the responsibilities of the major parties involved in a PFS, please refer to the report “Financial Innovation for Social Impacts – an Advocacy Report on Pay-for-Success” issued by Our Hong Kong Foundation in 2017 (Full Report; Presentation Slides).

SIE Fund as a Catalyst

The SIE Fund seeks to catalyse
the pilot development of PFS
in Hong Kong

The SIE Fund seeks to catalyse the pilot development of PFS in Hong Kong by linking up interested stakeholders, facilitating structuring of pilot PFS project(s) and assuming the role of Commissioner in worthwhile pilot PFS project(s). The aim is to:

  • test the effectiveness of PFS model in local context;
  • help all parties gain learnings;
  • foster cross-sector capacity building; and
  • use the pilot project(s) as a showcase for government bureaux and departments and inspire them to identify application to other social and poverty related issues.

To this end, the SIE Fund organised a sharing session on PFS in January 2018 with speakers from Our Hong Kong Foundation and Social Finance UK sharing the concept of PFS and global adoption of PFS (Please refer to the presentation materials [part 1part 2] and the video). In June 2018, the SIE Fund further organised a stakeholder engagement workshop to gather interested and relevant parties to appraise the potential of the model in Hong Kong and to explore the feasibility and readiness for Hong Kong to pilot PFS project(s) (Please refer to the Executive Summary for more details about the workshop). In October 2018, the SIE Fund organised a second sharing session with distinguished speakers from Our Hong Kong Foundation, Social Finance and Tri-Sector Associates (formerly known as Third Sector Asia) to introduce the concept, share examples of overseas PFS cases and provide insights on the key lessons learnt (Please refer to the presentation materials [part 1 / part 2 / part 3] for more details).

The First PFS Project in Hong Kong

Aiming to address the poverty and social exclusion issues of non-Chinese speaking students

The SIE Fund has taken up the role of Commissioner of the first PFS project launched in Hong Kong, namely, "Start from the Beginning - Chinese Supporting Scheme for Non-Chinese Speaking Students (NCS) in Kindergarten". Launched in September 2020 by Oxfam Hong Kong (Oxfam), the PFS project seeks to scale up an existing programme of Oxfam with the objective of helping NCS kindergarten students improve their Chinese proficiency and learning motivation, enhancing kindergarten teachers' capability of teaching NCS students Chinese, and thereby relieving the poverty and social exclusion issues of NCS students in the long run.

Riding on the solid foundation developed in the previous phases of the programme co-funded by the SIE Fund, this scale-up PFS project consists of curriculum enrichment, learning and teaching material enhancement, student support, teacher empowerment, parent support, development of an on-line learning community platform, organisation of seminars and workshops, etc., to cater for the needs of NCS students, kindergartens, teachers, and parents. Apart from recruiting an increased number of participating kindergartens and NCS students, major new components of the project include -

1) Curriculum guide
A Kindergarten Chinese as a Second Language (CSL) Enrichment Curriculum Guide will be developed to provide specific guidelines for the teaching of Chinese to kindergarten NCS students, including curriculum framework, transition guide from K3 to primary one (P1), assessment sets, teacher professional development resources, etc. The curriculum guide will be shared with all kindergartens in Hong Kong.

2) Online learning community platform
An online learning and teaching resources platform will be established to share teaching and learning resources for teaching Chinese as a second language at the kindergarten level. Teaching and learning materials developed by the team as well as exemplary lesson plans and teaching materials developed by collaborative school teachers will be disseminated.

3) Parent support
A resource pack will be produced to provide parents of NCS students with information about K3 to P1 Chinese learning support, school admission information, local school culture, health and nutrition, etc. Dedicated assistants will be deployed to the participating kindergartens to provide the parents with consultancy services on P1 admission. In addition, information sharing sessions and advisory hotline service regarding primary transition will be rendered to the parents.

4) Knowledge dissemination
Seminars and workshops will be organised for the local kindergarten communities. A project outcome sharing seminar will be held to transfer the knowledge and good learning and teaching practices. A series of workshops will be organised to demonstrate the good practices about the curriculum.

Joining Oxfam in project design and implementation are The University of Hong Kong, The Education University of Hong Kong, Hong Kong Council of Social Service, Tri-Sector Associates and Caritas Institute of Higher Education. The SIE Fund, with professional support from PricewaterhouseCoopers Consulting Hong Kong Ltd. and Freshfields Bruckhaus Deringer LLP, has taken up the role of Commissioner. Investors have undertaken to provide upfront capital for structuring and implementing the project, while the SIE Fund, as the Commissioner, will pay the investors based on the fulfilment of target performance to be validated by an independent impact auditor.

A “showcase day” was held by Oxfam in July 2022 to introduce to the public how the PFS project provides support for kindergartens, teachers, students and parents through various means and present the project’s achievements in the two years since its inception. Please refer to the press release for more informtaion.


Proposals related to PFS

PFS proposals/grant applications
are welcome
To facilitate pilot development of the PFS model in Hong Kong, the SIE Fund welcomes proposals from the community in either of the following forms –
(a) Proposal to invite the SIE Fund to act as the Commissioner of a structured PFS project; or
(b)  Application for a grant from the SIE Fund to fund the structuring cost of a potential PFS project.

(Note: Approval of the grant under (b) does not commit the SIE Fund to fund subsequent proposals to invite the SIE Fund to act as the Commissioner under (a))

Assessment of the proposals will be made according to established mechanisms.