style="font-size:15px;"> Yuliya Vyatkina
Editor, Positive Changes Magazine
The Russian Government officially signaled the launch of social impact bonds in the country by issuing a decree establishing the pilot testing procedure in the Russian regions for 20192024. VEB.RF has taken on the role of the driver of this instrument in Russia. As the operator of social impact bonds, VEB.RF provides financial examination, assists in project development and determination of key project parameters, assists in preparing the necessary documentation, and organizes end-to-end monitoring of project implementation and an independent evaluation procedure.
In February 2022, the Agency for Strategic Initiatives (ASI) got engaged in the implementation of social impact bonds in Russia. This made ASI one of several SIB operators in Russia.
So far seven SIB projects have been launched in our country in the following top priority areas: education, social protection, health care, and assisted living. At least five more projects are under preparation.
As noted on the website of the Russian Government, the outputs of the pilot testing will come in the form of a portfolio of projects for raising private investment to implement national projects, along with a project-based approach to addressing socially important problems with the involvement of socially oriented non-profit organizations and other contractors funded from nonpublic sources.
If we look at the geography of Russian social impact projects, we can see that five of the seven projects are being implemented in the Far East: two in the Republic of Sakha (Yakutia), two in Primorsky Krai and one in Kamchatka Krai. In recent years, the Government of the Russian Federation has started work on maximizing the favorable investment climate in the Far East. Can SIB projects become a territorial development tool? We turned to the experts with this question.
According to Olga Balabkina, Deputy Chairman of the Government of the Republic of Sakha (Yakutia), SIBs can be used for that purpose, because they are implemented in various sectors of the social sphere – from education and healthcare to employment and social protection or social services. That is, they are aimed at improving the quality of life, which directly affects the level of development of production and technology in the region. However, it is still too early to say whether SIBs will fuel territorial development in Yakutia.
"First, the two projects currently underway have not yet been completed; there is no final conclusion on the efficiency of this tool. Second, successful completion of a SIB project alone is not enough. It requires further replication and scaling", Olga Balabkina says.
According to her, the current social impact project in the field of education, which is implemented in Khangalassky district of Yakutia covers more than 5,000 children and 700 teachers from 27 schools of the district. According to preliminary calculations, the project has improved the children's overall educational performance by 10 % compared to previous years. Test results show an increase in the basic knowledge of eighth and tenth grade students of up to 29 percent in Russian language and up to 10 percent in mathematics. The number of winners in the regional stage of the All-Russian School Olympics increased from 5 to 11 children. Once we see the final testing results in Russian language and mathematics at the end of the academic year 2021/2022, we will be able to calculate the final figures of the social effect. A lot of work is planned for the last stage of the project: «packaging», evaluating and transferring the practices developed to the government of the Republic of Sakha (Yakutia), represented by the Ministry of Education and Science.
Khanty-Mansi Autonomous Okrug – Yugra, which comes third in the Ratings of Social and Economic Status of Russian Regions (RIA Rating, 2021), has been discussing the opportunity to launch social impact bonds in its territory with VEB.RF state corporation for the last two years.
"The topic itself is quite interesting, because it is close to the topic of concessions and public-private partnerships (PPP). PPP is developing quite well in the region, some concession agreements are also in place. We consider SIB projects implemented together with VEB.RF as a pilot. But so far we haven't found a specific topic to focus on, we're still considering all the options. On the whole, the idea is quite promising for a region like Yugra. It is likely that we will have such projects in the future", says Yakov Samokhvalov, General Director of the Yugra Center for Civic and Social Initiatives foundation.
SIBs can become a territorial development tool, albeit with some limitations.
"Social impact bonds are not a Russian invention, but a borrowing of foreign practice. They require adaptation to our legal system, budgeting processes, education about what examples of projects exist in the world and what domestic mechanisms are available in the country. The idea of buying only the finished result looks quite tempting per se. And I think that will play a part. We should probably talk more about this with specific examples that can be easily adapted to our country and specific territory", Yakov Samokhvalov added.
Only one of the seven social impact projects in our country is coming to completion in 2022, "Improving the Educational Performance of Students in the Republic of Sakha (Yakutia)". Therefore, experts believe it is too early to analyze the challenges faced by the project participants during their implementation. Open sources, including VEB.RF website, do not mention any problems when describing the interim results of the projects. Nor do the business media, such as Kommersant, Vedomosti, or RBC.
However, we can already talk about the general difficulties that emerged at the project launch phase. The regional government acts on behalf of the state, ordering the intervention and paying for the results of the project.
Social impact bonds are not a Russian invention, but a borrowing of foreign practice. They require adaptation to our realities.
"This is a new tool, there is little practical application experience, the regulatory documents are still to be worked out, so understandably mid-level officials are quite alarmed about it. Preparing the paperwork to launch the project proved to be a complex and time-consuming job, and we must give credit to the persistence and professionalism of VEB.RF specialists, the procedure becoming more and more streamlined with each new project launch", says Tatiana Burmistrova, co-founder and Chair of the "Toward Change" Foundation Board.
Judging from the available progress reports on the projects nearing completion, another major challenge is developing a system for monitoring the interim results of the project.
"Since the project conditions change all the time, it is vital that the contractors are flexible and focus on the end results. In general, it would be very interesting to do case studies of social impact projects, including the factors that influence the success and difficulties", Tatiana Burmistrova added.
Social impact projects require constant close interaction between the customer and the contractor. In case of the project "Improving the Educational Performance of Students in the Republic of Sakha (Yakutia)", the customers are the Ministry of Education and Science of the Republic of Sakha (Yakutia) and the National Research University – Higher School of Economics. Hence the first difficulty related to communication: the Republic of Yakutia is 5,000 kilometers and 6 time zones away from the contractor, NRU HSE – by the time Moscow gets to the office, the working day in Yakutia is almost over. At the same time, it is impossible to have the specialists from HSE to be permanently present in Khangalassky ulus.
"Therefore, the key to project implementation is delegation of responsibilities, high mutual contractor discipline, coordination of the positions, and reliance on local staff. Equally difficult is to develop a unified vision of the works aimed at achieving the planned results. Trust between the customer and the contractor is a very important part of success. NRU HSE has made
