Malaysia launches Social Outcome Fund to grow its social economy

The Malaysian government has launched a RM 3m (£537,000) Social Outcome Fund (SOF) as part of an ambitious effort to boost its social economy.

The payment-for-outcomes fund is designed to make it easier for “high potential” social enterprises and other social purpose organisations to obtain funding from social impact investors, corporations and foundations to deliver social services and preventative interventions that support marginalised communities.

If these interventions deliver agreed outcomes, the fund will repay the investors with interest based on the cost savings achieved.

“We have identified the need to modernise and innovate social services delivery to tackle the challenges that we face today,” said Datuk Seri Nancy Shukri, minister in the prime minister’s department, announcing the fund at the Social Economy and Investment Conference 2017, which took place in Kuala Lumpur in March.

We have identified the need to modernise and innovate social services delivery to tackle the challenges that we face today

In addition to spurring innovation in social services delivery, the Social Outcome Fund is also designed to produce savings in government spending.

Its development was informed by a national Social Progress Assessment that identified 40 key social problems, ranging from child abuse to healthcare in rural communities. Conducted by Agensi Inovasi Malaysia (AIM), a government-affiliated agency, the assessment quantified the unit and total cost to government of these social problems, rather than looking at each cost in isolation depending on which government department or agency had responsibility to address it.

This information, which will be compiled in a national database, is a key component of Malaysia’s social financing model. It will make it easier to compare the cost to the government of delivering specific social services on its own to that of commissioning social purpose organisations to deliver interventions.

In parallel, AIM is also helping to develop a tool for measuring social progress which would serve to streamline investments in the social sector.

The aims of these initiatives are to enhance existing social services, encourage innovative solutions, and support the delivery of greater impact, by putting greater emphasis on preventative action and on multi-sector collaboration.

A blueprint for social enterprise

Alongside these efforts to promote social finance, Malaysia is also taking steps to promote the growth of social enterprise.

In 2016, Malaysia was home to only 200 recognised social enterprises compared with over 12,000 in Thailand, but Malaysia’s prime minister Najib Razak launched a National Social Enterprise Blueprint that aims to support the sector to grow to 1,000 social enterprises by 2018.

This effort is being led by the Malaysian Global Innovation & Creativity Centre (MaGIC ), an agency under the Ministry of Finance which was tasked with promoting the growth of the Malaysian social enterprise sector through skills development, incubation and funding schemes, and social impact measurement programmes.

MaGIC is also building a platform to link social entrepreneurs and social impact investors and it works with policy makers and the private sector to initiate systemic changes that can support the social enterprise sector.

In addition, MaGIC is implementing a social enterprise certification scheme which is expected to be launched in July 2017 and benefit at least 500,000 Malaysians at the “bottom of the pyramid” through the work of Malaysia’s social enterprises.

Drawing on international experience

As it grows its social economy, Malaysia has been studying the experience of other countries.

“There is a wealth of models for developing a social economy and sparking of social innovations that we can emulate and adapt for the country,” said Minister Shukri.

To that end, MaGIC has been working with the British Council and other organisations to learn from countries that have had success in growing their social economy, including the UK, Thailand and South Korea. And the Kuala Lumpur conference heard from a number of international sector experts including Baroness Glenys Thornton, who is CEO of the UK’s Young Foundation and founded what is now Social Enterprise UK.

“Yet whilst there is much to learn from other countries,” said Clare Walker, director of education and society at British Council Malaysia, “the way forward has to be to develop policies and systems which are right for the Malaysian context.”

The Social Economy and Investment Conference 2017 was jointly organised by Agensi Inovasi Malaysia (AIM), Malaysian Global Innovation & Creativity Centre (MaGIC), The Youth Trust Foundation (myHarapan) and the British Council, and supported by the World Bank Group.

Photo credit: Kah Wai Sin