PFS works like this: First, the government identifies a social issue it would like to tackle. Private investors then seek out and fund a non-profit organisation to address the issue and deliver a specified social impact. An independent evaluator, such as TSA, will help the government to develop success metrics to measure impact. 

To determine these indicators of success, Tan says TSA takes a strict approach: “As far as possible, we apply the same standards of evidence that we would in medicine. If you look at the medical literature, only about one in 10 drugs actually pass the approval process. Recent research on social programmes has revealed a similar success rate, and also that many of them actually do more harm than good.” 

Applying analytical techniques from econometrics and public health, TSA holds workshops with different stakeholders of a project to come up with a list of tangible and less tangible indicators that can capture the impact they hope to achieve.

Finally, if the non-profit organisation manages to achieve what is specified, the government will repay private investors.

See also: Intelligence Report: How Asia's Leaders Of Tomorrow Define Success

PFS can eradicate several structural problems that the public, private and social sectors face in their attempts to reach their social goals, says Tan. 

Governments in Asia often take a more prudent approach to using taxpayer money to fund new social interventions. In a PFS project, however, they will pass on the weight of taking risks to the private funders, who are aware of the possible costs of investing in a social project should it not work out, but are still willing to bet on its success potential.  

These private funders, in turn, give social service players the resources to actualise their ideas. In return, the social sector will guide the private sector in finding a balance between profit and purpose, while coming up with ideas and solutions to achieve the required impact.

TSA has kicked off projects with various NGOs, philanthropic foundations and private companies in both Singapore and Hong Kong, where Tan had lived for a while before moving home to the former. “I hope to show that the PFS concept is not just about cost savings, but also about helping civil society complement the government in new ways,” he says. “So I picked geographies where there is a budget surplus and where the motivation of bottom-up social innovation is predominant.”

In Hong Kong, TSA is working to expand and optimise a train-the-trainers model for an early childhood education intervention, with the aim of closing the language proficiency gap for the city’s ethnic minorities. In Singapore, it is tackling other issues, including mental illness among youths and improving the employment outcomes for persons with disabilities.

See also: Alvin Cheung, The Co-Founder Of Robotics Company HandyRehab, On Becoming The Iron Man Of Rehabilitation

In developing nations across Asia, Tan says PFS can be useful in solving the trust issue that giving parties have of the local social sectors. “For donors and international aid agencies giving to Southeast Asia, accountability and effectiveness are issues that are top of mind,” says Tan. 

“The PFS mechanism allows funders to only pay when the outcomes are actually achieved. In this way, it gives them the transparency they seek and drives more focus on ensuring that impact is actually achieved on the ground.”

The PFS model is not without its challenges. Besides being time-consuming to develop, PFS is not suitable to address every issue, says Tan. An example he gives is advocacy movements for issues such as better labour protection laws, where the impact is “more diffuse”. In this instance, he suggests a donation-funded grassroots movement as a more suitable approach for impact.

“At the end of the day, PFS is just one tool in a broader toolbox,” he says. “It is particularly effective for areas where outcomes can be clearly defined; the government cares about those outcomes; there is a well-defined target population to serve; and there is a promising intervention that can be adapted.”

The PFS mechanism reveals that it is not only in the government’s interest and capacity to solve problems in society, but also in the rest of society’s. As Tan says, “There’s a neocapitalist narrative in vogue that non-profits and governments have failed, so what’s needed to solve social issues is business wisdom. But I believe they still have a role to play. The question is what are the right tools to solve a given problem, and if a combination of tools across the sectors leads to new solutions.”

See more honourees in the Social Entrepreneurship category of the Gen.T List.