The federal government is taking its first steps down a new road to paying for social policy.

Human Resources Minister Diane Finley was in Toronto on Thursday to formally ask the private sector, charities and not-for-profits for their best ideas on how to handle and pay for problems, such as homelessness and hunger.

She is likely to float ideas such as social impact bonds — which would see the government back bonds that would finance money-saving solutions for local social problems.

The theory is the private sector would provide the capital, a not-for-profit organization would do the actual work and the government would pay the bill at the end of the day. If the program’s objectives are met, the government would pay a premium.

“It’s all part and parcel of a fundamental rethink of government delivery of social policy,” said Tim Richter, president and chief executive of the Canadian Alliance to End Homelessness.

“I take it as good news and a challenge.”

Finley is open to other ideas as well — proposals that would see the private sector and charities providing expertise and funding for solutions that can deliver concrete returns.

The formal request for concepts is the result of months of discussions Finley has held with experts both in Canada and in the United Kingdom, where Prime Minister David Cameron has embraced social financing through his “Big Society” approach to improving conditions for the needy.

So far, though, the federal government has not put any serious money on the table for social financing, saying it wants to thoroughly test the waters before plunging in.

The hope is that by collecting good ideas about what kinds of projects could be tackled and where the money will come from, Ottawa can move on to backing concrete proposals and pilot projects.

While many an expert is keen on the notion of social financing, there is very little real experience in Canada or elsewhere to show how it works.

“Like a friend of mine told me, who is working on some of the social finance stuff, he said … ‘You know social finance is a lot like sex in junior high because everyone is talking about it but no one has done it and no one knows what they’re doing’,” Richter said.

Affordable housing is crying out for such an approach, he added.

Progress on homelessness and poverty are stymied by a lack of cheap accommodation, but governments would need billions of dollars to tackle affordable housing on their own.

If the private sector comes into the picture through a social financing arrangement, not-for-profits could quickly design housing projects that would cut other government costs linked to homelessness, health care, mental health and incarceration, for example. And the private sector could collect a small and steady return for financing projects upfront, he said.

But such advances won’t make much of a difference unless they are done on a large scale, Richter added.

“For social finance to have impact, you need to do it to scale. You don’t do it in dribs and drabs.”