There is considerable buzz in the United States about whether a new “pay for success” model of financing social solutions currently being piloted across the Atlantic could work on American soil. It’s called a social impact bond (SIB), and the first—in fact, the only so far—was launched in September 2010 by an organization called Social Finance UK.
SIBs are structured to get proven solutions to scale with no risk to public budgets—governments pay for the solutions only if they work. But despite this risk shifting, a SIB’s structure involves several actors—each charging a fee or return. As a result, this tool is a more expensive way to scale programs than if government simply contracted directly with a service provider. These additional costs will be worth it in many cases, but SIBs won’t be suited to every situation.
As part of our Social Innovation practice’s work in innovative finance and social impact assessment, we have conducted extensive research and interviewed more than 125 thought leaders in the government, nonprofit, and academic communities, as well as potential players in the SIB ecosystem, to determine the potential of SIBs in the United States. Our work was done in close cooperation with an advisory group that included representatives from all the stakeholder groups that will be represented in SIBs. This research has resulted in a full assessment of how SIBs would work, including how roles, responsibilities, and capacity would be defined within the system for each type of stakeholder in a SIB partnership.
Over the past several months, we have put together a selection of social impact bond-related materials. These include: our report, “From Potential to Action: Bringing Social Impact Bonds to the U.S.,” an animated video that introduces the topic of SIBs, a webinar featuring experts in social finance, and an introductory article that describes the SIBs landscape.
Download the full report on which this article is based, From potential to action: Bringing social impact bonds to the US (PDF–2.8MB).