From Nigeria to California, the SIB bug is biting for all manner of reasons but in particular the simple fact that government resources are not merely finite but now shrinking in a debt-laden environment…
Could a Social Impact Bond Be The Way To Scale Up Your Effort?
Upskillsolutions
Social impact bonds (SIBs) are a complex, yet promising new approach for financing the scale up of effective preventive social programs. SIBs advance social good by providing private growth capital to nonprofits – funding that is longer term, larger and more flexible than has typically been available to them – and which shifts risk from the government, while also reducing the need for subsequent and more costly remedial programs.
Not actually a bond, SIBs are also known as “pay-for-success” financing models. SIBs differ from current performance-based contracts utilized by some governments in two major ways. First, non-profits are not required to raise their own capital and second, success is defined in terms of outcomes, rather than outputs.
Nigeria – How banks should finance the social sector
Businessday
Today’s financial markets are not working for charities and social enterprises. Most traditional financial intermediaries, like banks, are focused on short-term returns and deem unsecured lending to social enterprises to be too risky.
This lack of affordable funding limits the ability of social organisations to deliver on their missions, hampers their ability to grow and constrains their impact on society.
Banks have a role to play in the social sector. But it isn’t the one you might think. Instead of developing a business case to justify the provision of unsecured loans to higher-risk charities, banks should use their own philanthropic capital to implement the new models that others have developed to address this market failure.