Once again it’s the great vampire squid angle on SIBs which is always a tad off-putting when Goldman is more the story than the force for good…
The bureaucracy bloat argument is worthy of consideration and needs to be addressed – although it would seem the innate ‘pay for success’ aspect ought to reduce the bureaucracy aspect by creating greater accountability. At the same time, that “a” word I can readily report strikes fear through the heart of many NGOs who appear keen to pay lip service to SIBs and PFS concepts but really would like to strangle the concept at birth, rather than become, well, accountable. A revolution looms and as always some incumbents are deeply uncomfortable about the status quo upheaval.
SIBs: Beneficial Or Bureaucracy-Bloating?
Bill Bradley – Next City
In the halls of governmental offices across the country, social impact bonds (SIBs) are a topic often bandied about. Wait, what, I’ve already lost you? Seriously, though: These cutting-edge bonds, often called pay-for-success programs or social innovation bonds, allow private companies to foot the bill for ambitious new public programs. If the program meets certain benchmarks, they get their money back and begin to earn profits. The better the program’s social outcome the larger the return for the investor, who is essentially being paid for financing a program will over the long term reduce public spending on a given social problem. The arrangement allows government to take risks on new programs while reducing the public’s financial exposure.
Goldman Sachs Bets On Reducing Crime
Esmé E. Deprez – Businessweek
Nelson “Johnny” Aguilar was at a Dunkin’ Donuts near Boston on a Sunday night in March when a shooting outside left a 21-year-old man with a bullet wound to the gut, police say. They arrested Aguilar, a 19-year-old with a long record, on three charges, including armed assault with intent to murder.
Goldman Sachs suddenly has an interest in such police blotter entries. The bank, which wagered more than $300 billion last year on investments such as yen rates and bond spreads, is betting $9 million that troubled young men like Aguilar can stay out of jail. It’s partially funding the $21 million Massachusetts Juvenile Justice Pay for Success Initiative, which is helping Boston-area nonprofit Roca rid the streets of gangs and crime. The money is not a grant. It comes through an investment vehicle that combines capitalism and charity: a social impact bond (SIB).