Optimism in South Africa sits alongside measured pessimism from some NGO incumbents in the USA…
Welcome to today’s SIB News
Thoughts On Making Social Impact Bonds Work—If They Should At All
Rick Cohen – Nonprofit Quarterly
In the past few weeks, the Cohen Report has examined the practice of Social Impact Bonds or Pay-for-Success projects. As currently designed and implemented, SIBs are one-offs, linking strong, proven service delivery models associated with well-capitalized nonprofits to private investors, like banks and individual investors, who project that they can make a reasonable return (or sometimes more) by investing in these projects.
The slim handful of SIB/PFS endeavors that currently exist in the U.S. address issues of prison recidivism, supportive housing for the homeless, and early childhood education. Not one of these privately capitalized projects, anticipating government payment if they should reach predetermined outcomes, has yet reached even a first payment point. Still, enthusiasts promote SIBs as an exciting solution for a bevy of social problems and an alternative to what SIB backers see as dysfunctional governmental efforts.
SIBs may be just another public policy fad sweeping the social sector, generating bipartisan excitement accompanied by heavy promotion by a few consulting and investment firms, but buried within the SIB/PFS concept might be nuggets of insight that could be useful in boosting the efficacy of both nonprofit service providers and the government agencies that provide the bulk of their funding.
“How to Make Social Impact Bonds Work—If They Should At All” might be a useful topic for both the true believers who have something of a religious attachment to the concept and for the consultants who imagine themselves earning money as forwell-compensated financial intermediaries between investors and government. The answer is embedded in an understanding of the needs of nonprofits, the capacities of government, and the motivations of private capital.
Social Impact Bonds Are Just What SA Needs
Ryan Short – BD Live
SIBs are a new way of driving innovation to solve pressing social problems. They have attracted attention around the world as a hitherto missing platform for governments, companies, private investors, philanthropists and nongovernmental organisations (NGOs) to address social challenges. They also bring a game-changing approach of rewarding investment in successful social programmes with real financial return.
SIBs have been used in education, healthcare, early childhood development, homelessness, addiction, youth unemployment and prisoner recidivism.
Essentially, an SIB is a contract in which the government agrees to pay private investors for securing improved social outcomes. Socially minded investors provide up-front working capital to NGOs, charities, social enterprises and private service providers, to fund their programmes and test innovative interventions. If the programme achieves agreed targets, investors receive a variable return on investment from the government — the more successful the programme, the higher the return. If the programme fails, investors do not recover the investment.
The first SIB was issued by the UK government in 2010. Since then, SIBs worth more than $100m have been commissioned around the world. While the first investors in SIBs were predominantly philanthropists, the market has started to attract more commercial investors such as Goldman Sachs, Merrill Lynch and Michael Bloomberg, as well as private foundations and endowments.
If the model develops, SIB instruments could one day be traded as any other commercial asset class — with the exception that returns are determined by the scale of social improvement instead of financial performance. That would be a revolution in finance.