PLY: Three good articles to begin the week with a perfect mantra from Denver Post Alicia Caldwell: “It is foolhardy to believe government will ever have enough resources to fix society’s problems.“ We lead with an excellent synopsis of where we began and how the journey is shaping out from Catalina Geib and Rita Perakis of the Centre for Global Development…
Up & Down The SIB Road: How Far Have We Come?
Catalina Geib & Rita Perakis – Center for Global Development
There is no denying that interest in Social Impact Bonds (SIBs) is steadily growing: with investments coming from big banks like Goldman Sachs and Bank of America Merrill Lynch and approximately 26 SIBs implemented in industrialized countries across the globe (see below for a more detailed listing), an evidence base is starting to accumulate on what works and what doesn’t. So far, the evidence on Social Impact Bonds – that they enable innovation and improve service delivery through better use of data – suggests that this approach has huge potential for improving international development programs.
CGD has been exploring through its work on Development Impact Bonds the ways in which the SIB model, first piloted in the UK, could be tested in developing countries and could create a better business model for the way programs operate. While DIBs are a new concept – so far only one has been launched in June of this year with service provision to begin next year – the SIB market has been gradually growing since the launch of the first SIB in 2010. The evidence gathered over the next few years will determine whether SIBs can catapult to being a standard option for funding programs in the social sectors.
Social Impact Bonds Bring Government, Investors Together To Solve Societal Problems
Alicia Caldwell – Denver Post
It is foolhardy to believe government will ever have enough resources to fix society’s problems.
Just think about the magnitude of the work: Getting the homeless off the streets, keeping poor, at-risk babies out of intensive care units, helping ex-convicts create productive lives instead of heading back to prison.
This short list barely scratches the surface of the important causes and serious problems out there, and government doesn’t have near enough in the way of cash or even public backing to make a sizeable dent in them.
The gap, however, has the potential to be narrowed by an innovative and complex tool called social impact bonds.
Also called “pay for performance,” the idea is getting traction with Colorado government officials, non-profits and lawmakers moving to create legislation to help get such deals off the ground.
The basic idea is to harness markets to take on these deep-seated problems in a way that has created a new economy, one that “trades in social outcomes,” according to authors of a 2013 Harvard Business Review article.
“It’s an exciting and effective strategy,” said state Sen. Michael Johnston, who unsuccessfully ran a bill last year that would have created a vehicle for governments to enter into “pay for success” contracts.
Social Impact Bonds: Pay For Performance Partnerships
Ecotrust
Social Impact Bonds (SIBs) are powerful new tools to jumpstart funding for innovative social programs. SIBs allow governments to support programming with strong preventative potential by paying only for long term outcomes instead of short term delivery. Private investors provide the risk capital necessary to finance programming, and government repays investors for long term positive outcomes. This structure makes SIBs the ultimate pay-for-performance contracts.
The SIB model privately funds a service intervention in the short term, accruing savings to the public in the long term. If outcome targets are met, a portion of these public savings are returned to the private investors who provided the operating capital necessary to fund the initial intervention.
This pay-for-performance funding structure privatizes the risk of innovative program delivery and socializes its benefits.
Download Pay-for-Performance Partnerships Report to learn more about social impact bonds as funding tools for supportive housing and other innovative social programs.