June 15 2016

Sorting social mobility and understanding the benefits from PFS…70% of Americans born into poverty staying there is not an acceptable status quo!

How “Pay For Success” Investing Programs Can Help Fix Social Mobility In The US

Erika Poethig – Quartz

More than 70% of Americans born in poverty are expected to remain there. There is no quick fix for this social mobility problem because it is in large part structural. But there are new approaches that could address its various manifestations.

One of the latest innovations in philanthropy is an approach called “pay for success.” Like other forms of impact investing, the pay for success model is predicated on the assumption that the outcomes matter more than the outputs, and that success should not just be celebrated, but measured.

Also referred to as social impact bonds, pay for success investing allows governments to fund evidence-based social programs that improve outcomes for vulnerable people—and keep their money if the program doesn’t work as planned. This innovative financing mechanism shifts financial risk from the government to a new investor, who provides up-front capital. The investor is only repaid if the program achieves agreed-upon outcomes.