One story from the US as the UK celebrates its Spring Bank Holiday today…
Social Impact Bonds’ Slippery Slope
Clara Miller (The F. B. Heron Foundation, President) – Huffington Post
Social Impact Bonds (SIBs) as a vehicle for funding social change are gaining renewed momentum right now as U.S. Senators Orrin Hatch (R-Utah) and Michael Bennet (D- Colorado) have crafted legislation to appropriate $300 million for state and local social-impact bonds over 10 years.
It’s their second attempt and comes on the heels of even more social impact bonds unveiled over the last year in California, New York, Ohio, and elsewhere. In social impact circles the buzz ranged from praise along the lines of, “SIBs will revolutionize the way government provides social services, unleashing private capital for social good,” to criticism that “they are, bottom line, making money on the backs of the poor.”
Social impact bonds seem like a simple concept – donors and other investors provide money to a nonprofit that has a great way to solve a problem, like the number of criminals who land back in prison or the number of low-skills people who can get good jobs. If the project works and saves the government money by reducing the number of Americans behind bars or on welfare, then government pay the donors back for their investments. And if the project does better than expected, donors might get an extra payment beyond their initial investment.
As the leader of a foundation that has pushed to transform the way nonprofits are financed, I am happy to see real attempts to provide incentives to prevent social problems rather than pay for their cures, but I know how difficult these new efforts are to pull off.