Tag Archives: social impact bonds

Pay for Success Bonds

16 Nov

Image from Darby / John-Michael Maas: http://vimeo.com/41784209

Governments are looking at new financing tools to entice private investment to fund social service programs. The financing scheme, in theory, works like this: (1) a social service innovation promises to ameliorate a social ill in a way that reduces costs for government agencies and taxpayers; (2) an investor, wooed by the promise of said program forks over cash to fund the effort; (3) the program promises to deliver results at a minimum quantitative threshold (e.g., reduce chronic homelessness in a neighborhood by 5%); (4) if the program meets the minimum threshold, then investors recoup their initial investment; and (5) if the program exceeds the minimum threshold, then the investor sees a return, based on the overall savings to the government. In a nutshell, that’s how Social Impact Bonds should work. Continue reading