Historic US business publication Crain’s gets into the SIB theme while Ann Griffiths provides a rousing call to arms from the UK perspective…
New Funding Tool Could Spur Nonprofit Innovation
Theresa Agovino – Crain’s New York Business
Last December, New York introduced the first state-led plan in the U.S. It also aims to keep ex-offenders out of prison. The recently passed state budget earmarked $30 million for additional social bonds, and last month the state announced that four programs are under consideration for funding. Three are slated to work with New York City residents.
In a social bond, a government agency sets goals to fix a problem, and taps an outside expert to enlist a nonprofit to meet the objectives and raise money from private and philanthropic investors to fund the initiative. The government only repays investors if the program succeeds. If a program designed to reduce hospitalizations, for example, achieves its goal, investors will be paid with the money saved on patient care.
“These pay-for-success programs make a lot of sense because it’s an opportunity to expand social services to people who might not otherwise get them, and is an innovative structure that encourages public-private partnerships,” said Ian Rosenblum, New York state’s deputy secretary of education and economic opportunity and the point man on social-impact bonds. “This way, we are paying for results, not just paying for the process.”
Mr. Rosenblum said that in the coming weeks, the state will begin negotiating with the four contenders. He expects two or three to be selected. One program is jointly sponsored by the Children’s Aid Society and the Bronx’s Montefiore Medical Center to reduce teen pregnancy rates and improve asthma care.
The bonds will never replace private fundraising and government aid, nonprofit executives say, because not all social programs have quantifiable results. Experienced charities with a history of success are sought after for partnerships.
Payment By Social Results
Ann Griffiths – PublicFinance
Early intervention to tackle social problems is more vital than ever in a climate of local authority cutbacks.
Payment-by-results Social Investment Bonds are potentially an important way to kick-start such intervention Social Impact Bonds have had a significant amount of attention in recent years. Some claim that in them all our prayers have been answered, while others adopt a sceptical view. The lure of getting external investment for a service that may not have otherwise been funded seems pretty tempting.