Two good articles today. Not sure I agree with all they say but they are worth considering as the SIB market develops…
While energy around social impact bonds continues to build in places like Canada, the U.S. and the U.K., Enterprising Non-profits Canada team manager David LePage is calling for clarity and more expansive thinking.
Social impact bonds have gone from concept to execution possibly faster than any other social innovation seen in years. Proponents cite them as an example of a “disruptive innovation” that has great potential to transform the social service sector. Peterborough, U.K., Massachusetts, and New York each recently launched social impact bonds. In spring, Canada’s Human Resources Minister Diane Finley announced 15 projects that could be part of a new federal social finance pilot that is to include social impact bonds as part of the experiment.
David is not alone in identifying a need for more clarity around what these bonds actually are and a shift in the language used to describe them.
“Social impact bonds are not really bonds. They’re payments for performance,” he says.
How much should we trust private corporations to solve public problems? That’s the question cash-strapped state and local governments are asking as they experiment with private partnerships to fill the funding gaps that tax dollars can’t. From contracting out sanitation services, to privately-owned public spaces, private dollars infiltrate many of the programs and places we take for granted.
The latest iteration of this trend is Pay for Success or Social Impact Bonds. In New York, Governor Cuomo recently announced the launch of “Pay for Success,” a $30 million social impact bond initiative to support various social service programs in New York State including early childhood development and child welfare programs, healthcare and public safety.
Social Impact Bonds originated in the UK, but are beginning to attract attention in the U.S., including in New York, Massachusetts, and Utah. In 2012, Goldman Sachs and Mayor Bloomberg announced a $9.6 million loan to pay for a new four-year program aiming to reduce the recidivism rate of adolescent men upon their release from Rikers Island. The money is being used to pay MDRC, the social service provider, which is designing and overseeing the program. If recidivism rates are reduced by 10% by 2016, Goldman Sachs is repaid by the full amount. If the targets are exceeded, Goldman Sachs gets an extra return on their investment.