According to a recent report by the McKinsey & Company, Social Impact Bonds (SIBs) represent a new approach for expanding social programs. It is a partnership in which philanthropic funders and impact investors—not governments—take on the financial risk for scaling up. Nonprofits deliver the program; the government only pays if the program succeeds. The current financial crisis has led officials in several cash-strapped cities and states to launch SIBs to address issues as diverse as juvenile recidivism and homelessness.
While enthusiasm for Social Impact Bonds has grown rapidly, it will still be several years before results from the first SIB at HMP Peterborough prison in the UK are available. In addition, concerns have been raised in the nonprofit community about introducing the profit motive into programs that aid society’s most vulnerable populations.
Daniel Stid, “Confessions of a Social Impact Bond Skeptic,” The Bridgespan Group, June 2012.
Jon Pratt, “Social Impact Bonds: A Conversation with Simon Jawitz,” Nonprofit Quarterly, November 30, 2011.
McKinsey & Company: Social Impact Bond information portal