Policy Note: Can Social Impact Bonds Unlock Private Money for Public Goods?
Author: Georgia Levenson Keohane
Published: August 5, 2013
For years, scholars and practitioners have grappled with the problem that governments, for a number of political and fiscal reasons, do not always make cost-effective investments in prevention. Recently, some have looked to enlist private sources of capital to underwrite preventative programs in return for payment out of the cost savings if the intervention is successful. This is the basic idea behind the social impact bond (SIB).
The ﬁrst SIB was piloted in 2010 in Peterborough, England, where philanthropies have underwri!en services to reduce high rates of recidivism. In 2012 in New York City, the Bloomberg administration teamed up with Goldman Sachs to pilot the ﬁrst American SIB, and now several cities and states (and governments across the globe) are exploring SIB potential across a range of human service areas. This policy note explains what SIBs are and how they ﬁt into the larger “pay-for-success” and “social ﬁnance” frameworks, and explores their promise and limitations as instruments of public ﬁnance.