A new tool for scaling impact: How social impact bonds can mobilise private capital to advance social good
Despite the many complexities, multi-stakeholder interactions, and varying dimensions of risks, social impact bonds represent a potentially valuable new tool for scaling social impact.
Recently we have witnessed an important milestone in this nascent industry’s efforts. In May 2011, Massachusetts became the first state in the country to take formalsteps to create a comprehensive social innovation financing program to deploy social impact bonds and pay-for-success contracts. In January 2012, Massachusetts issued Requests for Response for performance-based financing to expand support for chronically homeless adults and youth exiting the juvenile justice system.
The Commonwealth’s pioneering efforts stand to validate the potential of social impact bonds: to improve social outcomes at reduced taxpayer expense, transfer performance risk from government to investors who might be more able to price and bear it, and reward high-performing nonprofits with long-term growth capital to scale proveninnovations.