Social Impact Bonds: Overview and Considerations

Elizabeth Lower-Basch, Center for Law and Social Policy

This article offers an overview of Social Impact Bonds (SIBs) that includes considerations policymakers, practitioners, funders and advocates should take into account when thinking about whether a SIB is an appropriate funding mechanism. Although performance-based contracting is not a new concept, recently SIBS have been attracting a great deal of attention at all levels of government. Essentially, a SIB is a contract in which the government agrees to pay the private entity an agreed-upon sum if it can meet certain goals or outcomes. However, intermediate and long-term outcomes may be difficult to measure and quantify, and achieving social impact may take some time to achieve. Therefore, an inability to articulate clear objective measures couples with the timing of the project may not allow for the effective evaluation of outcomes or measuring broad, long term effects that may be required as part of the contract agreement. This article provides solid background information and a framework to help policymakers, practitioners, funders and advocates determine whether a SIB is a good way to expand funding for a particular intervention or population in a given state or community. This article aims to help those considering SIBs to think strategically about whether this is the appropriate vehicle to use.

Global Topics: Nonprofit Capital
Focus Areas: Nonprofit Capital
Resource Types: Article