Social Impact Bonds

January 30, 2013
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Social Impact Bonds (SIBs) are a relatively new method of funding and delivering social services. Under this approach the private or social sector finances and delivers services under contract to the public sector, against a bond issued by the public sector, promising to accomplish specified delivery criteria. If the criteria are, in fact, met over a specified period of time, then the private or social sector agencies cash in the bond, receiving reimbursement of their costs plus a rate of return based on performance. SIBs are not, therefore, bonds as traditionally defined, a title ascribed to financial instruments with a fixed lifetime and a fixed interest return, but are, instead, better seen as a form of public-private partnership (P3), in which finance, service delivery and, supposedly, risk, are devolved from the public to the private sector (see Loxley and Loxley, 2010).