Every idealist has ‘great’ ideas about how to solve all of the world’s problems. Juvenile incarceration, homeless youth, substance abuse or teenage pregnancy–there are thousands of programs that have been constructed and promoted to reduce the prevalence of these issues. However, not all of our great ideas always work. It’s the truth. And this is a very painful truth to realize if you are the one pumping those types of programs with money (which includes anyone of us who pay taxes to our local and federal governments).
In comes the idea of the Social Impact Bond (SIB). Social Finance defines SIBs as follows:
“Social Impact Bonds provide up-front funding for prevention and early intervention services, and remove the risk that interventions do not deliver outcomes from the public sector. The public sector pays if (and only if) the intervention is successful. In this way, Social Impact Bonds enable a reallocation of risk between the two sectors.”
Social Impact Bonds (SIB) have the potential to solve many pressing societal issues as well as impact the approach that foundations utilize to fund major initiatives. It is not without it’s possibly unintended consequences as well. However, if structured properly and investments are chosen wisely, they can have an impact on issues such as school dropout, teen pregnancy and mental health in ways yet to be seen.
Check out this insightful article from the Nonprofit Quarterly on SIBs and let us know what you think about this innovative approach to creating better outcomes for people at-risk.