Posted on February 17, 2011

Nonprofit Finance Fund Receives Grant to Explore Feasibility of Social Impact Bonds in United States

The Nonprofit Finance Fund has announced a grant from the Rockefeller Foundation to explore the feasibility of an innovative model to help support the social sector.

Piloted in the United Kingdom, the "social impact bond" program is designed to deliver a return based on positive social results, while aligning the interests of the public, private, and philanthropic sectors. According to NFF, social impact bonds have the potential to save taxpayers money while concentrating investments in proven, high-impact interventions that create measurable social benefit.

In the U.K., investment funds were provided funds for a program designed to reduce recidivism rates among prisoners. Social Finance, the nonprofit organization that developed the first social impact bond in the U.K., has raised nearly $8 million from investors, including Rockefeller, in an effort to reduce recidivism rates at Her Majesty's Prison Peterborough. The U.K. government will make payments to investors based on the program's measurable success. If the model is brought to scale, it is expected that the payout to investors will cost the government significantly less than housing re-offenders in prison — thus saving the British taxpayer money and providing a sustainable, long-term solution to a social problem.

In exploring the adaptation of a social impact bond model for the U.S. market, NFF will partner with several organizations, including Social Finance. Funded through the end of August, the study will entail data gathering, a feasibility assessment, proposed models for the U.S. market, and a review of implementation requirements. To that end, NFF has launched a Web site where participants can share information and resources. The group will also hold a series of online discussions, starting February 23 at 1 p.m. EST.

"We've long known that funding prevention or intervention is typically far more cost-effective than dealing with social issues later in their evolution," said Rockefeller Foundation managing director Antony Bugg-Levine. "As governments face tough cuts and economic troubles continue, we need to be open to fundamental change in the way we address society's needs. The social impact bond is a promising, innovative, results-based approach — worthy of deep study into how it might be adapted for the U.S."