Posted on May 24, 2012
Will Social Impact Bonds Work in the United States?
Will Social Impact Bonds Work in the United States?
Social impact bonds — a market-based approach to financing solutions to social problems with private investment capital — could end up costing governments more than contracting directly with service providers, a report from McKinsey & Company argues. Will Social Impact Bonds Work in the United States? (PDF, 6 pages) explains how SIBs could help scale proven interventions and reduce the need for remedial services in, for example, the areas of homelessness and criminal justice. Despite the potential of the "pay-for-success" model, however, the report notes that numerous parties — including investors, intermediaries, nonprofit service providers, assessors, and evaluators — will be looking for "returns" of some kind, whether that means management fees, performance bonuses, or evaluation and assessment fees. And that, in turn, could reduce the amount available for service delivery and jeopardize the ultimate success of the approach in certain situations.
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