Social Impact Bonds

Social Impact Bonds are unique public-private partnerships that fund effective social services through performance-based contracts. Impact investors provide the capital to scale the work of high-quality service providers. Government repays those investors if and when the project achieves outcomes that generate public value.

Whether they are focused on helping mothers experiencing poverty achieve healthy births, supporting immigrants and refugees through job training, or retrofitting homes, Social Impact Bonds transfer risk from the public to the private sector and align project partners on the achievement of meaningful impact.

1. Form partnership. Government identifies the social issue and the objective. To achieve the objective, they partner with an intermediary, like Social Finance, and high-performing service providers—organizations with track records of success and evidence that their programs work.
2. Develop project and mobilize capital. Social Finance works with the government and the provider to drive the design, negotiation, and financial structure of the project. We then raise capital from impact investors to provide upfront, flexible funding.
3. Deliver services. The provider delivers services to the target population, with ongoing support from Social Finance, including governance oversight, performance management, course corrections, and financial management and investor relations.
4. Achieve outcomes. With the support of high-quality services, people in need achieve life improvements—having healthy births, raising children ready for kindergarten, staying out of prison, and finding and keeping good jobs.
5. Measure results. An independent evaluator measures the impact of the project according to predetermined outcome metrics. If the project is successful, government repays project investors. However, government pays only at the level of outcomes achieved.

What is Pay for Success? →