Facing the problems with Social Impact Bond
In the last post we discussed pros and cons of Social Impact Bond. But how to reduce risks that come with Social Impact Bond?
Firstly, since social impact bond can be considered a type of charity, the investors should consider “donating” their money at first. When they are lucky and the methods work, investors can consider social impact bond as an investment.
To be successful the target group and goals must be precisely defined. The program has to be chosen by government so it eliminates the chance of private investors preferring profit to impact programs or choosing the easiest and less riskiest problem-solving program. Long-term project may be costly but then again they have a larger impact on society than short-term programs (for example, instead of giving toys every year to children who live in orphanages, a longer project trying to find them homes or building a support system might just cost as much as the first but have a much larger impact on these children’s lives than a mere toy).
To find investors and to reduce uncertainty among them, detailed questions about the candidate program must be answered. The government needs to be ready to pay back the investors and in order to do so it has to realize a cost savings. Another solution to this problem is that government is ready to pay investors back from their budget which is meant to tackle social problems and that requires Social Impact Bond being an accepted and known method.
It is recommended to have an objective and unbiased evaluator who is qualified and experienced to measure the impact, otherwise the results would not be trustworthy.
None of these programs should be called “unsuccessful” because from every failure people learn and if one organisation fails at one project they gain knowledge to be successful at the next one. Nobody knows everything from the start everybody has to learn, even the smartest and most experienced of us do not succeed all the time.
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