Warm-up for Social Impact Bond!

In July, the process to establish SIB will start in Estonia. We are also involved in the process. The next post refreshes our memory about SIB… and is also straightforward about the many problems of the approach.

 

Social impact bonds were first proposed and implemented in the UK. They are supposed to solve problems with social programs where certain attributes are underfunded. The problems include programs with large up-front costs, programs that affect a lot of people and risky programs. The solution was to use private capital to finance these programs.

Firstly, a public sector problem is identified which cannot be solved with the government resources. Secondly, the government identifies performance measures. Then private investors are found to finance the project which is supposed to solve the problem. When the program ends the impact is evaluated and determined if it was successful or not. If the program was successful, the government reimburses investors plus profit. If the program fails the investors do not get their money back.

 

SIB what is it

 

 

Social impact bond is sort of a charity program which helps to develop measures to help the society. After these funded programs the government knows which measures work and which do not work at all, so they can implement programs which have a great social impact.

 

There are a lot of advantages when it comes to social impact bonds:

 

But there are also certain problems with social impact bonds:

 

 A nasty bunch of big problems, isn´t it? In the very next post we will see how to tackle these.

 

 

Sources: 

www.urban.org/presentations/Social-Impact-Bonds-ASC.ppt
http://evpa.eu.com/wp-content/uploads/2011/06/11-04-11_Social_Impact_Investment_Paper_2.pdf
http://www.socialfinanceus.org/sites/socialfinanceus.org/files/small.SocialFinanceWPSingleFINAL.pdf
https://www.se-alliance.org/sector-news/the-social-impact-bond-potential-and-pitfalls
http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/government/ca_en_social_impact_bonds_091012.pdf

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