As attractive as SIBs can look in theory, in practice, their success is by no means proven yet, and there has been no independent research to verify long-term effectiveness or net cost savings. As Jon Pratt and Ruth McCambridge wrote here recently, one disappointing experiment, which has been much analyzed, is one in which SIBs were used to try to reduce recidivism at Rikers Island prison in New York City. That program brought Goldman Sachs, which provided a $7.2 million loan, to the social justice nonprofit MDRC, which oversaw the project. Bloomberg Philanthropies provided a $6 million loan guarantee. … The Brookings Institution has published a report analyzing the global impact bond market and the use of these instruments in the early childhood development sector, in which certain interventions have higher potential for long-term returns in adult health, education, and employment outcomes. Like Goldman, they point to the benefits of countering the financing and delivery constraints typically seen in the sector by providing the necessary upfront capital. … Brookings recognizes, however, that the link between services and longer-term outcomes isn’t always easily tracked in the early childhood development sector, and that the inability to cleanly establish connections may prove problematic in some cases.
Foundations for Social Impact Bonds: How and Why Philanthropy Is Catalyzing the Development of a New Market
Source: Jane Hughes and Jill Scherer, Social Finance, 2014
From the summary:
Philanthropic institutions have been instrumental in helping to launch the SIB market both in the US and abroad. To explore this work, Social Finance has released a White Paper entitled Foundations for Social Impact Bonds: How and Why Philanthropy Is Catalyzing the Development of a New Market. Drawing on existing research and our on-the-ground experience, as well as interviews with numerous foundation staff and thought leaders, we assessed the role that philanthropy has played and will continue to play in developing the SIB market in the US.
Foundations for Social Impact Bonds
Source: Tracy Palandjian & Jane Hughes, Stanford Social Innovation Review, March 19, 2014
New research explores the role of foundations in the development of the new SIB market.