Recent Developments for Social Impact Bonds

Social Impact Bonds, also known as Pay for Success Bonds, are a funding model where private investors fund social programs through an outcome-based contract with the public sector; if the program achieves the desired results the private investors see financial returns, if it fails the investors lose their investment.

We’ve already posted about social impact bonds, and noted how governments at all levels had shown varying amounts of interest in the pilot projects. However new announcements at the federal and state level show a continued interest in the model.

First, the White House recently announced that the Department of Labor and the Department of Justice would each make millions of dollars available in grants for programs which incorporate social impact bonds. The Department of Labor will make up to $20 million available to grant applicants through its Workforce Innovation Fund, which focuses on employment and training outcomes. Likewise, the Department of Justice will give priority consideration to grant applicants for the Second Chance Act, which provides funding to organizations which help reduce recidivism among newly released inmates.

In Massachusetts, Governor Deval Patrick made a recent move towards implementing a social impact bond program, as the state’s Executive Office of Administration recently called for “social entrepreneurs to submit proposals for performance-based programs which would curtail chronic homelessness and to support youth who leave juvenile correction and probation systems in Massachusetts as they get older.”

Abroad, social impact bonds continue to be used. In the UK, the Department of Work and Pensions recently announced the use of the social impact bonds to help fund charities that would work with disadvantaged youth.