Social Impact Bonds

I was invited to a discussion this morning on Social Impact Bonds…and the likelihood that Rhode Island might participate in a Social Impact Bond offering.

It’s an interesting idea, hatched by the English, to deal with the cost of social interventions (which are difficult to fund). Most of our social service dollars go to the prison, or treating the disease…not to preventing the problem in the first place.

The idea of the Social Impact Bond is to get socially motivated investors to take the risk that a given social intevention (for example, job training and education to prevent prison recidivism) will reduce government cost in an amount greater than the initial social costs (prison, parole care, etc.). If the social outcome ‘contract’ in the Bond succeeds, investors make an agreed upon return paid by the government (out of a portion of their cost savings). If the social outcome fails, the investor takes the loss as a charitable donation.

It is an intelligent approach to ‘curing’ social problems, and it could add substantial capital to private social service organizations that now struggle to finance their very respectable, measureable work.