Social Impact Bonds

A Social Impact Bond (SIB) is a contract between a public entity and private investors to fund outcome-focused social programs. Private investors provide upfront capital, and if the program achieves predetermined, measurable outcomes, investors earn a return. This return is funded by the public sector's savings resulting from the program's success. For instance, a SIB might fund efforts to reduce recidivism rates; success would result in a return to investors, funded by government savings from reduced incarceration costs. However, if the program doesn't meet its goals, investors may lose their investment. This model transfers financial risk from the public to private sector, promotes accountability, fosters public-private partnerships, and encourages evidence-based policymaking by focusing on measurable outcomes.