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Russell Webster

Russell Webster

Criminal Justice & substance misuse expert and author of this blog.

Do Social Impact Bonds work?

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As we have come to expect, there are significant benefits to the SIB approach but also some serious challenges. Most stakeholders involved in SIBs, especially service providers, had a positive experience to the extent that most see themselves as likely to be involved in delivering Social Impact Bonds in the future. The Payment by Results approach places an intense focus on outcomes and greater impact for beneficiaries.

SIBs – The State of Play

Recently, (28 November 2014) the Big Lottery Fund published a report summarising the progress of Social Impact Bonds (SIBs). “Social Impact Bonds…The State of Play” looks at the lessons learnt from the 16 SIBs launched in the UK. The report was produced by consultants from Ecorys and ATQ.

Just to be clear, SIBs are a form of Payment by Results contract where the Commissioner pays for the outcomes achieved, not for the interventions made. This approach allows providers to work in any way they see fit. The working capital needed to fund the intervention comes from external investors who receive a return on their investment if, and only if, the intervention is successful.

The best-known SIB in the UK is the Peterborough Prison reoffending one whose results you can see here. There was also a recent report on on a SIB designed to reduce rough sleeping in London.

Big Lottery SIB

The Findings

As we have come to expect, there are significant benefits to the SIB approach but also some serious challenges. Most stakeholders involved in SIBs, especially service providers, had a positive experience to the extent that most see themselves as likely to be involved in delivering Social Impact Bonds in the future. The Payment by Results approach places an intense focus on outcomes and greater impact for beneficiaries. SIBs themselves bring additional investment, the opportunity for more innovative service delivery and a much improved alignment of financial and social returns.

However, the SIB process can be cumbersome and expensive. The intervention needs to be delivered on a large scale to justify the amount of resources needed to agree contracts, outcome measures and monitoring systems. The report found that both commissioners and service providers often don’t understand the role of investors or other intermediaries.

These key benefits and main challenges are summarised in the infographic below.

Big Lottery SIB2

 

Conclusions

The report authors make a series of measured conclusions. They note that SIBs in the UK are still in their early stages of development and, although more SIBs are being developed, the evidence base supporting them is still relatively limited – particularly in terms of their effectiveness.

Nevertheless, they conclude that the early signs are positive with all three core groups – investors, commissioners and service providers – having a broadly positive experience. They caution that if SIBs are to be successful, it will be important to continue to encourage innovation in terms of models and structures and to avoid an over-prescriptive approach.

For more information on SIBs, follow this link.

 

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