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Community development What are real world pros & cons of "Social Impact Bonds" (SIBs) for financing community projects?

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The academic world abounds with discussions on the pros and cons of Social Impact Bonds. I am extremely familiar with this subject from the academic, intellectually speculative viewpoint.

Like most planners, I'd to know what actually happens "out there". Seeking real-world examples of what has happened when specific SIBs have been (or are being used) as a tool to finance community development.
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A SIB is a contract formed by a private/public partnership that pays for pre-defined social outcomes in a community program; part of the savings achieved are passed to investors.

The success or failure of a SIB is different from almost any other community financial investment in that the monetary payoff to investors is almost entirely outcome-based.

The first social impact bond ever to be launched was ten years ago in the U.K.. SIBs are therefore a relatively new academic field of study and an even newer financial tool for community development.


SIBs have been launched for community programs in areas such as:
Prisoner rehabilitation and recidivism reduction
Chronic homelessness
Health care and visiting programs for the elderly
Health care/education for impoverished U.S. communities
Family and family-planning support services
Rebuild-after-natural-disaster programs
Child protection, juvenile justice, and foster care
Early childhood education
Economically-disadvantaged pregnant and single mothers at risk
Substance abuse programs
Emergency infant (health-related) care
A myriad of community programs in developing countries

I have not read about COVID-19-related SIBS.


Figure represents the structure of a SIB:

1601330158859.png
 
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OfficialPlanner

Cyburbian
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The success or failure of a SIB is different from almost any other community financial investment in that the monetary payoff to investors is almost entirely outcome-based.

So... it's like philanthropic, foundation funding? Except, instead of donations, they ask for "investment" in a bond? Come to think of it, it sounds like a federal grant. :thinking:
 
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OP- It looks like we both share a healthy skepticism about the circumstances under which SIBs can be effective as a tool for community development.

However we or anybody else generally feel about SIBs--they're already here. They've also gone global rather quickly.

I started this thread neither to promote nor to rant about SIBs, but rather to understand them a lot better.
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So... it's like philanthropic, foundation funding? Except, instead of donations, they ask for "investment" in a bond? Come to think of it, it sounds like a federal grant. :thinking:
The answers to your questions, as you've probably guessed, is "sort of Yes" and "sort of No".

Rather than write a thousand words, I'm posting a flowchart of the process. (From Wikimedia Commons):
Social_Impact_Bond_Process.png
A few very important notes about this flowchart:
  • The (1) "partner" with the government entity is often a group of partners, and they are usually from the private (non-government) sector.
  • The (2) "develop & finance" process involves the partnership's specifying extremely detailed and quantifiable specs about what the desired outcome(s) is.
  • The monetary impact on the financial investors (final brown circle) is based solely on the pre-defined success or failure of the program: ie., outcome-based only. The outcome is often binary: the financial investors get either the total sum of money promised, or no money at all.
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I've already provided a main source for beginner-learning about SIBs:

The Wikipedia article on SIBs is not quite as clearly-written, but it appears to be an adequate-enough start:
 
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To examine the success level of Social Impact Finance, I studied the findings of Washington D.C.'s Brookings Institution. The educational material is very high-quality, but may have a slight bias.

I've found biases, to different extents, in almost all material of this sort that is put out by to the public. This is why I'm asking for real-world ("unvarnished" and "unembroidered") input from Cyburbians.
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Back to the reports of Brookings, a non-profit public policy organization with this stated goal (my bolding):
"to conduct in-depth research that leads to new ideas for solving problems facing society at the local, national and global level."

Within the past month Brookings has issued especially useful reports for public education, such as (PDF):
"Are impact bonds delivering outcomes and paying out returns?"
For researchers who are extremely pressed for time, this is probably one of the best overviews of social impact financing thru September-2020, and includes the impact of Covid-19. (The references/links at the PDF's end are very useful, too.)

A few snippets of findings (at the beginning of the document):

...for the nearly 50 completed impact bonds (out of 194 contracted to date), outcomes have in fact been achieved and investors have been repaid in all cases but two.
Most impact bonds that have come to a close fall in the social welfare and employment categories, with outcomes including sustained employment, stable housing, and reunification of families.
Investor returns range from around 1 percent to 20 percent of the original investment, with an average return of $25 million.
 
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To examine the success level of Social Impact Finance, I studied the findings of Washington D.C.'s Brookings Institution. The educational material is very high-quality, but may have a slight bias.

"Are impact bonds delivering outcomes and paying out returns?"

^This^ PDF from my previous post is PART 3 of a Five-Part Series on SIBS that was published by the Brookings Institute in September 2020. Here are the other parts of the series:

PART 1: What is the size and scope of the impact bonds market?

PART 2: Are impact bonds reaching the intended populations?

PART 4: Do impact bonds affect the ecosystem of social services delivery and financing?

PART 5:
Do the benefits outweigh the costs of impact bonds?

https://www.brookings.edu/wp-conten...-outweigh-the-costs-of-impact-bonds-FINAL.pdf

 
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Wow! That's some detailed work. Good job on the thread. My friend was looking for related information.

Thank you, Stella, and welcome to Cyburbia.
New members have the option to start a new thread in Cyburbia's Friday Afternoon Club, where they can introduce themselves and describe their backgrounds. New members also have the option to not do any of that. It's totally your choice.

After you make 5 posts, you will get full use of the PM (private message) option and other benefits of full membership.

You wrote that your friend is looking for related information. Would your friend also be interested in joining Cyburbia?

Finally, the Friday Afternoon Club is not just for Friday-afternoon-like posts! That may or may not appear obvious to you. (I confess that it wasn't obvious to me when I first joined!)
 
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