What is a Social Impact Bond?

The Nonprofit Finance Fund just received a $400,000 grant from the Rockefeller Foundation to explore the feasibility of social impact bonds in the United States.

I’ve been missing in action from this blog as life, budget cuts, and same old, same old got in the way. But suddenly I’m feeling energized again, thinking about how nonprofits will survive the aggressive budget cuts that the Republican House is proposing.

So, what do you think about this idea? NFF press release

A Social Impact Bond is a concept that aligns the interests of the public, private and philanthropic sectors around a shared vision of desired social outcomes. Instead of creating compensation based on the number of services delivered, incentives are tied to positive results. Social Impact Bonds have the potential to save taxpayers money while concentrating investment in proven, high-impact interventions that create measurable social benefit.

The Social Impact Bond was piloted in the U.K., where investment is focused on a program designed to reduce re-offending rates among released prisoners. The U.K. government will make payments to investors based on the program's measurable success stemming returns to prison. If the Social Impact Bond model is moved beyond a pilot and brought to scale, it is expected that the payout to investors will cost the government significantly less than housing re-offenders in prison – thus saving the tax payer money in the end and providing a sustainable, long-term solution to a social problem. Adapting the Social Impact Bond model for the U.S. could have tremendous implications for the way social needs are funded.

If you’re interested in following this development, check it out here.

NFF also just launched a new open, online community for any organization interested in exploring this topic and sharing resources. The group will host its first in a series of web chats on February 23, 2011 at 1:00 pm EST. The first chat will feature expert panelists on the topic: 'The Federal Government's Role in Implementing the Social Impact Bond in the United States'. All are invited to join the group and the web chat, which are designed to facilitate idea-sharing around this new concept. Visit www.nonprofitfinancefund.org/SIB for details.