Social Impact Bonds

Social Impact Bonds (SIBs) are a relatively new method of funding and delivering social services. Under this approach the private or social sector finances and delivers services under contract to the public sector, against a bond issued by the public sector, promising to accomplish specified delivery criteria. If the criteria are, in fact, met over a specified period of time, then the private or social sector agencies cash in the bond, receiving reimbursement of their costs plus a rate of return based on performance. SIBs are not, therefore, bonds as traditionally defined, a title ascribed to financial instruments with a fixed lifetime and a fixed interest return, but are, instead, better seen as a form of public-private partnership (P3), in which finance, service delivery and, supposedly, risk, are devolved from the public to the private sector (see Loxley and Loxley, 2010). The financial instrument itself has more in common with venture capital than with bonds as, if performance targets are not met, the financing is not repaid.





The Canadian Centre for Policy Alternatives


Winnipeg, Manitoba, Canada


John Loxley


January 30, 2013

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Social Impact Bonds