What is a Social Impact Bond?
ASIB is a specific type of social impact financing
mechanism that allows governments to
raise private sector funds to provide service
producers capital to complete a task to achieve predetermined
outcomes[2]. This innovative mechanism
allows the flexibility of governments to impact specific
social issues, the security of knowing taxpayer money
will only be spent if the outcomes are met, the stability
of service providers getting long-term funding for their
impactful work, the opportunity to earn both social and
financial returns, and the target communities the help
they need that will truly change lives.
This mechanism is uniquely different from other social
financing tools for five reasons. First, SIBs allow for a
vast pool of investment capital to support often underfunded
service providers. Second, service providers with
proven track records are given upfront capital. Third,
sectors who rarely work together collaborate under the
SIB model. Fourth, the focus is on preventive, rather
than remedial action, which tackles the root of the issue.
Finally, there is direct funding to the most effective
programs at that time. SIBs are causing a stir in the
social financing arena because they have real potential
to alleviate the United States of the social issues that
historically have been underserved.