Social Impact Bonds— A SIB begins when a
government agency identifies a social problem it wants to
address. The agency then contracts with an organization
to serve as an intermediary and administer the program.
The intermediary raises capital from investors and
uses those funds to support service providers who
have a plan to address the agency’s targeted problem.
After a predetermined period of time, an independent
evaluator will assess the service providers’ progress
towards the goal. Then, the government will reimburse
the investors based on a formula established by the
original agreement. If the program is successful,
investors will be reimbursed for their investment. If it
is not, they will lose money and potentially their entire
investment, depending on the terms of the agreement
[1]. Agreements sometimes provide guarantees to
investors to minimize their exposure to risk.