Month: May 2016

Social impact bonds: state of play & lessons learnt

Today, the OECD released a report on Social Impact Bonds entitled “Social impact bonds: state of play & lessons learnt” prepared by Peter Ramsden (Freiss Ldt) with inputs by Antonella Noya and Stellina Galitopoulou (OECD).


As some of you may know, social Impact Bonds (SIBs) can be defined as “a mechanism that harnesses private capital for social services and encourages outcome achievement by making repayment contingent upon success” (Gustaffson-Wright et al., 2015). Since 2010, which marked the advent of the first SIB, 43 of them have been set up in 11 countries representing an investment of over €200 m.

Public welfare expenditures seek to achieve social impact but not all such expenditures succeed (see Social Impact Bonds: Promises and Pitfalls). The enduring nature of many persisting social issues like homelessness and unemployment suggests that varying approaches might be helpful. In this regard, social impact investing seeks to marry social with financial returns (OECD, 2014a).

Exploring the current state of play of SIBs:

  • Section 2 presents their geography and thematic scope.
  • Section 3 asks whether SIBs are scaling up social innovations and examines the roles of the different actors and in particular the role of commissioners, investors and service delivery organisations.
  • Section 4 examines the focus SIBs place on outcomes and the use of evaluation, and comments on monitoring systems and where the risk is placed. It also discusses whether the reward mechanism of the contract is able to deepen the focus on results throughout the delivery chain.

No known SIB had been evaluated ex-post at the time the paper was published (mid-2015) and it is therefore too early to know whether SIBs have produced performance improvements.

One of the conclusions of the paper, however, is that though it is often cheaper to pay for public services directly, SIBS have the potential to be more effective because they entail stronger performance management. They also represent a way to access to vast private sector investment resources in fields where policy failure can have very high costs – the advent of SIBs can lead to better learning and increased value for money on targeted interventions.

One of the main take-aways from the study is that “SIBs illustrate the need for continued experimentation in financial models for public service delivery. They may not answer all the questions that they raise, but they have succeeded in asking some important questions about how public money is used to achieve social outcomes and what changes when private money is brought into the mix.”

Click here for the full paper.