Investing for "Impact" or Investing for Profit? Social Impact Bonds, Pay for Success, and the Next Wave of Privatization of Social Services and Education
A major new financial phenomenon has appeared within the social services arena, with corresponding legislation poised to change how social services are delivered and who delivers them. While different programs use different terms—including, for example, Pay for Success (PFS) or Results-Based Financing (RBF)—the umbrella term encompassing all such programs is Social Impact Bond (SIB). SIBs are promoted as a way to help fund projects in such areas as health care, homelessness, early education, workforce development, and prison reform. These investments are thought to have potential to cut costs but are nonetheless viewed as too risky for public agencies to directly invest their scarce public funds. In this review, the authors examine whether SIB financial structures provide all that they promise and whether results so far yield any insights into their future direction and potential pitfalls.