The Social Impact Bond or how to win-win-win

The first issue of a new financial instrument to raise capital for the social sector was announced in the UK last Thursday. The Social Impact Bond (SiB) (See Alliance, March 2010), launched by Social Finance in partnership with the UK’s Ministry of Justice, will fund social organizations working to reduce re-offending rates among short-sentence male prisoners leaving Peterborough Prison. Organizations, such as St Giles Trust, will provide intensive support to 3,000 short-term prisoners over a six-year period, both inside prison and after release, to help them resettle into the community. If the initiative reduces re-offending by 7.5 per cent or more, investors will receive a share of the consequent savings to the public purse. If re-offending is reduced even further, investors will receive a proportionately increased return, up to a maximum of 13 per cent (interestingly, the Ministry of Justice press release looks at the matter from the other side: ‘If reoffending is not reduced by at least 7.5 per cent the investors will receive no recompense’). What sort of savings are we talking about? As an instance, Rob Owen, Chief Executive of St Giles Trust says that a recent independent evaluation of St Giles’ work showed that its ‘”meet at the gates” service reduced re-offending by 40 per cent. Pro Bono Economics calculated that, for every pound invested in this St Giles Trust service, the state saves over £10.’

As the double bottom line became the triple bottom line, so the ‘win-win situation’ seems set to become the ‘triple-win situation’, for, as Owen adds, the Bonds represent a ‘”win, win, win” situation’ for organisations doing preventative work.  ‘Society wins as there are fewer victims of crime, the tax payer wins as less money is spent on prisons and clients win because they are given the chance to turn their lives around.’ Social Finance will raise up to £5 million to fund the Peterborough Prison pilot.

Next News to read

NPC publishes pre-election manifesto on third sector effectiveness

Alliance magazine