Social impact bonds

– a new financing model for social innovation

Social impact bonds are a new way of developing and delivering welfare services. The model is used to finance measures in areas such as care for the elderly, child protection, drug abuse, homelessness, health challenges, integration, employment, truancy, sick leave, correctional services and the environment. The measures that are financed act as a supplement to public sector services and are, as a rule, delivered by a social entrepreneur or voluntary/non-profit organisation.

The world’s first social impact bond was launched in the UK in 2010. Today 74 projects have been implemented across 18 countries, including in Sweden, Finland, Germany and the Netherlands.

A Norwegian social impact bond: Lier Municipality, Trygg av natur and Ferd Social Entrepreneurs have entered into a collaboration to increase self-mastery in elementary school pupils and to ensure public funds are used more efficiently. Photo: Trygg av natur

Payment for results

A social impact bond involves a social investor or foundation initially financing an activity, with the investor then reimbursed by the public sector if the pre-agreed results are achieved. This reduces the risk to the public sector of trying out new measures, and provides investors with the chance to contribute to social innovation. The authorities only have to pay if the outcome they sought is achieved, and investors only benefit if society itself also benefits.

Public-private collaboration

Social Impact bonds involve the public sector, the private sector and the voluntary/non-profit sector collaborating in order to find better solutions. The process requires all parties to work systematically and in a knowledge-driven fashion to discover the target group’s needs, what a positive result for the group would be, how this can be achieved and how it can be measured. The process can result in new insights, new ways of collaborating, and new knowledge about what measures have a measurable impact.

Find out more about social impact bonds from the Norwegian Association of Local and Regional Authorities (KS) here (only available in Norwegian).