Social Impact Bonds: The New War on Poverty?

A great clip explaining what a social impact bond is an how it is supposed to work:



Globally speaking, budgets are being slashed and dashed, with many programs for the poor being at the top of the list. But people are still suffering, so social impact bonds are being pitched as the entrepreneurial way to mitigate this gap between need and response. While the notion of profiting off of helping people out seems really strange and bordering on wrong, you can't argue with the results. It allows people to 'invest' in the social future of their community, with a small financial reward (you'd still make money money elsewhere). But if given the choice, I like to believe that people would choose to do the right thing and put some of their money into these sorts of investments.

Heck, the Acumen Fund and others have already shown that this kind of investing can pay multiple 'dividends'--to the recipient of services, the investor, and the community at-large. Social impact bonds are a bit newer than that, but governments should absolutely consider them in the future.

Understanding the psychology of poverty is complicated business and shouldn't be taken lightly, but if social impact bonds get more people involved in their communities and their neighbors, then I'm all for them. I think you run the risk of having a market repeat of education (i.e. the rise of for-profit 'education') that looks the same, but isn't, but I hope that with some controls (e.g. tightly-controlled definitions for acceptable social impact bonds) this market won't follow the same path.

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SEE: Social finance as a field hasn't quite become widespread the Midwest--the best sites on the topic are British, Canadian, Bostonian, and San Franciscan (all separate links). But hey, the Midwest will get there, and we'll do it well. Also, I was tempted to call it "San Francescan" because that sounds fun, too.