How it works
Investors fund a provider; an evaluator checks outcomes such as reduced reoffending; government pays only on success. Liebman (2011) introduced it to the US; Seoul adopted one in 2015.
Promise
It funds prevention and shifts risk, echoing Osborne and Gaebler's (1992) new public management; Edmiston and Nicholls (2018) assess the UK.
Critiques
Warner (2013) notes high costs; Saltman (2017) metric distortion; Fraser et al. (2018) and Arena et al. (2016) find limited evidence and scale. See public value.
FAQ
- What is it in simple terms?
- Investors pay for a social programme first; government repays only if it works.
- What if it fails?
- The government pays nothing and investors lose money.
Sources reviewed: 2026-10-26
References
- Liebman, J. B. (2011). Social impact bonds: A promising new financing model to accelerate social innovation and improve government performance. Center for American Progress. An influential report introducing SIBs to the US and their suitable conditions.
- Warner, M. E. (2013). Private finance for public goods: Social impact bonds. Journal of Economic Policy Reform, 16(4), 303–319. A critical look at private finance in public services, costs and risks.
- Arena, M., Bengo, I., Calderini, M., & Chiodo, V. (2016). Social impact bonds: Blockbuster or flash in a pan? International Journal of Public Administration, 39(12), 927–939. Compares early cases to assess whether SIBs will scale.
- Fraser, A., Tan, S., Lagarde, M., & Mays, N. (2018). Narratives of promise, narratives of caution: A review of the literature on social impact bonds. Social Policy & Administration, 52(1), 4–28. A systematic review of promising and cautionary narratives.
- Edmiston, D., & Nicholls, A. (2018). Social impact bonds: The role of private capital in outcome-based commissioning. Journal of Social Policy, 47(1), 57–76. Analyses private capital's role in UK outcome-based commissioning.
- Saltman, K. J. (2017). The promise and realities of Pay for Success/Social Impact Bonds. Education Policy Analysis Archives, 25, 59. Critically examines education cases and distorted outcome metrics.
- Osborne, D., & Gaebler, T. (1992). Reinventing government: How the entrepreneurial spirit is transforming the public sector. Addison-Wesley. The key text on results-oriented government, the administrative backdrop to SIBs.