About Social Impact Bonds

A social impact bond (SIB) brings together government, service providers and investors to deliver positive social outcomes over a specific time period (usually between three and seven years) for a certain group of people.

These are people who generally face significant levels of disadvantage.

Service providers deliver the services necessary to deliver better outcomes for the individuals, with investors providing the funding.

SIBs are most often used where people have a number of complex issues in their lives which government programs have found difficult to resolve.

Government makes payments to the investor if specific desirable outcomes are achieved. Service providers gain the flexibility to design programs to meet the needs of the people using the services. Programs are rigorously assessed to see whether they are successful or require re-design.

The SIBs are designed to improve outcomes for people. Independent outcome measures and an independent assessment of the programs being delivered help keep the focus on achieving successful outcomes.

Below is a typical design of a SIB.

Social Impact Bonds design process flowchart

In Australia, New South Wales have set up bonds and are currently finalising another round of bonds.

Queensland, South Australia and New Zealand have all announced that they intend to develop bonds in social areas such as homelessness, reoffending and indigenous disadvantage.

What Victoria has learnt from other states and internationally is that SIBs can be useful to assist in dealing with difficult social problems by promoting innovation, in moving from outputs to outcomes-based service delivery, and focussing on outcomes for people who need the services the most. SIBs also offer flexibility as the program continues, to make sure outcomes are being achieved successfully.

A few broad criteria are useful in evaluating which policy areas are suitable for a form of social bonds:

  1. There is scope for innovation: SIBs are useful in situations where there is no clear solution for difficult and complex problems. SIBs are a low-risk way for government to trial new programs that could ultimately assist with the design of government service delivery by proving the effectiveness of its approach.
  2. Desired outcomes can be defined: SIBs are designed to deliver specific outcomes to people with difficult social issues. An outcome-based approach can improve the effectiveness of government service delivery and investment in services more generally.
  3. There is a clear group of disadvantaged people: SIBs target programs to a clear group of disadvantaged people throughout the life of the SIB.
  4. Outcomes can be measured: Under a SIB, payments from government are based on performance. Performance, based on delivering outcomes, need to be able to identify key measurers that can be proved.


Reviewed 16/05/2018
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