The first Impact Bond, how it reduced recidivism by 9% and key insights.

I will provide a brief history of the first ever social impact bond and some of the key learnings.

SIBs are a form of results based financing (RBF). Private sector takes the upfront financial and program delivery risk, and is rewarded by either governments or philanthropic organizations on a pre-greed scale of delivered and verified outcomes.

The reward is in the form of repayment of the investment plus an “interest rate”, bonus, based on results achieved over agreed thresholds.

It’s 2010. 1st social impact bond is issued to reduce recidivism

Between 2010 and 2015, the One Service program operated at Peterborough Prison. It provided support to adult male offenders released from the Peterborough Prison who had served prison sentences of less than 12 months, whose reoffending rate in 12 months was 60%.

The goal? Reduce recidivism by 7.5%. The result was 9.3%.

Social Finance raised £5 million from trusts and foundations to finance this program, the first of its kind, as a one stop umbrella service program for inmates.

In July 2017, the Ministry of Justice declared that the SIB had reduced reoffending by 9% compared to a national control group. This was over the target of 7.5% set by the Ministry.

The result was, the 17 investors in the Peterborough Social Impact Bond a return of just over 3% per annum for their investment.

But what else was achieved?

1. A new financing instrument had been introduced, tested and proven to deliver results.
2. For the Government, upfront cost and risk of delivery of a new program was shifted onto the private sector.
3. For investors, an opportunity to contribute to social good was borne, both with their money and innovation skills.
4. For the society in general, public money was used to fund innovation and results that were delivered and verified, leaving the public sector with a new program that could be scaled.

SIBs are a great financing model, but not for everything.

SIB serve a great purpose, but they should not take Government of the hook for the services it should deliver, or be a vehicle to outsource programs that are not bringing anything new, scale or cost benefits for the public.

Their strength relies in incentivizing innovation without public risk to create programs that the Government can then scale.

We’ve learned many lessons over the past 12 years since the first SIB. Follow me to get more insights on SIBs and other innovative impact finance instruments.

Read this post and more on my Typeshare Social Blog