A study suggests that social impact bonds, which use private investment to finance social services and programmes, are “costing much more than they save and restricting the freedom of charities to improve social outcomes for vulnerable groups”.

Social impact bonds fund social programmes to address problems such as homelessness, reoffending rates, and mental and chronic health issues. The government initiates these bonds, the private sector funds them, and non-profits and social workers carry out the work. Investors only receive a return if the fund has proven to improve the outcomes for these vulnerable people.

GovInsider previously reported on the world’s first social impact bond, which had resulted in a 9% reduction of reoffending in the city of Peterborough in the UK. This exceeded the target of 7.5% set by the country’s Ministry of Justice, and private investors subsequently received payments.

Now, a report which looks closely at four UK-based social impact bonds suggests that “there is, at present, very little definitive evidence to suggest that services funded through such a mechanism lead to any relative improvement in social outcomes”. It continues, “where there is evidence available, it is rather mixed”.

The findings reveal that private social investment may encourage “gaming” to achieve social outcomes, and that social outcomes that are paid for “are not always sustained or carried through”. Furthermore, private investors “restrict the autonomy of service providers to deliver innovative services according to their social mission”.

Yet, there has been growing media coverage of the perceived positive impact of social impact bonds, and they are projected to bring in “billions of dollars in new investment” by 2020.

“Despite efforts and substantial public support, [social impact bonds] are yet to evidence either a record or capacity to achieve these things,” Daniel Edmiston, Lecturer in Sociology and Social Policy at the University of Leeds and corresponding author of the study, said. “This is perhaps unsurprising given how young they are.”

Edminston added that there is yet to be evidence of benefits of social impact bonds, and that “the risks are already being felt by charitable organisations and vulnerable groups seeking assistance”.

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