World’s first social impact bond sees results

The world’s first social impact bond has resulted in a 9% reduction of reoffending in the city of Peterborough in the UK.

This scheme saw investors commit to pay to charities if they achieve certain targets over a set period, with the methodology left flexible to allow iteration.

This result exceeds the target of 7.5% set by the country’s Ministry of Justice. Launched in 2010, the Peterborough Social Impact Bond funded rehabilitative interventions for a thousand short-sentenced prisoners for a year after their release from the Peterborough prison.

17 ‘impact investors’ had provided a total of £5 million (~US$6.61 million) to the bond, and will now receive payments following its current success.

These payments come from government thanks to the savings that the results have achieved for the British taxpayer.

Social impact bonds provide investment to address social problems such as refugee employment support, loneliness among the elderly, rehousing and reskilling homeless youth, and diabetes prevention.

‘Impact investors’ only receive repayment of their initial investment and any financial risks if the social outcome for these groups improve.

The UK criminal justice system sees “persistent” reoffending of short-sentenced reoffenders, and the national reoffending rate was 60% around the time when the Peterborough programme was designed.

Social impact bonds have become a widespread phenomenon since the UK’s Social Finance non-profit organisation launched the Peterborough Social Impact Bond.

There are currently 89 Social Impact Bonds in 19 countries, including Japan, South Korea, India, Australia, and the US. The combined investment totalled more than £300 million (~US$ 396.5 million).

Image by davebloggs007 – CC BY 2.0