M-RCBG Associate Working Paper No. 26
Establishing Social Impact Bonds in Continental Europe
Social Impact Bonds (or pay-for-success contracts) are multi-stakeholder partnerships designed to provide innovative social services. Private investors engage funding for effective non-profit organizations to carry out their mission, and the state reimburses investors (plus a pre-determined return on their principal investment) if and only if the non-profit organization has met pre-specified, verifiable, performance targets.
Since the early pilot in the prisons of Peterborough (UK) in 2010, the concept of Social Impact Bond has generated significant interest in multiple countries. SIB initiatives are now flourishing around the world but so far cases are limited in continental Europe. However, today more than ever, being under tight budgetary pressure and facing an ever increasing demand for social services resulting from the long-lasting effects of the economic crisis, European governments need to improve the efficiency of social services provision. Social Impact Bonds can be a credible answer to that issue by drastically innovating in the way social services are delivered and unleashing the potential of social entrepreneurship in Europe.
This paper proposes to investigate potential hurdles and practical solutions to leverage the Social Impact Bond model to provide quality social services at a lower cost in continental Europe. Given the early stage of Social Impact Bonds' development, an operational approach has been adopted.