Advantages And Disadvantages Of Social Bonds

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Introduction

As funding for non-profit organisations falls annually, government’s across the globe need to look for ways of funding without negatively affecting the public sector. The 2015 New Zealand budget set aside $28.8 million for four social bond programmes. Social bonds are means of funding social developing, non-profit organisations with the aim of minimal public sector impact. Social bonds offer means of funding without risking government cost. However it runs the risk of the private sector jumping on the opportunity to commercialise non-profit organisations. This essay will examine these advantages and disadvantages of the use of social bonds and analyse the appropriate blend of government and business in delivering public services.
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First launched in 2010, a social bond, also know as a social impact bond, is a method of financing non-profit organisations in which the private sector invests money in the programme. The organisation sets measurable social outcome goals which when reached, the government will return the investors invested money with interest. (a) As social bonds are funded entirely by the private sector there is no collateral on the government if the organisation is unsuccessful as the losses will be at the expense of the private sector, not the public sector. Social bond programs have proven to be successful in countries such as America and the United Kingdom. The success of social bond programs can be seen by the progress of the Peterborough Social Impact Bond, which aimed to decrease prisoner recidivism. Peterborough has seen reoffending fall 8.4% since starting the programme in 2010 and is on track to achieving their goal of 10% by 2016 …show more content…
As proven in the Peterborough Social Impact Bond, progammes require vast amounts of time and recources in order to set up taking “18 months to set up, and required the equivalent of 2.5 years of staff time and 300 hours of legal and specialist tax advice”(g). As the initial setting up is so complex, the need for external resources and teams may deter investors. Additionally, commercialising non-profit, social developing organisations funding may comprimise the social impact due to the primary focus of investing being profit. Private investors with large legal recources may look to dictate negotiations to benfit themselves rather than provide optimal public service (h). It is important to note that social bond programs are a relatively new concept and there is a lack of empirical evidence. The more they are put into action,and the more outcome that are reported, further advantages and disadvantages will present

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