Social Impact Bonds Case Study

1400 Words 6 Pages
In today’s situation, most of social aspects are changing. Investors and funders become more aware about their investment, along with their intention to seek evidence of the usage of their money whether it is being used effectively and accordingly. Government becomes more restricted to give fund since restruction take place and to save up spending. For that matters, Ronnie Horesh, an economist based in New Zealand, invented Social Impact Bonds in 1988 (Lincoln College, 1988). This term is defined as a method to impact one specific issue by raising funds from private investors in order to provide services, in return, if the objectives achieved, the funders are going to received interest from the signed contract (Jeram & Wilkinson, 2015). Detailed …show more content…
In order to successfully run the program, there are five parties that need to cooperate. Government who is the decision maker on the project timeline and the expected outcomes, also design the rate of return that will be offered to the private sector (Ainsworth, 2011). Intermediary organisation will be partnered with the government to coordinate the program, and also the one that will be issuing the bonds to the investors. Private investor is going to provide the initial capital to the intermediary agency, and the investor is expected to ensure the intermediary is succeed to meet the intended goals (Ecotrust Canada, 2014). A service provider is important to deliver the program to the target population. Last but not the least, a presence of an independent examiner is needed in order to review and verify the result of the program and to decide whether the outcomes have been achieved. The purpose of Social impact bond is to allow the fund to social priorities and later is expected to reduce public expenditures (Liebman, …show more content…
Every year, government comes up with one social problem and try to address the issue, however, performance is hardly assessed which indicates less transparency. Thus, it becomes one of the advantages that offered by this method. Since social bonds is a performance-based payment, it indicates that performance will be frequently evaluate and transparency will be increased. In addition, social impact bonds use private money to fund the social service, which mostly used in a preventive program. Hence, the government may allocate more fund to programs that considered as a ‘crisis’ which outcome could be observed immediately. According to Department of Internal Affairs (2015) these method shows an effective way of reducing public expenditure because of preventative interventions are less costly than addressing the problem. These advantages can be justified by looking at the Peterborough project, where the objective was to prevent recidivism rate to increase, managed to collect $5 million from the private investor (Schinckus, 2015). For that moment, government can allocate the $5 millions that supposedly go to the project, to use that for more critical cases that can be measured immediately. Although this method offers intriguing benefits,

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