Social Impact Bonds for a Sustainable Welfare State: The Role of Enabling Factors

Abstract

The financial crisis has put pressure on governments throughout the world to reduce deficits with severe budgetary cuts in many welfare areas by reinforcing the need to modernize social policies and optimize their effectiveness and efficiency. Social impact bonds (SIBs) have rapidly become one of the most innovative financial schemes used by governments to privatize the upfront costs of welfare interventions by reducing taxpayer expenditure. Our analysis focuses on healthcare impact bonds (HIBs) that correspond to the adaptation of SIBs to health programs and are considered to be a viable way to fund out-of-pocket and preventive programs, especially considering the recent cuts to public healthcare expenditure. By using an in-depth qualitative analysis of existing practices based on a multiple case study approach, this study contributes to the ongoing debate on the role of SIBs for the future sustainability of welfare systems by proposing reflections and indications for the scalability and replicability of SIBs. With respect to the existing literature, this paper provides a theorization of the main scaling ingredients to be considered for the development of the SIB market as a supporting financial approach for new and emerging welfare needs by also proposing suggestions and insights and serving as a guide for scholars and practitioners.

Use of social impact bonds in financing health systems responses to non-communicable diseases: scoping review

“…It has been previously noted that large scale expansion of SIBs has been impeded by the challenges ‘of replicability across scale’ and ‘sustainability over time’. 68 Addressing the identified limitations of SIBs by lowering transaction costs, increasing private investment, choosing more appropriate health-based outcomes, increasing duration and size of the intervention, and increasing transparency could support a more convincing case and expanded the use of SIBs.…”

The Governance of Social Risks: Nurturing Social Solidarity through Social Impact Bonds?

“…In doing so, the two investors did not assume any degree of financial risk. There are more SIBs structured on this Direct Provider model (Carè and De Lisa 2019), where service providers deliberately shoulder some or most of the financial risk, but even in the case of SIBs modelled on a partnership structure or with a Special Purpose Vehicle (SPV) intermediating financial flows and managing contracts the financial risk that service providers are exposed to is significant, particularly in the case of underperformance. For example, in the case of the Trailblazers SIBs which were not based on the Direct Provider Model, service providers were withheld payments when services did not perform as intended (Fraser et al 2018a).…”

Asian Development Outlook 2020 Highlights: Financing a Green and Inclusive Recovery

“…(1) 2010-2019 (2 Two important types are social impact bonds (SIBs) and development impact bonds (DIBs). SIBs leverage private investment for social interventions by transferring risk from governments and service providers to third-party investors that are reimbursed only if the desired social outcomes are achieved (Carè and De Lisa 2019;FitzGerald et al 2019;Rania et al 2020). DIBs are SIBs applied in low-or middle-income developing countries that finance development programs with money from private investors, which normally earn a return paid by a donor if the program is successful.…”