Social Uncertainty Evaluation of Social Impact Bonds: A Model and Practical Application

Abstract

In the last years, Social Impact Bonds (SIBs) have gained popularity in the impact investing space. A number of scholars and practitioners are debating—in theory and practice—the opportunities, challenges and obstacles of these financial models. Amongst others, social uncertainty evaluation metrics appear as a critical factor for the future development of the SIB market. The present work aims to shed some light on this issue, by realizing a practical application of a model—which is an extension of a framework previously proposed—for social uncertainty evaluation in SIBs. In our exploratory analysis, 34 SIBs were selected for the empirical tests. We combined the Analytic Hierarchical Process (AHP) with the creation of aggregate measure, deriving by suitable indicators at the end of the tree. Our findings open new avenues for future research in the field of uncertainty factors in the SIB landscape. Finally, our results represent a basis for implementing a prediction model for social uncertainty evaluation.

Roadmapping New Impact Bonds in a Post-COVID World: Insights from Case Studies in the Education Sector

“…In particular, some scholars have called for a "finance reconsidered", from an epistemological, ontological, and methodological perspective [35][36][37][38]. In particular, Lagoarde-Segot [36], Rania et al [39], and Trotta [40] pointed out the linkages between impact investing and new foundations for a new theory of finance.…”

Asian Development Outlook 2021: 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.…”

Fighting Poverty and Inequalities Through Social Impact Bonds: Learning from Case Studies to Support the Covid-19 Response

“…By using a statistical technique for converting objective probabilities into subjective estimates, the author investigates a specific way of integrating the uncertainty related to the valuation of SIBs. Starting from a model for measuring social uncertainty/risks in SIB models, a recent work (Rania et al 2020) proposes an original model to evaluate the social uncertainty of SIB programmes. Regarding the rate of returns of SIBs, it is worth noting that data are very limited at the moment.…”

“…Several scholars highlight the importance of this financial model (Schinckus 2018), while others point out the practical difficulties faced by attempts to realize tangible benefits from SIB programmes and, above all, on a larger scale (McHugh et al 2013;Sinclair et al 2014;FitzGerald et al 2020). In fact, narrowing the focus on the SIB market, a very small number of SIBs have been launched worldwide, and this empirical evidence clashes with the relevance that these models are assuming in the international debate (Rania et al 2020).…”

“…In line with the alternative finance perspectives, SIB programmes represent experimental practices for addressing very important and various social issues (Rania et al 2020), but it becomes necessary to realize more ex ante considerations of the complex balance of risks, drawbacks and benefits of SIBs and more empirical studies ex post (Fraser et al 2018: 16) to favour the enabling factors and remove the impeding causes. However, on the theoretical level, in our opinion, it is indisputable that these models would provide a significant innovative change in the community's development and also in advanced economies if only they are able to develop to their potential.…”