At Finance for Good (FFG) we are looking forward to the Social Enterprise World Forum. The gathering will provide a great opportunity to develop our collective understanding of outcomes financing, and how it can be used to support social enterprises. A previous article on this website highlighted a few of the issues that will likely be top of mind for participants interested in social finance (and social impact bonds).

First, the article brought up the notion of where SIBs are and are not applicable. This is a question we are often asked by social sector organizations interested in accessing SIB funding and by governments interested in determining what local issues they can address with SIB financing. It is understood at a macro level that SIBs can be used to fund programs that decrease recidivism or improve educational attainment, but at a local level, a commissioner must also explore the availability of good data and the capability of local service providers.

It is important to remember SIBs are not a panacea, and rather one tool we can use to create social change.

Second, it is important to understand what’s in a name when it comes to social finance. This conversation has come to the forefront due to two factors – first the newness of social finance as a sector, and second the misleading nature of the name “social impact bonds.” 

To avoid this confusion of a SIB not being a bond, practitioners in the US renamed the tool when they brought it over from the UK. In Canada the term SIB is still most widely used, but members of the federal government have coined the term “community benefit investments” to be used in the place of “social impact bonds,” though this new term has yet to gain popularity.

Third, it is worthwhile to understand how SIBs provide benefit beyond simply adding new money to the social sector. Fundamentally SIBs create a mechanism to share operational risk associated with a social program or social enterprise. Removing operational risk from government allows a department to launch a program that they think will be successful, but don’t know will be successful. This means government can make a decision without having perfect data (which is often the case in the social sector). Removing risk from the service provider agency is also important. In the current system many providers need to stick to doing what they have always done because that is what funding is allocated for. With a SIB, an organization is charged to achieve an outcome and modify services as required to help the clients in the program. 

A lot of work is still required to take SIBs, and other social finance mechanisms, from concept to reality, and we pleased to be part of team doing what is needed. We are helping government and community groups determine where SIBs are applicable, working to define a consistent nomenclature for tools, and supporting social organizations to better help their clients. We are looking forward to attending all the sessions in the social finance stream at SEWF and seeing many of you there.