Giving Compass’ Take:
• Chris Jurgens explains how Pay for Success can drive systems change and be an effective avenue for impact investors.
• Is Pay for Success appropriate for causes you support?
• Read about when Pay for Success makes sense.
As impact investors, we often focus on for-profit startups that are advancing innovative solutions. But nonprofit social service delivery represents an enormous market that merits greater attention from the impact investing community. Federal, state, and local governments spend a combined $5.4 trillion a year, with more than half flowing to education, healthcare, criminal justice, workforce development, child welfare, and veterans’ support.
Few question that social service programs have laudable goals, but a common critique of the social sector is that we don’t have concrete evidence of what works. And too often that’s true …
Pay for Success is a public-private partnership which funds effective social services through a performance-based contract. PFS models, sometimes called social impact bonds (SIBs), connect evidence-based service providers with impact investors who provide upfront funding for programs, and government agencies that agree to repay that investment if a given program achieves predetermined goals. Put even more simply, PFS leverages private investments to better enable governments to partner with high-performing providers and expand effective programs
Social Finance US has been at the forefront of the PFS movement in the US since the organization’s founding in 2011. As a leading PFS intermediary, they play multiple important roles bringing a PFS project to life: helping governments and nonprofits identify interventions and populations where a PFS approach is feasible; designing how payments can be linked to specific outcomes; partnering with governments and nonprofits to help strengthen their capabilities in outcomes measurement; and raising capital from commercial and philanthropic investors. And once a PFS project is underway, Social Finance helps provide the glue between the project partners to keep things running smoothly.
Read the full article about Pay for Success partnerships and social services by Chris Jurgens of Positive Returns at Medium.
If you are looking for more articles and resources for Impact Investing, take a look at these Giving Compass selections related to impact giving and Impact Investing.
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