Can We Pay for Success? Notes from the White House Convening on Social Impact Bonds

April 1, 2011

For more on social impact bonds, check out this webinar from the Forum for Youth Investment on April 26, 2012.

ELIZABETH GAINESOn October 21, 2011, the White House Office of Social Innovation and Civic Participation partnered with the Nonprofit Finance Fund for a discussion of Social Impact Bonds and how we might pilot a "Pay for Success" initiative in the U.S.

Elizabeth Gaines was there and blogs about her reactions.

After spending the day at the White House Conference Center and listening to lots of smart economists, state and local government leaders, federal officials and the like talk about Social Impact Bonds (the UK version) Pay for Success (the U.S. version) my head is swirling with both the potential—and the possible unintended consequences. 

This innovative model—where private investors fund social programs up front and are paid returns based on programs’ success—has been tried in the UK for the last 18 months and is now generating buzz in the U.S.  Folks with deep pockets are interested in supporting something that not only gets them the outcomes they have been seeking but also pays them back their investment, and in some cases more, in the long run. (Read on if you already know what SIBs are, or jump to a quick definition.)

What does this finance model mean for those of us who care about positive child and youth development?

The Potential:  My takeaways are that we could be on to something that (finally) shows respect for quality—at least inasmuch as money equals respect. This may also be a way to convince tight governments to spend money on intervening up front to avoid the high cost of back-end services and responses. And it may offer a way to sustainably support programs that work, rather than just continuing business as usual with the programs that are already in place because “it’s the way we’ve always done it.” 

This steers the human services world into uncharted waters, but our economic times have already placed us "off the map" so what do we have to lose?

The Possible Unintended Consequences: A cynic by nature, I could go on and on here, but I won’t.  My main concern is that social impact is so hard to define and measure that we could end up spending too much time and resources on the measuring and not enough on scaling interventions.

Bringing programs to scale is in fact my second concern: how replicable are programs in the human service arena, really?  The HUMAN staffing element in human services is always going to be the wild card.  We are not talking about producing tubes of toothpaste or building roads here.  What happens if the provider fails and the intermediary organization and funder who are on the hook to deliver outcomes don’t get paid back by the government at the end of the agreed-upon time? 

Finally, my last big concern is that if we focus, laser-like, on one or two outcomes of any intervention, do we end up doing a disservice to other outcomes that matter?

Consider, for example, the No Child Left Behind Act's focus on high-stakes accountability, which meant that reading and math dominated at the expense of other areas of skill development.

And what about the “creaming factor?” if an intermediary is in this for the wrong reason, they may be likely to pick the easiest targets to show the most gain, without addressing the hardest cases in the intervention. 

The bottom line: this is truly uncharted waters for all of us in the human services world. But our economic times have already placed us (and our budgets) well out of familiar waters, and “Pay for Success” just may be a lifeboat for some of the social supports that we think could really work. 

The Take-Aways: Three Things You Should Know

What are Social Impact Bonds?

  • Under the social impact bond investment model, a government contracts with a private sector intermediary organization that issues bonds to private investors. The money funds social programs and services. In exchange for providing up-front capital, the investors receive a share of the government payments that become available if the performance targets are met.
  • According to the Center for American Progress, “The government pays the [bond issuer] entirely or almost entirely based upon achieving performance targets. If the bond-issuing organization fails to achieve the targets, the government does not pay."
  • The goal is to drive significant non-government investment to address the causes of social problems. The returns on the investment come from cost-savings and/or measurable impact. Ultimately, SIBs aim to save tax payers money by improving government services and bringing better social outcomes than the current intervention models.

Do they work?

  • The UK Justice Ministry is currently conducting the first test of this approach.
  • It’s not an idea that will fit everything in the social realm because it requires relatively quick and timely impact, and many social programs are long-range by their nature and take time to show results.

Are we likely to see SIBs anytime soon?

  • The White House appears very interested this idea as a potential model for some domestic social programs.
  • There are key large foundations  (e.g., Rockefeller Foundation) and private funders supporting this idea.

But wait…

  • There are lots of unanswered questions, some of which I raise in the blog above.

Back to the top

For More Information

If you missed the live webstream of the convening at the White House, fear not. The Nonprofit Finance Fund has a full video:



Elizabeth Gaines is the director of policy with the Forum for Youth Investment, SparkAction's managing partner. You can reach her at elizabeth[at[

Elizabeth Gaines


It&;s great to see that the idea of social impact bonds is creating such interests across the world – I have seen a range of articles from the US, Canada and Australia in the last week or so.
The debate is hotting up in the UK – perhaps inevitably as more SIBs come online, then more debate and, sometimes, controversy is stimulated. We had news today of an exciting new SIB which will fund the renovation of empty properties by employing ex-offenders – therefore tackling two social problems together. For more details see:
Readers may also be interested in a recent discussion of the pros and cons of using SIBs to replace public funding on my own blog:

It&;s great to be involved in an international debate with all the advantages that brings with our different cultures and perspectives.

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