Have we ‘stretched’ social impact bonds too far? An empirical analysis of SIB design in practice

Abstract

When the social impact bond (SIB) model was first introduced in 2010, there were many claims about how these projects could transform public service delivery. This article investigates how SIB projects have been designed in relation to two original intentions: (1) shifting the focus of public service delivery to achieving impact and (2) transferring risk from the government to external investors. Qualitative content analysis of SIB projects launched until 2020 in the US and UK (n = 114) is used to plot and analyze how the design of SIB projects vary across these intentions. We find that SIB design in practice has deviated from the model’s original intent in several important ways: In the UK, payable outcomes are generally not subject to rigorous validation methods. In both the US and the UK, upfront capital is generally independent and at-risk, but risk mitigation strategies may limit the intended transfer of risk to investors.