Federal Government to Explore Use of Social Impact Bonds

Alex Goldmark reports on a new for-profit investing tool to incentivize innovation to solve chronic social challenges, which is gaining popularity in the U.S. and has already been tested in the United Kingdom and Australia.

According to Goldmark, rather than providing social services directly, the social innovation financing would, "allow the government to task a firm in the private sector to solve a public challenge, paying the company only if it achieves certain success metrics."

"Using pay-for-success bonds could save taxpayer money, earn a profit for impact investors, and incentivize innovation to solve chronic social challenges. "

"President Obama asked for $100 million for social impact bonds in his budget, a hefty federal stamp of approval and financial carrot for states and nonprofits to get moving on how to spend that money. Massachusetts, Minnesota and New York City have all taken the bait and started issuing their own bonds. Connecticut, Michigan, New York State, Rhode Island, Virginia, and the cities of Atlanta, Los Angeles, and Louisville are considering pilots of their own."

Full Story: Pay for Success: How a New Kind of Bond Could Save Taxpayer Money and Improve Social Services

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