Social Impact Bonds First introduced in the UK in 2010, Social Impact Bonds (SIBs) link financial returns to the achievement of predefined social outcomes. The pioneering SIB in Peterborough Prison aimed to reduce recidivism by funding interventions with private capital, repaid only if the project met its goals. Although SIBs are not traditional bonds, they are structured as payment-by-results contracts, combining innovative financing with measurable outcomes. SIBs are not, in fact, bonds of any sort. Instead, they are a payment-for-success contract where investor returns are directly linked to the achievement of defined social outcomes. 23 For example, the Toyonaka City SIB in Japan funded smoking cessation programs, where investor returns were directly tied to the number of participants who successfully quit smoking. Since SIBs combine innovative financing with a focus on measurable outcomes, they highlight the importance of clear metrics, effective data collection, strong stakeholder partnerships, and flexibility in program design. Figure F shows the structure of a typical SIB. Figure F: The Structure of a Social Impact Bond
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Ten Years in the Making
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