Social Impact Bonds (SIB)

Social Impact Bonds (SIBs) are a financing mechanism where private investors fund social programs upfront, such as reducing homelessness or improving education. If the program achieves agreed-upon outcomes, the government repays the investors with interest, often using savings generated from the improvements. If outcomes are not met, investors may lose some or all of their money. SIBs aim to encourage innovative social solutions by aligning financial incentives with social progress, maximizing the effective use of public funds while sharing risk between private investors, service providers, and government entities.