- They make more funds available for early intervention and prevention at no risk to government;
- Government funding only pays for those services that are effective as the investor bears all the risk of services being potentially ineffective;
- Investors and deliverers have an incentive to be as effective as possible as the larger impact they, the larger the repayment.
Now the US are looking at this model - under the American term "Pay for Success Bonds". Barack Obama’s proposed 2012 budget contains a rule change that allows various government agencies to issue social impact/pay for success bonds and he has proposed that up to $100m of federal money be freed up to run pilot schemes to test the idea.
Social Finance US which President Clinton highlighted at his recent Clinton Global Initiative in September. Social Finance US also announced some new stellar Directors including former Gates Foundation CFO Alexander Friedman, the leading Harvard business professor and thinker Michael Porter, Luther Ragin, head of the Global Impact Investing Network and the excellent Sonal Shah, the former Director of the Office of Social Innovation at the White House. Wow. Exciting times for social impact bonds both sides of the Atlantic and for social innovation scaling internationally.