Last week, U.S. President Barack Obama proposed his budget. The most interesting part is a minuscule fraction set aside for social impact bonds. In this post, we explain what that means.

To create this interactive post, I used the free “zooming presentation” software Prezi. After the presentation loads, use the forward and backward arrows to go through the presentation or click on the target on the bottom right to explore the presentation. As always, let us know your thoughts.

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9 Comments »

  1. Ritika Said,

    February 21, 2011 @ 12:43 pm

    Brilliant!

  2. Dipika Prasad Said,

    February 21, 2011 @ 2:06 pm

    Great work Abby!

  3. Tina Crouse Said,

    February 22, 2011 @ 9:24 am

    Cool. Brilliant. Concise. Would someone please make one of these to convince investors (just kidding). Nice presentation but needs meat. Instead of a complicated example (eg. which government department ?), why not assume that cost reductions will be across the board and everyone (every dept) can chip in their portion as recognition of the success ?

    Measuring the ‘portion’ will be problematic but at least for the non-profit service provider, KNOWING that they’ll get their expenses covered is going to make a huge difference.

    How many conversations start out, ‘If we only had the money …’?

    Solutions are at hand but they couldn’t be acted upon without investment. $100 million will make a dent.

  4. Imran Said,

    February 22, 2011 @ 2:31 pm

    Really interesting and well-produced. Nice work!

    In terms of the concept, I am skeptical. This was broached in the ‘con’ argument, but I think the measurement and evaluation piece is a massive barrier to the success. Who sets the bar for what defines success? If policymakers set it, it defeats the purpose and advantages of having the private sector lead the innovation. If the private sector sets the bar, will they be incented to set the bar lower to be able to be paid back sooner and with more certainty? It’s a tough dilemma but I look forward to seeing how this plays out…I agree that it could hve a lot of opportunity in developing countries if the levers and roles are clearly defined.

  5. Abby Callard Said,

    February 23, 2011 @ 11:54 am

    Tina,

    I agree that departments should contribute their portion, but measuring that portion will be extremely difficult. Given the example of the housing solution, how would you go about deciding which portion each department should contribute?

    Abby

  6. Michael Austin Said,

    February 23, 2011 @ 8:02 pm

    A truly innovative idea by the government that may create somewhat of a revolution in business and under the heading of social enterprise. The question is, would it be beneficial for the government to provide a profit of some description for the programmes that are successful say 10% so as to provide extra incentive?

  7. DanV Said,

    February 23, 2011 @ 9:44 pm

    terrific presentation. measurement can be done, but probably not for ALL social problems. The quintessential example from the UK is recidivism of criminals, which can be measured, quite easily.

  8. Promise Contracts Said,

    February 24, 2011 @ 10:06 pm

    We find the idea of the “Social Impact Bond” very exciting and in fact our founder has dedicated the last five years to promote this concept all over the world. We, together with Social Entrepreneur organization Ashoka, brought the idea to the UK Government and advised on a pro-bono basis for their pilot (the same one that is being used as model for the US). We called (and still do) it “Promise Contracts”. We truly believe this is a simple concept that will help better the world. Our motto is “Anything a society truly wants can be financed and achieved”. We are completely turning upside down, in a good way, the way we use capital markets to unleash a constant flow of large scale capital and the best talent in the world to focus exclusively in improving quality of life for all, and at the same time a profitable enterprise for investors, there is plenty of room for both.

    Today, for example, financial markets allow billions of our own dollars to be spent on incentivizing our kids to demand a particular consumer product such as a video game that they may or may not “need”. That is, billions of dollars spent on creating new demand for products. Why can’t similar talent and resources be channeled to improve people’s lives without them having to consume something? Can this talent only be applied to such goals during their weekends or after hours? Are social goals really a second class objective? That is one riddle that markets and appropriate financial structuring can help solve by eliminating the importance of the legal definition, or at least subjugating it to the more important aspect of the role that it plays. We are a for-profit start company that given our limited resources is working on the “proof of concept” in Peru but looking forward to bring it forward to all over the world. Our “corporate” site is http://www.sffx.net and the Peru pilot site is http://www.contratospromesa.com

  9. Final Thoughts « Team Swagger Wagon Said,

    March 9, 2011 @ 9:22 am

    [...] that explains them while going into how they’ve been incorporated into Obama’s budget plan.  http://beyondprofit.com/social-impact-bonds-explained/ “Basically, private investments will fund public services and the government pays up when the [...]

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