Social Impact Bond – Development Concept for Humanly and Economically Profitable Social Investmentsactive 1 year ago
The Social Impact Bond (SIB) is a new form of impact investing, a new way to corroborate new business development through SIB investments for leveraging innovative preventive support for children and young people, increasing well-being, and preventing marginalization and social exclusion of children and youth.
SIB turns the situation upside down, so that private actors (investors and companies) are not able to gain profits through providing reactive, long-lasting and expensive remedial services, but instead innovating and funding new proactive cost-effective support that curbs the need for aforementioned child and youth services.
SIB is a cross-border model, which unites municipalities and private actors (investors & companies) for the good of the child and youth. A common aim is to improve the cost-effectiveness of the public service system by reducing the need for long-lasting and expensive remedial support (e.g. youth psychiatry and child protection institutional care).
Through Social Impact Bond initially developed by Sir Ronald Cohen and further elaborated the Finnish Innovation Fund (SITRA), Finnish municipalities and innovation HUB companies, timely measures can be pointed out as humanly and economically profitable social investments. Through performance-based financing agreements, funds are collected from private investors to the SIB Fund, from which funds are allocated to development of timely preventive innovations and HUBs responsible for nurturing new start-ups and business development.
When the goals are achieved, the municipality or city saves costs in expensive and long-lasting remedial services (e.g. child protection institutional care, child and youth psychiatry etc.), it returns part of the savings to the SIB Fund. The public sector only pays for the results achieved in curbing the need for long-lasting and expensive remedial social welfare & health care services. Thus, the SIB model is particularly suitable for preventive business innovations.