Social Finance, Inc. was founded in Boston in January 2011 by Tracy Palandjian, Sir Ronald Cohen and David Blood. Our sister organization in the United Kingdom, Social Finance, Ltd., was founded in 2007.
The world’s first Social Impact Bond was launched by Social Finance, Ltd. in the fall of 2010. It aims to reduce re-offending among short-term male prisoners leaving Peterborough Prison by financing the activities of experienced social sector organizations, including St Giles Trust, The Ormiston Children and Families Trust, SOVA, and YMCA. These organizations provide intensive support to 3,000 short-term prisoners over a six-year period, both inside prison and after release, to help them resettle into the community. If this initiative reduces re-offending by 7.5% or more, the government will repay investors from a share of the cost savings. If it delivers a drop in re-offending beyond 7.5%, investors will receive an increasing return the greater the success at achieving the social outcome. Returns will range between 2.5 percent and 13 percent.
Since the first Social Impact Bond was launched, interest is growing around the globe. Australia released a Request for Proposals on SIBs (which they refer to as “Social Benefit Bonds”) in September 2011, while governments and nonprofits in other countries, including Ireland and Canada, are actively exploring the concept.
In the United States, President Obama proposed funding of $100 million for SIBs in his FY2012 budget, and Massachusetts became the first state to formally indicate its interest when it released a Request for Information on the instrument in May 2011. In January 2012, Massachusetts deepened its commitment to social innovation financing and the development of SIB contracts by issuing Requests for Response. Specifically, the Commonwealth asked intermediaries and nonprofits how SIBs might be used to provide stable housing for chronically homeless individuals and support youth exiting juvenile corrections and probation systems. Numerous other states and local governments across the U.S. are actively exploring SIBs.