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This paper analyzes the Social Impact Bonds (SIBs) and their potential to unify social entrepreneurs, the government, and financial markets to solve social challenges. The first section analyzes the emergence of the social investment market as a political economy. In addition, it explains how SIBs bring together the key stakeholders in the design a...
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... agree on an investment structure, including the desired program outcomes (e.g. a drop of at least 10% of the prison recidivism rate). Once the targets are set and a credible counterfactual 6 is formulated, private investors provide the upfront capital to the service providers to scale up the program. This capital secures the delivery of the intervention to service users, regardless the targeted outcomes. During and after program implementation, independent validators conduct rigorous tests to assess whether the targeted outcomes have been achieved or not. Depending on these evaluations of the program’s outcomes, the government pays back the investors the principal plus a rate of return. This means that if the targeted outcome cannot be achieved, the government does not pay and the investors risk losing their capital. However, even a positive outcome is expected to save governmental resources, for example, by reducing the need for beds in prison or homeless shelters. These saved resources could be used to repay, at least in part, the SIB. Furthermore, the entire society profits from the achieved positive externalities, such as more security or less poverty (see figure ...
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Citations
... Impact investing refers to investments that deliver measurable social/environmental returns along with financial profits (Bugg-Levine & Emerson, 2011;Nicholls, 2010;Ormiston et al., 2015). Impact bonds are an outcome-based policy-making strategy in which private investors receive a rate of return if pre-agreed social/environmental outcomes are achieved (Liebman, 2011;Rivera-Acevedo, 2015). At the time of this research, 93 impact bonds are being implemented, including one in Colombia (Social Finance UK, 2017). ...
The informal economy accounts for half of the economic activity in Colombia. Street vending is a major part of the informal sector. In the context of a rapid urbanization due to internal conflicts, low skilled workers find a last resort for income generation as street vendors. Even though studies have revealed that street vendors can have high profits, they usually remain poor. A primary reason is their continuous indebtedness outside the regulated financial market. This paper proposes a comprehensive questionnaire survey on the socioeconomic profile of street vendors. This tool can be used to assess the individual credit risk and incentivize the financial inclusion of the poor. It can also be used for evaluation processes by the government or impact investors.
