Social impact bonds (SIBs) are a type of impact investing — investing for results. A community service provider (or any other kind of service provider) who wants to pilot or scale up a program can use SIBs to finance their projects.
A bond issuer (either a government, or a third party on behalf of a government) makes the SIBs available to private investors, who will receive the principal with interest if the program attains a predetermined success rate (interest usually reflects the savings to government from alleviating the problem). If the program is unsuccessful however, the investors lose their money.
Modified versions of this model are being trialled in NSW, and three more were announced in the 2015 Queensland budget.
Not everyone agrees that SIBs are the way to go. Critics of the model wonder, if the project is likely to get positive results, why not just let the government fund it? Why even deal with private investors?
Season 4 of the HBO crime procedural drama The Wire can shed some light on this [SPOILERS AHEAD]. One storyline concerns the efforts of former western district police commander Howard 'Bunny' Colvin to develop a special program for the students of a local Baltimore public school.
The series is, in a word, heartbreaking. Heartbreaking that the mistakes of the kids it depicts have such dire consequences for their future — more so than kids from other (read: better) socioeconomic backgrounds. Heartbreaking, too, that so many of the adult characters try to do the right thing yet time and time again come up against an unforgiving and immovable 'system'.
It got me thinking: how could good policy help? How might recent policy innovation help the plight of the characters depicted in the show?
In the series, Colvin and his academic research partner, sociology professor Dr David Parenti, observe a grade 8 class who have returned from school break.
They notice that there are two types of students with distinct traits and propensities to disrupt the classroom, and that these behavioural traits correlate with their roles on the street.
There are the 'corner' kids, who are small time drug dealers and have aspirations of being gangsters in a few years — they are the classroom disruptors. The other group is the 'stoop' kids, who stay on the stoop of their houses as their parents told them.
The corner kids are placed into a special class under Colvin and Parenti's program. Colvin and the researchers give them