Innovations in Financing Solutions to Social Problems – Framework Development for Identifying Social Impact Bond Projects

Social Impact Bonds (SIB) are a class of investment designed to raise private sector capital towards scaling outcomes-based social service programs. Though technically not bonds, this innovative mechanism is used to finance Pay-for-Success (PFS) contracts, which allow governments to pay only for positive results.

The key to SIB success is identifying the most effective non-profits with proven, evidence-based track records to achieve greatest measurable impact.

The Capstone client, Social Finance US, is a project intermediary that liaises among government agencies funders, and non-profits. The Capstone team developed an effective framework to identify the most promising non-profit partners to facilitate scaling PFS contracts. This framework was also presented to the White House Office of Social Innovation to advance their efforts to promote PFS.

Deliverables:

Phase I: Researched the emerging field of SIBs by conducting an academic literature review and analyzing external frameworks and databases of non-profits.

●     External Source Review: Reviewed and analyzed 12 databases of nonprofits, interventions and evaluation tools

Phase II: Developed a Framework identifying three primary factors of analysis, each with respective sub-factors indicating SIB-readiness. Conducted analysis, research and interviews to establish weighted metrics for each factor and sub-factor.

●     Framework: Scores non-profits on SIB readiness based on a set of well-defined criteria

Phase III: Tested the Framework by populating the Database and interviewing over 20 academics, practitioners, and funders.

●     Database: Compiled a list of 80 potential non-profits across issue areas, geographies, and levels of government using the framework

Phase IV: Conducted a thorough readiness analysis of 30 non-profits

Other deliverables: 1) User guides for database and framework maintenance; 2) Documentation of processes and sources; 3) Reports of policy relevant findings for Social Finance and the White House Office of Social Innovation