Public administrations have traditionally focused on maximizing the coverage of social services, rather than on the results that those services generate. Accordingly, success is measured by the number of beneficiaries of these services. This approach does not prevent social problems from becoming chronic, nor the search for more efficient and effective answers. Nor does it invite to explore prevention as a mechanism to reduce the incidence, depth, and cost of such issues. To solve this problem, a new mechanism has been created to focus on better results that solve social problems: Social Impact Bonds.
Social Impact Bonds (SIB) allow administrations to experiment new interventions without risk, obtaining evidence before scaling them up and transforming them into public policy or including them in social service portfolios. The risk of potential unsuccessful experiments falls over investors’ shoulders.
In this model, public administrations become payers for results; that is, they only pay if the intervention get the expected impact. Funds to implement innovative interventions are anticipated by private investors in exchange for possible limited returns. That is why Social Impact Bonds are expected to be the great catalyst for innovation in the public sphere, establishing the basis for relations and collaboration between administrations, social service providers and investors.
Since Social Finance UK launched the model in the United Kingdom in 2010, UpSocial has been proposing it in Spain to various administrations. By 2020, the first Social Impact Bond will be launched in the country.
Lanbide, the public employment service of the Basque Country, will be the first to launch a call for tenders for the implementation of a Social Impact Bond on the prevention of long-term unemployment, thanks to the support of BBK Foundation. The Generalitat of Catalunya and the Barcelona City Council are designing their first SIB, focused on preventing the entry of children into the social protection system, thanks to the support of La Caixa Foundation. The City Council and the Regional Government of Madrid have made explicit their commitment to launch their SIBs in this legislature, starting from addressing the challenge of housing. The Regional Government of Navarra has also made a feasibility plan on children in care, and the regional governments of the Valencian Community and Castilla-La Mancha are exploring the model.
An event addressed to public officials, politicians and institutions was hosted by Madrid City Council, the Open Value Foundation and UpSocial on January 14, 2020. In this event, some of the projects that have been launched in Belgium, Finland, the Netherlands, Portugal and the United Kingdom were studied, as well as the most advanced projects being launched by Spain.
Internationally, more than 130 Social Impact Bonds are being implemented, most of them aimed at finding better solutions to the challenges of employment, housing, health, social protection and justice. In Colombia, the first middle-income country that have implemented SIBs, UpSocial carries out a consultancy to analyse the two that have been launched, and also the Outcomes Fund led by the BID Lab, the Colombian government's Department of Social Prosperity, the Corona Foundation and SECO.
The model of Social Impact Bonds is not without its critics. It mainly works to experiment with new interventions and generate evidence. However, in some countries there have been design errors that must be taken into account when designing others. Some of these mistakes are made clear in The Invisible Heart documentary. UpSocial has participated in several discussions about the documentary, organised by Esade.