Narratives of Promise, Narratives of Caution: A Review of the Literature on Social Impact Bonds

Abstract

Social Impact Bonds (SIBs) are a new mechanism for delivering public services. This article reviews the emerging SIB literature in high‐income settings. It identifies three distinct narratives: a public sector reform narrative; a financial sector reform narrative; and a cautionary narrative. These are analyzed relative to three themes: public versus private values; outcomes contracting; and risk allocation. The first two narratives are complementary and offer a ‘win‐win’ portrayal of SIBs. The third narrative challenges this dominant commentary by highlighting potential risks. There is limited empirical evidence on active SIBs to support these narratives. SIBs may have the potential to align public and private interests while improving outcomes for people affected by entrenched social problems, but this is yet to be established and appears less probable than the third more cautionary narrative. More empirical research is needed to consider the potential risks, drawbacks, benefits and alternatives of SIBs in different settings.

Widening perspectives on social impact bonds

“…What's more, they are expected to enable greater accountability and deliver better outcomes than conventional forms of government purchasing, such as block contracting. Seen this way, SIBs can offer a "winwin" solution for all stakeholders, where socially minded investors can foster promising preventative interventions while providers receive the necessary funds to scale-up existing work, and government purchasers only pay for successful programming (Fraser et al 2018b). However, in practice, public services contracting is complex and there is limited evidence in support of paying entirely on outcomes from the performance-pay literature (Lagarde et al 2013).…”

“…The traction SIBs have gained in policy circles also relates to their emergence in a difficult economic climate and is apparent in a recent literature review on SIBs in highincome settings that identified three emergent narratives (Fraser et al 2018b). The first narrative was a "public sector reform narrative" premised on the view that public, nonprofit and voluntary sector organisations have important shortcomings in terms of service design, delivery and accountability, that require private sector management techniques and values, such as financial incentives and "market discipline" to remedy these issues (Liebman 2011;Mulgan et al 2011).…”

“…In contrast, the third, "cautionary narrative" is more prevalent within the academic literature, and diverges from the first two by taking a more critical view of SIBs on ideological grounds as being antithetical to public values and enabling the "financialisation" of public services (Lake 2015;Warner 2013;Tse and Warner 2018). Further, the third narrative takes issue with SIBs on pragmatic grounds from issues related to outcomes-based contracting and the transfer of risk between public and private parties (Fraser et al 2018b). The contrasting discourses surrounding SIBs further highlights their malleability and the possible consequences of their use as a mechanism to scale-up outcomes-based contracting or performance-pay which could also erode governance and transparency through the financialisation of public services (Warner 2015;Tse and Warner 2018).…”

Social Impact Bonds and the Perils of Aligned Interests

“…Research and scholarly debate about SIBs has mainly been conceptual so far (Fraser et al 2016). Empirical research has mostly been in the form of evaluation reports, with only a few academic studies (Arena et al 2016;Cooper et al 2016;Edmiston and Nicholls 2017) analysing existing SIBs with empirical methods.…”

“…Empirical research has mostly been in the form of evaluation reports, with only a few academic studies (Arena et al 2016;Cooper et al 2016;Edmiston and Nicholls 2017) analysing existing SIBs with empirical methods. The conceptual arguments concerning SIBs have been following distinctive narratives (Fraser et al 2016): A public-sector-reform narrative located within broader theories of Public Management, a private-financial-sector-reform narrative located within broader theories of social entrepreneurship, and a cautionary narrative sceptical of new public management and social entrepreneurship.…”