What are social impact bonds and how do they work?

An update to Social Impact Bonds in Australia including Australia’s first SIB focused on homelessness. (AHURI brief)

Last updated 21 Jan 2020

In 2017 the Australian Government announced it would provide $10.2 million over 10 years to partner with state and territory governments to trial the use of Social Impact Bonds (SIBs). As part of that commitment SIBs funded a number of innovative programs, including ones aimed at improving housing and welfare outcomes for young people at risk of homelessness.

What are social impact bonds?

Social impact bonds—also known as social benefit bonds—pay a return to an investor when an agreed social benefit outcome has been achieved by a service provider. These social benefits might be anything from improving conditions for people experiencing chronic homelessness to improving employment outcomes for long-term unemployed young adults.

The return to investors is partly generated by the cost savings to government, that is the reduction in costs to government in dealing with a social issue due to a SIB-funded program compared to the costs that would otherwise have been required. Payments to investors are conditional on the service provider actually achieving good results.

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