Social impact bonds (SIBs) are an innovative way for nonprofits to fund programs and services by attracting private investors. Investors provide upfront capital and get repaid based on the achievement of agreed outcomes. Nonprofits should consider SIBs to scale programs, focus on mission rather than fundraising, and tap a new pool of investors.
Identify a program that drives measurable impact.
Investors want outcomes, not outputs. Select a program, like training refugees as nursing assistants, with concrete results that benefit society. This helps win over investors and governments, who repay investors.
Understand and leverage your investor base.
Consider who wants to see change in your cause area, like healthcare, and may invest for both social and financial returns. Note that many investors value SIBs for the former reason, as they are driven by mission impact. Engage current donors as potential investors, as they already believe in your work.
Negotiate with your local government.
Discuss opportunities to implement an SIB for one of their grant-funded programs. Argue that an SIB lets them fund outcomes rather than activities while also allowing nonprofits to focus on mission. Some governments now prefer SIBs to traditional grants.
Rigorously evaluate your outcomes.
Well-evaluated programs attract more investors by demonstrating effectiveness. Work with third-party evaluators to analyze outcomes, ensure transparency, and prove success to investors and governments who will repay based on agreed metrics.
Address risks like costs, sustainability and evaluation. Applying for SIBs requires time and money!
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