New Public Policy Financing Models: Innovative or Ineffective?

What are the effects of Social Impact Bonds on the social service programs they finance?

Project Summary

What are Social Impact Bonds (SIB) and what are their effects in the sector where they have emerged? Under a SIB or a “Pay for success” financing scheme, a private financier funds a social service program with the possibility of a return on investment, or, in other words, making a profit or a loss, contingent on outcomes or impact. Programs regarding employment are most attractive for this type of funding, as they are easier to measure.  Yet, does this practice create better social programs, and does it advance innovation in the areas it funds, or do SIBs deliver worse services because financiers bring a private sector logic to a public policy challenge? This SIB-effect has not been studied. This study concentrates on labour market programs and compares the outcomes of SIB programs and non-SIB programs with regard to reemployment, long term income and job quality. This could give the answer to the question whether the SIB-effect has a positive or negative impact on our society.

The main research questions of the project are:

  • What are the differences between SIB and non-SIB programs?
  • Do SIB programs yield quantitatively different outcomes from non-SIB programs?
  • For all the above, are there significant differences in SIBs across countries and why? 

In order to find the answers to these questions a blended methodology will be applied. Those research questions related to the impact of SIB financing will be assessed with quantitative methods, and those questions related to differences in implementation will be assessed using qualitative methods. Specific questions and data sets will be developed in both instances, which will be tied together in a concluding analysis. 

Academic Output


The impact of social impact bond financing

Social impact bonds (SIBs), also known as Pay for Success, are an innovation in Pay- ment by Results contracting. Investors finance programs and are repaid based on the “SIB effect,” which includes changes in outcomes attributable to financing. We generate a quantitative estimate of this part of the SIB effect for two active labor market programs in the Netherlands and Switzerland. Comparing program impacts within providers using SIB and non-SIB contracts suggests financing has positive impacts on public benefit receipt, employment, and income. Qualitative research suggests this is because SIB contracts increased pressure for all involved parties, leading to the institutionalization of selection and greater resources for SIB-financed services. Contracts with high pressure, like SIBs, may compromise both performance requirements and the potential to measure performance. We examine the implica- tions of these findings in relation to agency and stewardship theories and highlight the significance of SIBs as multilateral as opposed to bilateral contracts.


Why is impact measurement abandoned in practice? Evidence use in evaluation and contracting for five European Social Impact Bonds

Despite broad consensus on the importance of measuring “impact,” the term is not always understood as estimating counterfactual and causal estimates. We examine a type of public sector financing, “Social Impact Bonds,” a scheme where investors front money for public services, with repayment conditional on impact. We examine five cases in four European countries of Social Impact Bonds financing active labor market programs, testing the claim that Social Impact Bonds would move counterfactual causal impact evaluation to the heart of policy. We examine first how evidence was integrated in contracts, second the overall evidence generated and third, given that neither contracts nor evaluations used counterfactual definitions of impact, we explore stakeholders’ perspectives to better understand the reasons why. We find that although most stakeholders wanted the Social Impact Bonds to generate impact estimates, beliefs about public service reform, incentives, and the logic of experimentation led to the acceptance of non-causal definitions.


Contested Social Impact Bonds: welfare conventions, conflicts and compromises in five European Active-Labor Market Programs

Over the past decade Social Impact Bonds (SIBs) have attracted much pub- lic policy and management research interest and debate. This article draws on the Welfare Conventions Approach to explore the diversity of five SIB- financed Active Labor Market Programs in four European countries using comparative case study methods. We identify a tension between the requirement to align civic and financial interests in SIB-financed programs alongside a drive to reform public sector procurement in a more entrepre- neurial direction. We suggest that the diversity of SIBs emanates from the political struggles in implementation processes stemming from a plurality of welfare conventions that actors need to align and compromise. SIBs are built within historically grown “institutional contexts” that are themselves on the move over decades of welfare state reform, and processes of marketization – and thus far from homogenous.


Public–private partnerships in Social Impact Bonds: facilitating competition or hindering transparency?

The use of Social Impact Bonds (SIBs), which introduces the potential for investor profit in public service provision, has been widely discussed. Some argue that SIBs might promote government transparency because outcome data collection and evaluation are part of contractual terms. On the other hand, some argue that SIBs might hinder government transparency because more contractual parties might lead to more uncertain data ownership and because the profit motive transforms information into a competitive advantage. This paper looks at SIBs in five countries, examining how transparency differed between SIB and non-SIB financed programmes at the same social service provider. On the positive side, SIBs led to more and longer collection of outcome data and the publication of evaluations. On the negative side, it was found that SIBs tend to generate significant obstacles to the release of data to academic researchers and that sponsored evaluations do not measure impacts.

Other Output

Social Impact Bonds 2.0? SIBs Growth in Europe May Reflect Politics and Lack of Accountability (Policy Brief)

The first Social Impact Bonds were launched about ten years ago. Much has happened since. Economic and social upheavals followed the 2008 financial crisis. Then came the COVID-19 pandemic.

These events compounded new and increasing social needs including ageing populations, the rise of long- term health conditions such as diabetes, high rates of unemployment for young people, a mental health epidemic, plus loneliness across the generations and homelessness. This transformed landscape makes now a timely moment to think again about Social Impact Bonds and their future development.

This series of briefings on the future of Social Impact Bonds has been produced by the Policy Evaluation and Research Unit at Manchester Metropolitan University and the Price Center for Social Innovation at the University of Southern California. The series editors are Professor Chris Fox and Professor Susan Baines from the Policy Evaluation and Research Unit and Professor Gary Painter from the Price Center for Social Innovation.

Research Team

Debra Hevenstone
Bern University of Applied Science

Michelle Beyeler
Bern University of Applied Science

Matthias von Bergen
Principal Member
Bern University of Applied Science

Alec Fraser
Principal Member
London School of Hygiene and Tropical Medicine

Wojtek Przepiorka
Principal Member
Utrecht University

Craig Churchill
Associated Member
International Labour Organization

Patricia Richter
Associated Member
International Labour Organization





Policy domains



Austria, Germany, Great Britain, Netherlands, Switzerland

Host Institution