The promise of social impact bonds

From the New York Times:

When a government needs to invest in an expensive capital project — a new sewer system, bridge or highway — it issues bonds. Bonds raise upfront money from private sector investors, who are then paid back with interest from the tolls or charges the project will generate.

Until now, no one ever issued a bond to invest in people like Popeye.

Popeye is a short, bearded man of 59 who often wears an earring and a cap.His real name is Robert Innes, but he acquired the nickname 25 years ago in prison. He started drinking at 13, and three years later began living on the streets, which continued until November of last year. When he was on benders, Popeye would steal beer and panhandle aggressively. His untreated heart problems would land him in the emergency room unconscious, and when he woke up would start a fight. He also gave new meaning to the term “repeat offender.” He said he has been incarcerated in his home town of Norwich, England, 118 times, and in Peterborough, where he lives now, 48 times.

Popeye used the prison system for housing, the emergency room for basic medical care and the courts as his support system.

This lifestyle is more than a tragedy for Popeye; it’s a tragedy for taxpayers. Just to keep Popeye alive —never mind helping him to change — was hugely expensive. . . .

A brand-new financial instrument may provide a way out of this dilemma. In September, 2010, in Peterborough, a town about an hour’s train ride from London, the first test began of a new idea that in a very short time has caught the attention of governments around the world.  They see it as a way to provide third-party upfront money for prevention programs they might not otherwise be able to afford.   The idea is called the social impact bond.

It has transformed Popeye’s life. At Christmas, Popeye got the keys to an apartment, and he has proven to be a meticulous housekeeper. He had help learning how to live in an apartment — how to connect utilities and manage his bills. His caseworkers helped him to get an ID card and bank account, and register with a doctor so he could use Britain’s National Health Service. They went with him to appointments and took him shopping (he had been banned from most local stores for his antisocial behavior). He got psychological counseling. He was encouraged to become a volunteer. He is starting cooking classes.

To read the complete article, click here.

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One Response to The promise of social impact bonds

  1. rickbrush says:

    This is a good overview of social impact bonds, which we think have tremendous potential in supporting public health. We are pursuing Health Impact Bonds in a number of areas. We welcome ideas and input: collectivehealth.net.

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