Social Finance Israel
SOCIAL IMPACT BONDS

OVERVIEW

The Social Impact Bond is a financial product which raises capital from private investors to fund not-for-profit organizations who aim to undertake preventative measures in order to reduce the future occurrence of certain social issues such as unemployment, substance abuse, homelessness or prisoner recidivism. If the performance of the not-for-profit organisation is effective, a cost saving is enjoyed by the government. This saving is quantified and a proportion of it is returned to the investor, via SFI.

In this way, five direct benefits are created: the investor may earn an acceptable rate of capital return; the not-for-profit is financed using new, sustainable capital which enables it to scale-up successful social interventions; the government enjoys a cost-saving (with no upfront investment); financial risk is transferred to the private investor; and the “underlying” social-issue is ameliorated.

Therefore, the Social Impact Bond uniquely links the monetary return on the financial product with its social delivery.

These bonds promise Israeli not-for-profits upfront capital for their operations while encouraging them to adopt a measurement system which accurately quantifies their social performance. This will, in turn, create innovation within the Israeli not-for-profit sector and, for the first time, allow investors to accurately correlate their monetary return with the social performance of their investment.

Click here to see the Frequently Asked Questions about the Social Impact Bond.