By Chris Ellis and Sara Blumenstein
At Fourth Economy, we are interested in—and experts in—a new generation of funding mechanisms that are enabling the expansion of interventions with proven results. (See these posts from last year introducing Social Impact Bonds and Three Questions to ask to demonstrate impact.)
The key stakeholders involved in a Pay for Success transaction
Last month, my colleague Chris Ellis shared some insight into Pay for Success as part of a larger conversation we’ve been having about innovative financing. Many of our clients are doing innovative work in the public and nonprofit sectors, and have found that thinking creatively about solutions often means facing challenges in securing the necessary resources to implement them. Pay for Success is one such promising model, and it relies heavily on the need to evaluate outcomes – which means that our approach to evaluation needs to be just as thoughtful and innovative as our approach to problem solving. Continue reading “Three Questions to Demonstrate Impact”
A new generation of innovative funding tools is enabling change agents to expand programs that are meeting their community’s needs. Pay for Success (PFS) transactions, or Social Impact Bonds, represent an emerging financing mechanism that is driven by cross-sector partnerships, robust data, and a commitment to outcomes.
PFS utilizes upfront private investment to expand social programs that have proven results. In order to encourage this type of investment in their programs, service providers must be able to use data to show that their proposed intervention measurably improves outcomes for their clients and leads to an avoidance of cost. Additionally, these transactions depend on the collaborative efforts of a diverse set of stakeholders. PFS engages partners from the public, private, and nonprofit sectors in five critical roles: an investor who funds the expansion of the program; a service provider who administers the program; an independent evaluator who measures the effectiveness of the program; a public entity, or other outcome payer, who repays the investment based on the success of the program; and an intermediary who facilitates the partnerships and ensures that the project operates effectively and efficiently. Continue reading “Innovative Financing: Paying for What Works”