Social Impact Bonds

Last week, Governor Deval Patrick announced a major new initiative to reduce recidivism rates among young male offenders in the state. Roca, a Chelsea social service agency, is administering the new program. But what’s even more intriguing is how the state plans to pay for the 18 million dollar effort.

It won’t.

So, who will?

Enter Goldman Sachs. The investment banking firm and five other organizations are financing the $27 million dollar project. The initiative is now the nation’s largest so called Pay For Success program, or social impact bond.

Note that I said, they’re “financing” the project. It’s not a grant. It’s a loan. And Goldman and the others expect to be paid back with interest– that is, only if Roca succeeds in keeping young men out of jail.

Other states have tinkered with social impact bonds in the past, but Massachusetts is at the tip of the spear in experimenting with this way of funding social services. A bold new experiment, with big consequences.


Jeffrey Liebman,Malcolm Wiener Professor of Public Policy at the Harvard Kennedy School and director of the Social Impact Bond Technical Assistance Lab.

Jon Pratt, executive director of the Minnesota Council of Nonprofits

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