Social Impact Bonds: The Next Phase of Third Sector Marketization?

TLDR

Austerity politics have shifted social provision to the third sector, prompting governments to use innovations like social impact bonds to fund service delivery and drive broader public‑sector reform and marketization. This paper clarifies what social impact bonds are, traces their Canadian emergence and cross‑national roots, and examines their potential to enhance non‑profit policy voice and community‑needs responsiveness.

Abstract

The politics of austerity has pushed the third sector to the centre of attention as governments turn to non-governmental institutions to pick up the social deficits created by economic recession and the state’s retreat from social provision. Some governments have begun supporting alternative service funding through such innovations as social impact bonds (SIBs), a financial product used to encourage the upfront investment of project-oriented service delivery. This paper provides a clearer understanding of what SIBs are and traces their emergence within Canada while linking them to their cross national origins. SIBs are situated conceptually within broader contemporary developments within the non-profit sector, particularly the agenda of public sector reform and third sector marketization. The analysis focuses on the potential impact of SIBs on non-profit policy voice and capacity to represent and meet diverse community needs as it is this function that to a significant degree defines the third sector’s ability to be innovative.