What are the advantages of a SIB?

Combining comments from our interviews with providers and experts, and other groups’ research[1], we have summarised some of the advantages of SIBs for delivery organisations, compared to other types of financing such as standard Payment by Results contracting, fee-for-service and grants.

1. Investors carry the risk and bring expertise and scrutiny

  • Investors bear the financial risk which would be carried by the delivery organisation in standard payment by results contacting
  • Upfront capital from investors means small providers can participate, who would not be able to otherwise in standard payment by results contracts
  • Funding can provide capital to scale up operations
  • Scrutiny of investors leads to capacity building for improved performance management and service redesign
  • Strong foundations are put in place to measure social and financial benefits
  • New-found skills, confidence and connections can unlock future funding opportunities

2. Deal structure offers flexibility, innovation and upside

  • Funding for innovative programmes, and proof if they work
  • A great deal of flexibility in the delivery model, especially with an active board
  • Potential of upside, in case of out-performing

3. Longer-term funding means more stable and predictable revenue

  • Most SIBs have timelines of three to seven years
  • Enables providers to improve financial planning rather than depend on government budget cycles or granting timelines

 4. Partnerships

  • Partnership brings wide range of expertise (provider consortia, investors, intermediary) and improved ways of working
  • Foster a culture of collaboration, combining services to best serve the population
[1] Social Impact Bond Technical Guide for Service Providers, 2013: MaRS Centre for Impact Investing.


Next: Provider-led and commissioner-led SIBs