Social Impact Bonds: NYC ABLE Project for Incarcerated Youth
Since the launch of the first Social Impact Bond (SIB) in the UK in 2010, the number of these financial instruments has been on the rise. A SIB can be understood as a financial instrument that pools capital from private investors to fund public social services. The returns for investors from the SIB depend on the achievement of predefined, measurable social outcomes. Given the large number of social challenges, SIBs have tremendous potential and might be the needed tool for combining investors’ interests with social impact and innovation.
One of the most prominent Social Impact Bonds is the NYC ABLE Project, a program aiming to reduce the number of previously convicted adolescents returning to prison. At Rikers Island Jail, New York’s largest jail, nearly half of the released teenagers used to return within just one year. From a governmental perspective, maintaining a prison of this size comes at immense costs. The state of New York spends around 1 billion a year just to operate its prisons. Additionally, when imprisoned, teenagers’ education gets interrupted which weakens their job prospects and generally harms families and communities. A vicious circle unfolds resulting in large social and financial costs. Launched in 2013, the NYC ABLE Project SIB raised close to 17 million dollars from investors. Based on promising study results, most of the money was invested in providing cognitive behavioral therapy (CBT) for the imprisoned adolescents. Investors in the SIB would then be paid depending on the success of the program in reducing the recidivism rate. In contrast to a very similar SIB in the UK, the NYC ABLE Project turned out to be rather disappointing for investors and did not meet its expectations. After the discontinuation of the project, many critiqued that the two-year project timeframe was simply too short and that other forms of therapy might have been more effective.
Even though the NYC ABLE Project did not yield the desired financial returns, I remain very optimistic regarding the concept of SIBs. They constitute an innovative and much-needed method of combining the interest of investors with the important challenge of solving social problems. What fascinates me most about this idea is that social impact and financial return are not mutually exclusive, they can co-exist and work together. I believe that making the fight against social problems financially attractive is the most effective way to solve them. Moreover, the flexibility in designing SIBs makes them very adaptable to most social and environmental problems. Nevertheless, as the NYC ABLE Project demonstrates, there is no guarantee for success. In my opinion, this case perfectly illustrates one of the biggest problems with SIBs: they are not simply scalable from one country to another. A similar SIB that works in the UK does not necessarily work in the US, and vice versa. Their success depends on many variables, which might be difficult to influence, as well as on the measures taken to solve the problem. Besides, one might argue that for the NYC ABLE Project the SIB addressed rather the effect than the cause of the problem. Ensuring that teenagers from structurally weak areas are not forced into criminality in the first place should perhaps have been the starting point. In spite of the challenges, I am convinced that while learning from experience, SIBs will become a crucial tool for solving social challenges. I am tremendously excited to see how these instruments will develop in the future and if they can live up to the big potential I see in them.
