Paradoxes of Social Impact Bonds

Social Impact Bonds (SIBs) have alternatively been portrayed as a promising tool to improve the functioning of welfare systems, or as an instrument of neo-liberalism that threatens to undermine them. Recently, a more nuanced understanding of the promises as well as pitfalls of SIBs has developed, as both practical experiences and published empirical evidence about implemented SIBs have increased in number. We aim to contribute to the development of such an understanding by analyzing practitioner reports on SIBs. We identify two key paradoxes of SIBs. These paradoxes centre on statements that cannot both hold true for the very same SIB: (1) flexible but evidence-based services; and (2) cost-saving risk transfer to private investors. We conclude by discussing how those paradoxes have been resolved in existing SIBs, which strategies of de-paradoxification may turn out to be paramount in future, and how positive aspects of SIBs can be preserved while defusing their more problematic ones.