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‘Social-impact’ bonds headed to U.S.

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In an effort to increase private funding to address social problems, a fledgling philanthropic concept that involves investing in programs that produce results is being studied in the U.S.

With a $400,000 grant from the Rockefeller Foundation, the Nonprofit Finance Fund will study the feasibility of bringing “social-impact bonds” to the United States.

With social-impact bonds, first used in Britain, goals for desires social outcomes are set for proposed programs, which are funded by private investors who bear the risk for the effort’s success or failure.

If those goals are met, investors receive payments from the government, which pays nothing if the pre-set goals are not met by the program.

The initial bond in Britain raised money for a program designed to cut the recidivism rate for prisoners, a result that, if successful, would cut the cost to the government and taxpayers of housing inmates.

“We’ve long known that funding prevention or intervention is typically far more cost-effective than dealing with social issues later in their evolution,” Antony Bugg-Levine, managing director of the Rockefeller Foundation, says in a statement. “As governments face tough cuts and economic troubles continue, we need to be open to fundamental change in the way we address society’s needs.”

The New York-based Nonprofit Finance Fund will use the grant funds to study existing projects, propose models for how the concept could work in the U.S. and analyze the requirements for implementation.

The group also is launching a new online community, open to all, that would provide a forum for discussing the concept and sharing resources.

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