Social Impact Bonds: Promises versus facts. What does the recent scientific literature tell us?

Interest in Social Impact Bonds (SIBs) and similar performance-based investments has been spreading around the world ever since the first SIB was issued in the United Kingdom in 2010. At the same time, such investments have given rise to questions regarding the complexity and cost of the contracting mechanisms involved, the possible contradictions between the various objectives pursued, and even the validity of the theoretical premises underpinning them (Albertson et al., 2018a). The objective of this paper is to take stock of the existing knowledge about SIBs and similar performance-based investments, through an overview of recent scientific literature. Relying on a targeted review of the literature and empirical studies, the idea is to compile the arguments that have been mobilized to support, nuance or possibly undermine the implementation of SIBs and similar financing tools. The objective is to provide answers to the question: Do SIBs work? And if yes, under which conditions? After explaining what SIBs are, how they function and how they have developed, the authors propose a synthesis of the arguments from recent scientific literature both supporting and criticizing SIBs. The article concludes that despite the possible improvements and opportunities of these bonds, caution is advised in applying them for as long as empirical evidence is insufficient with regard to their effectiveness and the conditions under which they might be considered appropriate.