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Big-ticket social impact bonds could justify transaction costs

A new report from the Centre for Public Impact says the complexity of the deals and the high cost of evaluation means social impact bonds will continue to need subsidies unless average deal size increases.

The center, a non-profit backed by Boston Consulting Group, found that investors think social impact bonds below $15 million don’t justify their costs.

More than 60 SIBs have launched since 2010, mostly in the U.S. and U.K. The average deal size in the U.S. is $9.6 million; in the U.K., it’s a mere $1.5 million. (In the U.K., every £1 invested has been supported by more than that amount in government grants and guarantees).

Advocates of SIBs believe the model is best suited for social interventions that cost hundreds of millions of dollars “that effectively take over the role of ‘solving’ particular social problems.”

This post originally appeared in ImpactAlpha’s daily newsletter. Get The Brief.

Photo credit: AP/ Jae C. Hong

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