Not all innovations in the social finance space originate in the UK or US. Frankfurt-based Roots of Impact came up with a new version of Social Impact Bonds (SIBs).
What is the issue? Social enterprises often have the problem that they are creating value … and most of it is enjoyed by the society without a proper payment model. Economists talk about public goods, mixed goods and private goods in this context.
What are Social Impact Incentives (SIINCs) doing? They are basically a payment to the social enterprise to keep on doing what they are doing. The additional income stream is linked to the social performance and gives the social enterprise more entrepreneurial and financial flexibility to better scale their business.
Worth considering for other projects? Even the largest development agencies have limited budgets and need to monitor and improve the effectiveness of their programs. SIINCs are a tool to fund the scaling of promising social enterprises to reach economies of scale and sustainability as result. Moreover, they can be a further component of the toolbox of hybrid finance which overcomes the segmentation of grants, investments and public subsidies.