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Yesterday the UK Ministry of Justice released for the first time the official results of the Peterborough Social Impact Bond – the world’s first-ever SIB and the inspiration for many more SIBs to follow and CGD’s work on Development Impact Bonds. Independently verified findings show that the package of services funded by the SIB led to an 8.4% reduction in reconviction rates for ex-offenders from Peterborough compared to a national comparison group. But those who were anxiously waiting to see if investors under this first SIB would get paid returns for successful results will have to wait two more years: although the results were positive and are above the minimum threshold set by the project of a 7.5% reduction, the reduction was not big enough to earn investors an early return at this point.   

Under a SIB, investors pay for program costs and government – in this case the UK Ministry of Justice – pays them back only when results are achieved, with returns proportionate to success. The 8.4% reduction in reconviction rates is the result for the first cohort of prisoners who were released from Peterborough and eligible for SIB-funded services, but these results will now have to weighed with the results of a second cohort in 2016 to determine whether investors will receive a return (for more background, see this press release by Social Finance, the manager of the Peterborough SIB).*

The current numbers are an encouraging indication that investors will receive a return before the project ends, as a group of investors in the Peterborough SIB said in the Financial Times. Explaining why they chose to invest in the SIB, they said:

“Many of us have grant-funded charities and projects in the past to help fill the void in resettlement support for prisoners serving sentences of less than 12 months. In the SIB we saw an opportunity to demonstrate on a much more ambitious scale that support for these prisoners not only reduces crime and the numbers of future victims, it makes financial sense as well.”

While the verdict is not yet out, the latest results are an indication that the package of interventions that ex-offenders are receiving through the SIB – which are being delivered in a way that is more flexible, data-driven, and responsive to individuals’ needs – are beginning to make a difference in reducing crime and improving the lives of a vulnerable and underserved group of people. And until we’re sure that’s the case (with high statistical significance), public money won’t be spent.

Perhaps one of the most important lessons from this experiment so far is that doing things in a completely new way, which requires bringing together a diverse group of partners, is simply hard and takes time. My colleagues Nancy Birdsall and Bill Savedoff previously wrote about the critical moment in an outcomes-based financing program when the results are first released, in a blog post aptly titled “How to be Patient when it Matters”: the first official Peterborough results provide a reminder that solving complex social problems is neither easy nor predictable, and there is a need to maintain realistic expectations and to test a range of programs in different settings before we draw conclusions about how effective the model is. 

CGD is using the lessons from this and other SIBs to inform the design of Development Impact Bonds, which are being used to address complex problems from girls’ education to sleeping sickness, and to understand the ways in which a flexible, long-term and investment-backed funding model can improve the quality of development outcomes. We congratulate Social Finance and the One Service, the service providers under the Peterborough SIB, for the groundbreaking work they have done so far both in improving prisoner rehabilitation outcomes in the UK and generating evidence about what works when it comes to testing new business models to solve social problems.

*Here’s the detailed explanation: The results measure reconvicting rates for one cohort of 936 men released from Peterborough Prison between September 2010 and May 2012. The contractual agreement is that reoffending would have to be reduced by 10% for the first cohort, compared to a matched 1:10 control group of 9,360 short-term offenders nationwide with similar characteristics, to ensure a statistically significant reduction in reoffending at a 95% confidence interval, in order to trigger outcome payments to investors. The 8.4% reduction is significant at the 90% level. When results are measured in 2016 across a second cohort of about 1000 men each, a 7.5% reduction in reconviction events across the two groups – the ultimate goal of the project - will be sufficient trigger outcome payments. Investors will receive outcome payments from the UK Ministry of Justice and Big Lottery Fund if there is a 10% reduction in reconvicting events for the second cohort compared to a matched control group or if the total reduction of the two cohorts is 7.5% or more.

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.