Figure 2.
The process diagram shows preparation phases of a social impact bond from initiation to deployment with key activities, challenges, and solutions. Phase 1 initiation includes presenting project cases implemented in other countries, communicating the social impact bond concept in layman terms, support from external content experts, identification of a societal problem, S I B awareness promotion, network creation and background research, and problem selection. Phase 2 scoping includes identifying root causes behind the social problem, identifying applicable objectives aligned with broader societal solutions, definition of S I B objectives, S I B target group segmentation, and formulation of indicators. Phase 3 operationalization includes estimating causal relationships with available data, modelling uncertainty, modelling the costs of the social problem, and building a compensation scheme. Phase 4 procurement includes time consuming negotiated procurement with multiple commissioners, collaborative procurement of multiple cities, competitive tendering of the project administrator, creating an investment programme, creating a wellbeing intervention plan, and contracting service providers. Phase 5 deployment includes coordinating cooperation with clear roles, responsibilities, and information sharing, operative integration between S I B commissioner and service provider, adjusting intervention plan based on how service impacts work, defining roles for service providers, practical service deployment plan, and service deployment begins. Challenges include convincing decision makers of the potential of S I B s, need for diverse expertise, juridical challenges related to defining which public services cannot be outsourced, insufficient scale of the societal issue to address with a S I B, difficulties in identifying indicators due to wickedness of the societal issue, difficulty defining compensation metrics and expenditure targets, and service centred defined data causing communication issues and challenges in attracting target groups. Solutions include problem aggregation, iterative indicator development, and linking compensation to public expenditure savings.The preparation process with key activities, challenges and solutions. Blue boxes represent key preparation activities for each phase, red rounded boxes highlight the most critical challenges and green snipped-corner boxes indicate proposed solutions
Source: Authors’ own creation