How Will Social Impact Bonds Work?

Social Impact Bonds as a way to solve social ails seems to be a problematic approach at best. It may be problematic the same way democracy is problematic: “Democracy is the worst form of government, except for all the others.” - Winston Churchill. But for now I’d like to take a critical look at this idea.

First, how do you decide which issues are addressed? This question - to me - is the biggest question of all. There are so many issues which nonprofits address that do not align with any particular political leaning, and there are many that function in direct opposition to party lines but make for a more civil society. Do you avoid the difficult issues simply because some political leanings will fight against them? What will that do to the fabric of the nonprofit sector?

Second, how do you decide which organizations are chosen to address these issues? If the government chooses a social issue that not enough nonprofits address how will they properly address it? Would they expect certain nonprofits to scale up to address the problem on a larger scale? If so, what happens to the organization should the funding run out? It seems that a lot of support would be needed to get a nonprofit to scale up to create any kind of national impact. Who is providing that support?

Third, how do you formalize evaluations for those organizations? Each organization across the country is going to be localized - tailored to the issue at the ground level. A consistent mode of evaluation simply might not be possible. At what point is the government funding a nonprofit to simply be absorbed into the government? Will these organizations have to change to meet the requirements of their evaluations?

Largely this idea brings up the problem of permanence. What is the point of shifting to this mode of addressing the problem? It seems that a lot of uncertainty would be created by this approach. If the issue is not important enough for the government to create an actual entity to solve it, why would they intervene in the funding of nonprofits? The argument is that the funding will be more direct with more modes of evaluation. I’m skeptical.

Do you think Social Impact Bonds are a viable avenue for solving social problems?