Pay for success financing (PFS), often part of a social impact bond, is a new concept in which private investment supports the delivery of preventive services that save the government money — and those savings are used to repay the investment.
PFS is attractive because it has the potential to finance innovative evidence-based services while ensuring that taxpayer dollars will only be spent once the desired outcomes have been achieved. This article draws an important distinction between financing (raising capital) and funding (paying for results), and discusses the funding implications for government leaders.
Any government organization considering funding a PFS project must answer the questions of how to define savings and how to capture them. Financing, in terms of external investment, can only occur after these questions have been answered.
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