June 29, 2011

Mass. Explores ‘Social-Impact Bonds’ to Finance Projects

Massachusetts is considering a financing approach for social-service projects that would require charities and philanthropists to obtain private financing and show results before getting state money, says The Boston Globe.

Gov. Deval Patrick's administration is examining more than two dozen proposals it has received from nonprofit groups since issuing a call for ideas on ways to adopt the “social-impact bond” approach that Britain is testing.

Investors in social projects could reap healthy returns if governments adopt and begin financing the programs but would lose their stakes if the efforts do not meet predetermined benchmarks.

“We have a new fiscal reality in state government,’’ said Jay Gonzalez, the state's secretary of administration and finance. “We have to find a way to become more effective.’’

Read two Chronicle of Philanthropy opinion columns on the potential pros and cons of social-impact bonds.

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