Pay for Success 101

Jitinder KohliCenter for American Progress – Doing What Works

White House ConveningOctober 21st 2011

Traditional financing

Drug treatmentprogram

Helping ex‐

offenders into work

Housing support

Restorative justice

$20m $8m $14m $5m

Government agency 1

Government agency 2

Government agency 3

Government agency 4

Provider Provider  Provider Provider  Provider  Provider  Provider  Provider 

Some issues

• Funding inputs• Hard to know what is working• Even harder to shift money between programs

• Bureaucratic reporting and controls• Effective approaches rarely scale

Pay for Success BondsGovernment 

agency

Investor 1

DealmakerInvestor 2

Investor 3

Provider 1 Provider 3Provider 2

Beneficiary populationBeneficiary population

Govt makes payment if outcome achieved

Dealmaker promises to 

achieve outcome

Dealmaker manages and funds providers

Providers work with beneficiary population and report progress to dealmaker

Investors fund dealmakerDealmaker promises return to investors if successful

Challenges• Complex

• Cannot work for everything– Measurability– Non essential services– Outcomes need to flow in sensible timeframe

• Requires political courage– Flexibility for dealmaker/providers on the ‘how’– Possibility of private sector return– Potentially getting beyond silos

Advantages

• Allows successful social innovations to scale• Removes input controls from providers

• Public money only allocated to approaches that work 

• Helpful in a fiscally tight world

• Leverages private and philanthropic capital

Very early days

• But what’s the potential? 

• Could it be relevant to your world?

• What variations might be needed in your context?