A social impact bond (SIB) is a novel impact investment model aiming to increase the effectiveness of solving social problems. A private investor will invest in the solution of a social problem proposed and implemented by a non-governmental organisation. The state will pay the investor back its investment with interest if the solution turns out to be more successful than the existing state intervention.

In the end, the shortlist includes three issues, namely juvenile delinquency, domestic violence, and the mistreatment of infants (parental misbehaviour). Based on the analysis of information collected, it is recommended that the issue of juvenile delinquency be chosen for the pilot in Estonia. The decision is based on the following criteria:

  • There is a defined and quantifiably verified group of youth with a registered pattern of misbehaviour. Additionally, a control group (a group who will not receive intervention) can be identified to conduct impact assessment.
  • Measures that the public sector has currently taken to address the issue of juvenile delinquency have been identified.
  • It is possible to assess the costs on the implementation of current interventions and potential cost savings from future interventions.
  • Several evidence-based social programs in other countries have shown good results and can be used as model cases.
  • The Estonian public sector is motivated to try out innovative solutions and contribute to the development and implementation of social programs.
  • There are capable service providers in Estonia willing to start implementing the evidence-based program and measure its impact.

Although the analysis concludes with only one social issue being selected for the SIB model pilot, the two other issues – domestic violence and the mistreatment of infants (parental misbehaviour) – are also potentially suitable. Before applying the model, however, it is advisable that further research is carried out on the impact of social programs implemented so far. In addition, more data needs to be collected to evaluate the scope of the problem and the costs for the implementation of these interventions.