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Symposium 2012

Solution for Tackling Inequality of Opportunities

The Challenge

Inequality has increased substantially in many countries in recent decades. Spectacular gains in the incomes and wealth of the richest fraction of the population often contrast with severe poverty in ...

Inequality has increased substantially in many countries in recent decades. Spectacular gains in the incomes and wealth of the richest fraction of the population often contrast with severe poverty in the same country. Inequality of outcomes often goes hand in hand with inequality of opportunities, as poor people endure various forms of social exclusion, including unequal access to education and health care, high rates of youth unemployment or precarious work and an absence of social recognition.

Fund social projects through Social Impact Bonds (SIBs).

It is still an open question how far policies aimed at improving opportunities for poor people can actually yield cost savings or revenue increases for governments and how the latter could be monetized via enforceable contracts, within reasonable timeframes and risk levels. But if these information uncertainties and operational challenges could be met, it will be possible to issue social impact bonds (SIBs) to finance such social investment policies.

So-called social impact bonds (SIBs) or "pay for success" financing approaches, aim to attract private investors to raise funds for social investments, in particular programs for early childhood care and education, without charging the target groups and without burdening households. They are contracts with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings. Private investors cover the upfront costs and assume the performance risk. Repayment to investors is contingent upon achieving the desired social outcomes.

SIBs could reap three different types of returns: (i) the economic return of improvement in school readiness with all its implications for the life success of SIB scholars cumulating in aggregate growth and job creation; (ii) the financial return in form of the reductions in health expenses and special education costs; (iii) a societal return through the involvement of local and national business-leaders and philanthropic institutions into comprehensive and benevolent coalitions that know what works and does not work in early child development and education.

    Related Solutions

    Solution
    Symposium 2012

    Add quality targets to quantity targets in education and provide access to high-quality education through education vouchers for poor children and free choice of institution.

    Add quality targets to quantity targets in education and provide access to high-quality education through education vouchers for poor children and free choice of institution.

    Add quality targets to quantity targets in education and provide access to high-quality education through education vouchers for poor children and free choice of institution.

    Polity, Academia
    Solution
    Symposium 2012

    Publicly-funded early childhood programs should complement family and social policies that provide support for disadvantaged families.

    Publicly-funded early childhood programs should complement family and social policies that provide support for disadvantaged families.

    Publicly-funded early childhood programs should complement family and social policies that provide support for disadvantaged families.

    Polity, Civil Society