The Department of Work and Pensions has awarded two contracts worth £7m to the social investment body Social Finance to run two new social impact bonds.
The bonds will fund two programmes that help provide access to education and training for about 2,500 14 and 15-year-olds.
The money will come from the DWP’s Innovation Fund, which backs new payment-by-results schemes to tackle youth unemployment.
Under the social impact bond model, all the cash needed to fulfil the contract will be put up by investors, meaning that delivery organisations do not need to risk their own capital. If the charities succeed, the investors will get their money back and take a share of the profits.
Investors in the two contracts include the Barrow Cadbury Trust, Berkshire Community Foundation, Big Society Capital, Bracknell Forest Homes, Bridges Ventures, CAF Venturesome, the Esmée Fairbairn Foundation and the Impetus Trust.
Social Finance said that it was unable to provide details about the potential profit margin for investors.