Advocates of social impact bonds in the US have been spinning madly to explain the failure of the flagship SIB, a $9.6m (£6.2m) investment, into which Goldman Sachs put $7m, which was aimed at reducing recidivism among teenagers released from New York City's notorious Rikers Island prison. The bank could have seen a return of more than 20 per cent.
The goal was defined not as reducing the number of teens who end up reincarcerated, but reducing "the number of days that people are held in jail custody following their initial release by 10 per cent". The teenage prisoners participated in the SIB-supported Adolescent Behavioral Learning Experience (Able) programme, but an evaluation team from the independent Vera Institute of Justice determined that "the program did not lead to reductions in recidivism for participants ... when compared with the matched historical comparison group". In simple English, the recidivism rate didn't budge, so rather than wait to see if additional performance benchmarks might be reached in the future, the implementing agency, the Osborne Association, simply shut the programme down.
Now backers of SIBs are fretting that the highly touted Rikers SIB might derail the expectations of investors or, worse, the anticipated revenue streams to consultants designing and packaging SIBs. The Rikers SIB has been declared a success because data on it generated new insights for government. But the real goal might be not how to keep teens from returning to the prison, but how to keep them out in the first place – possibly by reducing the arrests of black teens for misdemeanours such as loitering and dealing with social problems such as unemployment: the rate for African American youth is 31.8 per cent, twice that of their white counterparts.
For SIB enthusiasts, the attractiveness of recidivism SIBs has suddenly been replaced by concerns over the specific situation at Rikers, characterised by the Urban Institute's John Roman as "uniquely challenging" due to the "disruptive environment" there. One diehard declared the Goldman SIB a "unicorn" – meaning a high-risk hope for success in an improbable situation.
SIBs are still attractive to Wall Street; when they work, they offer a handsome return on investment, dressed up as doing good. Gary Hattem, head of global finance for Deutsche Bank, declared himself undeterred by Rikers: "This is the frontier of something," he said.