The Communities and Local Government department expects to run a pilot of the social impact bond in the spring.
The bond, proposed by enterprise consultancy Social Finance, offers third sector organisations the opportunity to attract finance for a project backed by the promise of a Government payout to bond holders based on the success of the project.
Barbara Follett, a local government minister, told Third Sector the department was doing a feasibility study on whether the bond would be effective in a local setting and hoped to follow it up with a local pilot.
"We feel that the social impact bond is a very good idea," she said. "We're supportive of removing the dependence on government for finance wherever possible."
Follett said the department was also researching how local authorities could provide more support for social enterprises.
