Nonprofit Finance Fund Issues Report on First Generation of Pay for Success

April 19, 2016

April 19, 2016—Nonprofit Finance Fund (NFF) has released a comprehensive free report on the first 10 Pay for Success (PFS) projects that have launched in the United States. Pay for Success: The First Generation details how and why communities have applied this new approach to address critical social issues including early childhood education, homelessness, and criminal justice and recidivism.

"Pay for Success has generated a flurry of 'hype' and 'hate' disproportionate to its limited applications in the field to date," said Jessica LaBarbera, Vice President of Nonprofit Finance Fund. "We believe that the legacy of these early projects will be their role in lighting the way toward a social sector more focused on collaboration, outcomes, and a commitment to understanding and paying for the full costs of positive change." 

Pay for Success is an approach to contracting that ties payment for service delivery to the achievement of measurable outcomes. In the U.S., all of the current PFS projects have been accompanied by a form of social innovation financing, often referred to as a Social Impact Bond, in which investors provide upfront financing for the delivery of services and are repaid only if the services achieve a pre-agreed upon set of positive outcomes. 

The report includes a series of comparative graphics and observations on the market's development to-date. It examines project goals and project design; the partners and stakeholders involved; the underlying data, evidence, and evaluation plans; the governance and investment structures, including repayment terms and investor profiles; and project costs.

"The market is too young for us to draw conclusions; our goal is to equip anyone considering PFS with information on the promise, realities, and complexities of these projects," said Dana Archer-Rosenthal, NFF's Pay for Success Program Manager and lead author of the report. "The challenge—and opportunity—in the next phase of the PFS market’s development is not to advance a particular financial innovation, but to collectively improve our ability to deliver better results." 

To create the report, NFF drew on experience as a PFS educator, partner, and investor and conducted research using project documentation, publically available information, and stakeholder interviews. Over the past five years, NFF has conducted more than 200 PFS trainings, presentations, webinars, workshops, and convenings across the country for service providers, governments, and investors. NFF also manages the Pay for Success Learning Hub,, the leading national repository for education and information on Pay for Success. NFF's work on the report was made possible with the support of the Corporation for National and Community Service’s Social Innovation Fund (SIF). 

"This report is an essential guide for anyone interested in better understanding Pay for Success and how this new approach to tackling entrenched issues is coming to life in communities across America," said Damian Thorman, Director of the Social Innovation Fund. "SIF is proud to support Nonprofit Finance Fund as it brings to light how this new and promising practice of Pay for Success works, where it works best, and where it might not – all to support the movement toward a social sector that better delivers high-quality, effective services to people most in need." 

NFF has released a 4-minute video guide to accompany the report, which can be found here.

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