Community Development Innovation Review

April 2013

Pay for Success: Opportunities and Risks for Nonprofits


Across the United States, a variety of social sector stakeholders are looking to “pay for success” (also known as pay for results or pay for outcomes) approaches to enhance the reach and impact of social programs. As a contribution to this national conversation, McKinsey & Company recently published a comprehensive study on the potential for social impact bonds (SIBs) in the U.S. In discussions of the study’s findings, stakeholders repeatedly stressed that nonprofits are likely to continue providing the majority of social services in the U.S. for some time, even if for-profit or hybrid social enterprises are growing in number and importance. In particular, nonprofits will continue to be the primary providers of programs for poor and vulnerable people, including homeless people, troubled youth and youth aging out of foster care, and low-income seniors. This is why it is critical to understand how Pay for Success (PFS) can strengthen nonprofits’ work and what risks it might create for them.

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Other articles in this issue

Community Reinvestment Act (CRA) Banks as Pioneer Investors in Pay for Success Financing

The Real Revolution of Pay for Success: Ending 40 Years of Stagnant Results for Communities

Pay for Success is Not a Panacea

The Promise of Pay for Success

Social Impact Bonds: Lessons Learned So Far

Pay for Success: Understanding the Risk Trade-offs

The Ethics of Pay for Success

Learning from the Low Income Housing Tax Credit: Building a New Social Investment Model

Using Social Impact Bonds to Spur Innovation, Knowledge Building, and Accountability

Social Impact Bonds: Using Impact Investment to Expand Effective Social Programs

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Success Begins with a Feasibility Study

Government’s Role in Pay for Success

Rikers Island: The First Social Impact Bond in the United States

Human Capital Performance Bonds

Pay for Success: Building On 25 Years of Experience with the Low Income Housing Tax Credit

Can Pay for Success Reduce Asthma Emergencies and Reset a Broken Health Care System?

Supporting At-Risk Youth: A Provider’s Perspective on Pay for Success

Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation

Bringing Success to Scale: Pay for Success and Housing Homeless Individuals in Massachusetts

Making Performance-Based Contracting Work for Kids and Families