DEFINITION of 'Social Finance'
Social finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives. Rather than a charitable donation, these investments take the form of equity or debt financing where the investor seeks both a financial reward as well as a social gain.
BREAKING DOWN 'Social Finance'
Modern forms of social finance can also include some segments microfinance, specifically small loans to small business owners and entrepreneurs in less developed countries to enable a better standard of living for them. Lenders expect to earn a return on their loans in addition to helping improve social outcomes.
Social impact bonds (also known as Pay for Success Bonds or Social benefit bonds) are a specific type of bond that acts as a contract with the public sector in where an obligation is made to pay for improved social outcomes and that result in public sector savings.