Social Finance

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.