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Another potential barrier to this pay-for-success approach is that the funding to pay investors their return ultimately comes from government. These investments are not necessarily creating a new pot of money. Rather, they’re transferring the risk from taxpayers to private investors. In the past, government funding for social projects would pay for everything upfront, regardless of outcomes. Now, under impact bonds, they will only pay for results from non-profits after they have been achieved. So, are pay-for-success bonds a truly revolutionary way to fund charitable work, or is it just government funding repackaged?

espite potential shortcomings, these pay-for-success bonds are forcing people to rethink how the not-for-profit sector operates and funds its work. Applying private sector principles to charities is not necessarily a bad thing – many non-profits can benefit from working more efficiently and measuring their results. But whether these new bonds are the mechanism that will transform philanthropy remains to be seen.

While the Big Society Bank will offer capital to help social enterprises scale, it may not provide the right kind of capital for new, potentially ground breaking, ideas. Ambitious start-up ventures require investment to test their models and start paying their way. The Big Society Bank will not be issuing grants so it looks unlikely that intermediaries will, in turn, be able to offer the kind of "soft capital" required to new social enterprises. Largely avoiding the world of social investment, the successful graduate teaching programme, Teach First, secured its founding investments from businesses, government agencies and charitable foundations. This diverse range of sympathetic supporters sacrificed financial return to give the untested vision of Teach First a chance. Other successful start-ups continue to cobble together the finance they need rather than waiting for social investors to meet their needs.

To attract investment to scale, an enterprise needs a clear strategy, a robust model for generating revenue, and economics that scale (or, as the enterprise grows it will simply become bigger, and not better). This is tough; entrepreneurs often need support from some of the 100-plus organisations – identified in the NESTA-commissioned report, Growing Social Ventures – that are dedicated to supporting Britain's 65,000 social enterprises improve, expand or become more resilient. For example, Scottish social enterprise Working Rite was supported by the Young Foundation to develop a financially sustainable business model before it could attract capital to its apprenticeship-style work preparation programme, even though it had achieved better results for youngsters from tough backgrounds than its larger, commercial competitors.

While we welcome the Big Society Bank, the government needs to level the playing field in the ever-tighter fight for government contacts. Shrewd social entrepreneurs – like those behind Enabling Enterprise, Teach First and Working Rite – will need to continue to scrape around for risk capital, and scramble to build robust business models under innovative services. From on high the government declares that social enterprise is critical to the success of the big society, yet on the ground it can feel like "soft privatisation".