The Federal Government and the states are paying close attention to a NSW plan that addresses big social problems through community programs.

The funding model undertaken by the Baird Government in NSW uses new financial instruments called “social impact bonds” to bring investor funding to community programs.

If the community programs then save Government money, extra funds are paid out as a return to investors.

The portion of the savings returned is calculated based on benchmarks set by the Government.

It has already seen investors get returns up to 8.9 per cent in NSW.

Reports say Queensland and South Australia have similar programs on the way, with Western Australia looking on keenly.

Social Services Minister Scott Morrison has indicated that the Federal Government is interested too.

The South Australian Government has begun negotiations with homelessness services for a potential program, and the Queensland Government has unveiled a two-year pilot program of social bonds also on the issue of homelessness, as well as Indigenous issues and re-offending – an area the Western Australian Government is interested in.

Most jurisdictions are looking at the potential for the bonds in the areas of aged care, mental health and chronic health.

There is plenty of praise around for the social impact bond schemes, though some market players say they are concerned about the structure, name, valuation and risks.

In NSW the bonds have been successfully used to fund programs including The Benevolent Society's Resilient Families and UnitingCare Burnside's Newpin program.

Both aim to keep children out of foster care.

Scott Morrison has told ABC reporters that the Federal Government could look to the private investment model to help in areas of social housing and unemployment.

“[Social impact bonds] recognise that the challenges we have in addressing social challenges go well beyond the public sphere and we need the innovation, the accountability and the discipline that comes from private investment in this area,” he said.

But, he added, there must be a framework to support it.

“For social impact bonds to work there has to be a rigorous and accountable model,” Mr Morrison said.

“There is a real appetite among investors to get involved in this.”