The first social impact bond (SIB) in the Netherlands got off the ground recently in Rotterdam. It takes the shape of a new financing instrument, with private investors providing municipal capital to help vulnerable groups in the labour market find employment. The greater the rate of success, the higher the yield. Els Sol gives us a local perspective on this development and warns against investors looking for quick returns.

Els Sol works at the Amsterdam Institute for Advanced Labour Studies (AIAS), an institute for multidisciplinary research and teaching at the University of Amsterdam, The Netherlands and as scientific member of the investment committee of Start Foundation (www.startfoundation.nl). This article is a translation of a publication in Dutch in the 2014 September Issue of the Journal Zeggenschap, 2014, 32-34.

Dutch municipalities have been assigned responsibility for resolving a multitude of social problems including those related to healthcare and benefits. In many cases, the people concerned face multiple problems. The solution requires money and knowledge, neither of which are sufficiently available to the municipality. Take work reintegration for example. Municipalities find themselves facing harsh budget cutbacks in this field. Re-employment programmes, especially those for the unemployed facing multiple problems, are expensive and often require an approach that spans clearly defined municipal budget years. Not surprisingly, driven by budgetary discipline and deep cutbacks, municipalities have shifted their focus to reintegrating unemployed people who can find jobs relatively cheaply and easily. Consequently, more people at a greater distance from the labour market are being left out in the cold. Additionally, municipalities – especially the smaller ones – suffer from a lack of knowledge as to which labour market interventions actually succeed best in guiding their citizens into paid employment. This also ties in with budgetary disciplines that hamstring programmes spanning several years or requiring scaling-up, therefore generating insufficient information to adequately test whether the interventions are successful. Continue reading →