Rotterdam has cut youth unemployment with a social impact bond, through which professional coaches helped 60% of the bond’s first cohort find work and get off government benefits. Local job training firm Buzinezzclub mentored 160 unemployed young people, helping them to identify skills, find work or develop business plans. Rotterdam’s 14% unemployment rate is among the the highest in the Netherlands.
Results & Impact
Results from the first cohort showed that 47 out of 80 young people have started careers and are no longer of benefits, which allowed for a total reduction of 464 days of unemployment benefits. The 60% reduction in unemployment could increase, as when results were released in 2016 some beneficiaries were still applying for jobs. Results for the second cohort have not yet been made public, but if the group is as successful as the first, investors will get the maximum rate of return, 12%.
The City of Rotterdam, Buzinezzclub, ABN AMRO Social Impact Fund, the Start Foundation, Bonds Rotterdam Foundation, Deloitte, Ortec Finance
The social impact bond aimed to get 160 young people aged 17 to 27 off government benefits. Buzinezzclub, the social impact bond's service provider, mentored the beneficiaries over six months by helping them identify skills, devise personalised career paths and develop business plans. Through the social impact bond, Buzinezzclub was able to scale up its services for young people in Rotterdam, allowing the city to test an innovative service with little risk. Investors ABN AMRO Social Impact Fund and Start Foundation provided capital for the scheme. Bonds Rotterdam Foundation managed funding, and Deloitte and Ortec Finance evaluated the project. The program cost $4,300 per beneficiary to run.
Rotterdam, the Netherlands
Low-income people, entrepreneurs, young people
Cost & Value
Rotterdam raised $740,000 in investments
Rotterdam has reduced youth unemployment with a social impact bond that helped 60% of an 80-person cohort find work and get off benefits.
At 14%, Rotterdam has one of the highest unemployment rates in the Netherlands, of which young people aged 18 to 27 make up a large part. Rotterdam supports the unemployed with basic benefits totalling $15,300 annually, which amounts to $42.50 daily.
In its first social impact bond, Rotterdam partnered with Buzinezzclub, a job training firm, to tackle youth unemployment.
In a social impact bond, private investors pay for a government-sanctioned intervention – in this case, getting young people off unemployment benefits. If the desired results are met, investors are paid back their initial investment plus a return. For governments, social impact bonds create a new revenue stream by attracting socially conscious investors, and allow government to test innovative services with little risk.
Rotterdam partnered with Buzinezzclub, the two-year bond’s service provider, due to its track record of placing young people in jobs or education. Through the social impact bond, Buzinezzclub was able to scale up its services for young people in Rotterdam. The city government and Buzinezzclub raised $730,000 in capital from the ABN AMRO Social Impact Fund and social investor the Start Foundation. Bonds Rotterdam Foundation managed funding, and Deloitte and Ortec Finance evaluated the project. The program cost $4,300 per person to run. The remaining funds were allocated for the extra costs of running the program.
Buzinezzclub and the city of Rotterdam worked together to develop a statistical model that would predict and measure performance using the expected length of unemployment for each of the 160 participants, taking into account factors such as whether the participant has a degree and the length of time he or she has been on benefits. The model prevented selection of participants who would have found a job without the intervention. A median reduction across 160 participants was used as a baseline for outcomes payments.
The social impact bond began in March 2013. One hundred and sixty young people aged 17 to 27 who were on benefits – many of whom did not have basic qualifications, came from a troubled background or had debt – were chosen for the initiative. Buzinezzclub helped the 160 young people identify interests, learn new skills and develop business plans. While the program was focused on fostering entrepreneurship, the coaches also helped participants find jobs and post-secondary education programs.
Experts and volunteers provided participants with six months of classes with daily coaching, workshops and training. Each recipient worked with a coach to develop a plan tailored to their professional development, and will continue to work with them even after they are off welfare benefits.
Results from the first cohort were released in 2016. They showed that 47 out of 80 young people have started careers and are no longer of benefits, which allowed for a total reduction of 464 days of unemployment benefits. The 60% reduction in benefits beneficiaries could increase as some young people from the cohort are still applying for jobs. If the second group is as successful as the first was, the investors will get a maximum rate of return. Returns increase in line with successful outcomes with a cap of 12% annually.
Investors provided 60% of capital, and the remainder was supplied by Buzinezzclub. According to Social Finance, the service provider’s financial involvement further incentivised the social enterprise to improve outcomes.
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