Rotterdam has pioneered the use of social impact bonds (SIB) to tackle youth unemployment.
Social impact bonds are a relatively new financial instrument that bring together a public authority, a social entrepreneur, an evaluator and investors who provide the capital to launch or expand an innovative social service. If the expected outcomes are achieved within a defined time period, investors get back their capital plus an agreed rate of return.
Rotterdam’s Buzinezzclub was continental Europe’s first example of a social impact bond, designed to tackle historically low levels of youth employment in the city. The Buzinezzclub began as a pilot project developed by a local social entrepreneur who, due to the project’s success in reaching out to disaffected young people, was looking for ways to scale up his initiative. At the same time, the municipality was seeking new ways to finance and deliver its services, and together the two parties decided to create a social impact bond around the Buzinezzclub.
There are valuable benefits for all parties involved in a social impact bond: public authorities can develop innovative services with minimal risk; social enterprises can grow and learn; and investors can make good returns whilst doing good.
Unlike other employment initiatives limited by resources to providing help with individual tasks, the Buzinezzclub offers a comprehensive package of support to beneficiaries over a realistic timeframe. With the help of experts and volunteers, young people learn new skills, discover their entrepreneurial capacity and discover opportunities in the industries they are interested in. The programme begins with six months of classes with daily coaching, workshops and training – while participants are still on benefits – and continues until they put their personal plans into action. They become members of the Buzinezzclub for life, and can continue to receive support beyond their step out of welfare.
One of the challenges of establishing a social impact bond around the Buzinezzclub was defining the criteria of success. Together with specialist consultants, the stakeholders developed a statistical model to predict and measure the performance of the SIB. This stated that the investors would get their money back providing that over two years, 160 young people would come off benefits at least three months faster than predicted without support. The social enterprise also invested capital on similar terms.
As a result of the Buzinezzclub SIB, hundreds of young people have been able to stop claiming welfare benefits and embark on new careers. Since its launch in 2013, 60% of beneficiaries have left welfare after participating.
To discover more, please see our case study here.