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As many nations learn to live with COVID-19, intensified budgetary pressures and uncertainty continue to influence policy discussions today. In parallel, many existing inequalities were exacerbated and brought to the fore by the pandemic, ranging from health to economic outcomes across regions, and their complexities leave little doubt that financial constraints will remain considerable in the years to come. 

A recent report by Government Outcomes Lab (GO Lab) and Chartered Institute of Public Finance and Accountancy (CIPFA) explores innovative financing mechanisms for delivering social outcomes under such circumstances. The report identifies various innovative market-based approaches that unlock additional funding to serve the public as a potentially valuable mechanism to explore. In this blog, Wouter Vos (Co-founder of Rikx) introduces their local marketplace for social outcomes piloted in Rotterdam, the Netherlands.

What is Rikx? 

Rikx is a local marketplace for social outcomes, directing sustainable private investment into projects that are expected to improve employment opportunities for local residents. Developed against the backdrop of persistently high unemployment in Rotterdam, Rikx offers a digital platform to which citizens and social entrepreneurs can bring projects that facilitate access to the local job market through training and employment opportunities. These projects are first appraised to assign a monetary value to outcomes by a group of independent experts. Projects that meet the criteria are then listed on the platform for investors to fund (through purchasing outcomes). Investors include companies seeking ways to fulfil social responsibility objectives as well as philanthropies – or even individuals. The projects currently listed on the Rikx platform focus on employment and skill development, and range widely in terms of target cohort and industries.

In effect, Rikx acts as a nexus between local stakeholders by addressing their challenges and facilitating collective action to bring about social impact.

  • For municipalities: Rikx provides a way to deliver policy objectives through increasing and sustaining private investment to alleviate budgetary pressures.
  • For social entrepreneurs and citizens: Rikx is a reliable source of funding for their projects.
  • For companies: Rikx is a simple way to meet CSR ambitions and the obligations of social clauses in public procurement (in Rotterdam, companies with public procurement contracts above the threshold need to invest 5% of the contract value into creating job opportunities for those excluded from the labour market).
  • For social investors: Rikx provides reliable and impactful investment opportunities.

How is the impact ‘priced’? 

The impact of each selected project is assessed by a team of experts using quantitative and qualitative analysis. Appraisal processes focus on 3 key aspects of the project:

  1. the reach (how many beneficiaries?),
  2. the depth (intensity of the intervention?) and
  3. durability (how long will the impact last?).

To ensure cost-effectiveness, the team examines the total costs of projects against their expected impact, resulting in a score-based ranking of projects to inform the selection of projects. The price is then set such that 75% of projects (ranked in order of cost-effectiveness) are listed on the platform. A more cost-effective project can therefore generate additional funding through Rikx marketplace. This mechanism incentivises social entrepreneurs to deliver maximum impact with the lowest possible costs.

How do investors purchase social outcomes? 

Target outcomes of the selected projects are listed as Rikx ‘tokens’ on the online marketplace platform for buyers ranging from investors, private companies, philanthropies, and individuals. Once purchase of these tokens reach a certain threshold, a proportion of funding is made available to deliver the projects. The outcomes are monitored against pre-agreed monitoring and evaluation framework throughout the delivery, and the remaining funding is released only upon the first portion of target outcomes have been achieved (outcome-based payments). By linking the latter portion of funding to verified results, it seeks to ensure effective delivery and rigorous evaluation without making the process overly resource intensive.

Why is Rikx a potential alternative to Social Impact Bonds (SIBs)? 

Rotterdam has been an early adopter of SIBs in continental Europe, launching the region’s first Social Impact Bond (SIB) in 2013. The Buzinezzclub SIB aimed to support skills development among the unemployed youth. However, Rotterdam has since moved away from the model. SIBs are seen as relatively costly due to the lengthy process of design and implementation, which make them potentially impractical for some projects (for example smaller initiatives).

This is where Rikx comes in as an alternative solution. Rikx can help overcome some obstacles such as insufficient and unstable private investment, a lack of incentives for collective and outcomes-focused action, and limited space for innovative ideas to flourish. It works similarly to SIB by focusing on outcomes rather than inputs and activities, but it seeks to simplify the design and implementation processes to facilitate more localised, inclusive, and efficient delivery of projects. Meanwhile, independent appraisal and evaluation as well as continuous monitoring of projects by a group of independent experts ensure credibility of projects. When information asymmetry among stakeholders hinder trust, Rikx can offer the missing link to facilitate collaboration.

What is next for Rikx?

Rikx is at an experimentation phase with a grant provided by Bloomberg Philanthropies, and the team is seeking ways to foster Rikx ecosystems across continents. To meaningfully scale digital marketplace for social impact, we need to:

  1. Foster ecosystems that identify and nurture outcomes-oriented projects: Municipalities will need to invest in the work of credible organizations working to deliver social impact locally.
  2. Secure availability of buyers: Cities will need companies committed to investing in local social impact and/or that are contractually bound to deliver social impact.
  3. Identify policy and regulatory gaps that can be best served by a marketplace: This could be a policy like the Social Return Obligation (social clauses in public procurement) in Rotterdam, a fiscal benefit, or a Council-led campaign.