SIBs in the Netherlands: Part 1 - State of Play

In this two-part interview with Social Finance NL co-founder Björn Vennema we take stock of the Dutch experience with social impact bonds and reflect on what it takes to move from experimentation to scale. Part 1 of the interview looks at the state of play, while in Part 2 we discuss what is needed to strengthen and grow the SIB ecosystem moving forward.

In 2013, the municipality of Rotterdam partnered with ABN AMRO, Start Foundation, and social enterprise Buzinezzclub to launch continental Europe’s first social impact bond (SIB). The initiative set out to support young people in the local area to find a job, set up their own business or start training, at a time when Rotterdam had one of the highest youth unemployment rates in the Netherlands. Since then, ten other social impact bonds have been launched in the Netherlands (see snapshot below), making it the country with the highest number of such projects after the UK and the US. 

To mark five years of social impact bonds in the Netherlands, Social Finance NL has published a report that looks at the successes and lessons from SIBs in the Netherlands. On his recent trip to Oxford Björn Vennema, Co-Founder and Managing Director of Social Finance NL, sat down with us to discuss his insights from the Dutch experience with social impact bonds.

What have been the main drivers for the development of SIB approaches in the Netherlands?

Björn: The initial development of SIBs was mainly driven by local champions, willing to make a change in society. This was certainly the case for the first SIB that was launched in 2013 and we see that the partners in that SIB have all played a significant role. ABN AMRO Bank and Start Foundation have been investors in the majority of the SIBs in the Netherlands, Buzinezzclub has been the service provider in three SIBs and the City of Rotterdam was the first city to launch two SIBs as well as to dedicate a staff member full-time to work on SIBs and impact investment. 

More broadly, the role of individual champions within local authorities has been instrumental in leading the development of SIB projects. This has ranged from civil servants to deputy mayors that were attracted to SIBs for a wide range of services. In most cases those champions were triggered by the idea that this could be a way to find more innovative solutions to the social issues at hand or break through the system barriers that were in change. 

What is interesting is that so far SIBs have been used mostly as an experimental tool, but we are slowly seeing that they can be used as a tool that can bring about broader systems change within public sector. SIBs are sometimes the catalyst to create that systems change and implement the conditions that are needed to do so. This is sometimes done implicitly, but more government agencies are directly linking the SIB that is being designed, or more broadly outcomes-based contracting, to the way that they work with service providers and a focus on the outcomes of those services. 

For instance, in Rotterdam we have seen that the first SIB was not only successful in itself, but has led to the City contracting the service providers that work in youth unemployment in a direct outcomes-based way, together with external evaluation to measure impact. The service provider in the SIB was also one of the service providers to win a contract there.

What is the role that Social Finance NL has been playing in the development of SIB approaches in the Netherlands?

Björn:  Both Ruben Koekoek and myself (Ruben and Björn are co-founders of Social Finance NL – ed.) have been involved with that very first SIB and Ruben has been the driving force behind the involvement of ABN AMRO Bank in the field, while I was able to work in various roles at ABN AMRO, Deloitte as well as spend time at Social Finance UK. 

In 2018 we decided to take that experience into an impact-first organisation with Social Finance NL to further build the ecosystem of outcomes-based contracting and related social finance methodologies. Most recently, we have been working with and on behalf of the province of Noord-Brabant on setting up an outcomes fund with the objective of helping social enterprises to scale up and thus shape the purpose economy in the province. We expect that the Brabant Outcomes Fund will support the development of at least two meaningful outcomes-focused initiatives, such as social impact bonds, that contribute to a fairer society and a stronger economy locally. 

What kind of projects are being developed using a SIB approach in the Netherlands? How has practice evolved since the first SIB project was first launched in 2013?

Björn:  The majority of projects have focused on (youth) unemployment. This was mainly due to the fact that local authorities are legally and financially responsible for unemployed citizens and improved services could be directly related to a reduction in unemployment benefits. Ten out of the 11 SIBs in the Netherlands are directly focused on employment outcomes, although they do focus on different beneficiaries (young people, ex-detainees, employees with cancer); nine of those have a local authority as the outcome payer, the other two work with the Department of Justice (ex-detainees) and an insurance company (employees with cancer). 

Lately though we’ve seen a strong push to broaden our horizon, which we also see in various projects that are under development. We have launched an outcomes fund with the Province of Brabant that also focuses on mental health and ecological values for example, but we work with several local authorities to develop SIB approaches for young people in youth care, the prevention of debt and in education. 

This widening of scope is needed to gain further evidence for the methodology of SIBs, but also to regain focus on why it is worth developing SIBs. Since the launch of the first SIB, we’ve seen a movement where sometimes a SIB became a goal in itself, because it was seen as an innovative instrument or because it was seen as a way for public organisations to reduce their budget. Part of the reason for us to launch Social Finance in the Netherlands was to regain focus on the SIB as a means to an end, the focus should always be to find (innovative) approaches that better address the complex social challenges that exist in current society.

Continue reading Part 2 - Way forward

To find out more about social impact bonds and outcomes-based financing in the Netherlands, visit the Social Finance NL website. Björn will be sharing more insights from their work on social impact bonds and outcomes funds at this year’s Social Outcomes Conference on 5-6 September in Oxford.