Using social impact bonds to integrate refugees in Finland - will it work?

Three years into the European refugee ‘crisis,’ debate around migration remains both pervasive and polarised. A popular article by Angelina Jolie recently termed our response to the challenge as “the measure of our humanity.” As questions of acceptance now evolve into questions of integration, it is valuable to look at different countries’ approaches to managing one of the greatest challenges of our generation. 

One country that is supporting refugees in a particularly innovative way is Finland, who launched their first social impact bond last year. This blog piece explores the migration context in Finland, followed by the country’s unique response to integrating refugees. It ends with the question of whether it might be appropriate for other countries to follow their lead. 

The Migration Context in Finland 

As a signatory to the 1951 Geneva Refugee Convention, the European Convention on Human Rights, and other agreements, Finland offers protection to international asylum seekers and refugees. For the last 30 years, it has voluntarily partnered with UNHCR to receive a quota of refugees each year. Although the country has not received a large number of refugees overall, the relative rise has been noteworthy. According to Statistics Finland, over 30,000 new asylum seeker applications were received in 2015– ten times higher than the usual annual number. 

Not unlike some other European countries, this has been met by concerns of an ‘islamisation of society,’ a 26% rise in racially motivated hate crimes between 2011 and 2015, and the rise of far-right factions with anti-immigrant sentiments (such as Finland First). In 2017, political tensions heightened when anti-immigration hardliner Jussi Halla-aho was made leader of the government’s coalition partner, the Finns. Prime Minister Juha Sipilä who adopts a pro-immigration approach and has previously offered to host refugees in his own home, was understandably concerned. Several thousand refugees have been deported in the last couple of years amid ongoing amendments to application rules and tightening of asylum procedures.

On the other hand, benefits from Finland’s success as one of the world’s leading welfare states provide great support to both asylum seekers and those granted asylum. These social services are delivered at the municipality level in the form of monthly cash benefits, schooling and healthcare. Integration policies actively provide basic information, enable initial assessments, support personalised integration plans and facilitate integration training. Asylum seekers and refugees gain the right to work three months after filing an application, or after six months of residency (in the absence of valid travel documents). Punkalaidun, a remote municipality in the West of Finland with a falling population, has led the way in promoting ethnic relations and creating employment opportunities for refugees in the countryside. 

Another creative initiative, Startup Refugees has been visiting refugee reception centres. It has already gathered profiles of 1000 refugees in six cities, and now aims to match refugees to employers ranging from mobile gaming companies and think tanks to government ministries and universities. This ties in well with the Government Integration Programme for 2016-2019 which backs using immigrants’ skills to promote Finnish innovation, internationalisation and business growth. Despite some success stories, the unemployment rate for immigrant groups remains two to five times as high as that of native-born Finns.  

Finland’s First Social Impact Bond 

Social impact bonds (SIBs), a form of outcomes-based commissioning, are an emerging way of financing and delivering public services. By bringing in private investors to contribute upfront capital and basing payments on the achievement of pre-agreed results, they focus on improving social outcomes and incurring savings for governments through increased collaboration, innovation and prevention. Although the first SIB was launched in the UK in 2010, there are now over 100 SIBs globally, addressing a wide range of social issues. 

The biggest social impact bond in Europe, worth €14.2 million, in fact focuses on faster employment and integration of immigrants in Finland. Started in early 2017, ‘Koto-SIB’ aims to provide jobs for 2500 immigrants over the course of three years, by matching them to labour shortages in the Finnish labour market. These jobs are primarily in manufacturing, construction, trade and services, where the shortage of skilled workers is particularly acute. Implemented by the Finnish Ministry of Economic Affairs and Employment, the SIB model was designed by Sitra the Finnish Innovation Fund (an independent public foundation supervised by the Finnish Parliament) and funded by investors such as the European Investment Fund, Epiqus, SOK, Tradeka, and Sitra themselves. Besides speeding up employment of immigrants, it pilots new models of education and employment which combine training and work in a flexible way, making it the first of its kind in Europe. 

The impact will be evaluated through a randomised controlled trial with the primary outcome measure being the differences in tax collections and unemployment benefits between control and intervention groups. The hypothesis is that those immigrants who benefit from Koto-SIB (the intervention group) will be paid lower unemployment benefits than immigrants not involved (the control group) while paying more in taxes. This should result in savings for the government, who will then pay 50% of any money saved directly back into the fund.

In addition, a bonus of €1500 will also be paid to investors for each immigrant who has achieved 70 days of training (as outcomes payments). This amount is half of the market price for the training service, which leads to further savings for the government. According to the project’s estimates, the government could potentially save €35 - 40 million over the 6-year period (including the pilot phase), or €70 million in the “best” case scenario.  

Has the SIB been Successful?

While the Finnish Ministry of Economic Affairs and Employment reports that 184 immigrants and refugees have found employment through the initiative so far and up to 659 are part of the program*, it is still too early to say if applying the SIB model to the policy area of immigrants’ and refugees’ economic integration is more effective than other approaches. A fairer assessment of its success can only be made when the project is closer to its end in a year’s time, but there is certainly quite some work to be done if the target of 2500 refugee placements is to be met. Notably, over 80% of those who found employment have continued to work at the same place, suggesting at least some degree of satisfaction with their work. 

Meanwhile, the intervention process is designed well to encompass crucial language training, general career coaching, as well as more specific work skills, and is innovative in its sustained approach. Other projects could find it valuable to target similar outcomes. The process is structured around three modules:

• Module 1 features due diligence, career coaching, language training level 1 and a deep screening of skills over an intensive 30 days period. 
• Module 2 provides 20 to 50 days of sector specific training, with a focus on sector specific skills, in addition to language training level 2, work-life skills and more specific work training. 
• Module 3 is completed in 85 days over three years based on commitment to work relationships, language training level 3 and deep sector-specific skills. 

Four “lines,” or programme variations, are also run in parallel. The Express Line transitions the individual from module 1 to work directly. The Training Line adds training at work and further education. Whereas the Entrepreneurial and Specialist lines also offer tailored support for entrepreneurship and managerial tasks, respectively.

Given that immigrants’ unemployment tends to be higher and more prolonged than that of the native population as well as more prolonged, emphasising customised training and language training in workplaces are highly positive steps. 

Can we apply SIBs to other countries managing migration?

Challenges of integration are legitimately complex and difficult to address, and there is a question of whether such challenges should be addressed by the public sector alone, or whether the private sector has a role to play. If this were the case, private sector involvement could take the form of social impact bonds as seen in Finland, or perhaps other methods like employment for refugees through special economic zones currently being trialled under the Jordan Compact. Or maybe the best option has not been proposed yet.

Regardless of this, it is key to support refugees and immigrants get jobs without the usual obstacles around language, documentation or the right to work getting in the way. Might the Koto SIB be an example to the world of how to support refugees and asylum seekers? This is as yet unclear, but providing resources and seeking to address these great challenges is notable, and innovation in this complex space is highly encouraged. As the world debate on migration powers on, policymakers’ efforts to facilitate integration through employment must not lose steam.

*Epiqus reports that 200 people have found employment while 800 are part of the program.