Ministry of Economic Affairs and Employment: Integration SIB – employment of immigrants through financing agreements based on social impact bonds
Ministry of Economic Affairs and Employment
Object of procurement
Employment of immigrants
Impact of procurement
The goal is to employ 2,500 immigrants over a three-year period (2017–2019) and help employers find the competent employees they need. If the project is successful, it will enable the state to save EUR 28 million by the end of 2023, as well as helping immigrants integrate into Finnish society.
Implemented by the Ministry of Economic Affairs and Employment, the experiment facilitates the employment of immigrants by means of private capital. The experiment makes use of financing agreements based on social impact bonds (SIB). The funds are collected from investors, who also bear the financial risk related to the project. The state only pays for results – that is, cost savings accumulated in the public sector.
Goal of procurement
- To employ 2,500 immigrants over a three-year period and help employers find the competent employees they need.
- To help immigrants integrate into Finnish society through training and employment.
Parties involved in the procurement (client side)
Ministry of Economic Affairs and Employment, Impact Investing team at Sitra, Hansel Oy
PROCUREMENT METHODS USED
- Based on competitive bidding, the Ministry of Economic Affairs and Employment selected Epiqus Oy to manage its Integration SIB project. In cooperation with the service providers it selects, Epiqus is responsible for finding jobs, providing training to immigrants and collecting funds for the operations. TE offices will guide customers to participate in the experiment.
Terms and conditions
- Measurable targets have been set for the employment of immigrants, and the achievement of these targets is monitored closely.
- The Ministry of Economic Affairs and Employment will only pay for results – that is, when an immigrant is employed.
The rapid employment of immigrants reduces the state’s labour market support expenses and the cost of integration training, as well as increasing the accumulation of tax revenues. If the targets of the Integration SIB project are achieved, the ministry will transfer some of the savings to a SIB fund, which is used to return the capital to the investors, along with reasonable returns. Employers will be provided with competent employees, and immigrants will integrate into Finnish society.
Customer’s comment / Lessons learned
In an interview with Uusi Suomi, Jari Gustafsson, Permanent Secretary at the Ministry of Economic Affairs and Employment, says that this type of funding model is excellent for various pilot projects. According to Minister of Employment Jari Lindström (Blue Reform), the goal is to start a project based on the same model for the employment of long-term unemployed people during the autumn. (link: https://www.uusisuomi.fi/kotimaa/244348-jyrki-katainen-hehkuttaa-suomalaista-kotouttamishanketta-mullistaa-onnistuessaan)
Financing agreements based on social impact bonds (SIB) are suitable for procuring services when the goal is to procure outcomes instead of performance. Private capital makes it possible to make upfront investments in wellbeing – that is, operations intended to promote and prevent. At the moment, in addition to the Integration SIB project, two SIB projects are in progress in Finland. Their goals are related to wellbeing at work in the public sector and wellbeing in families. Projects under preparation include an environmental project, for example.
- Focus on outcomes instead of performance
- The client only pays for actual results
- Private capital enables upfront investments
- Paying only for results ensures cooperation between service providers and prevents partial optimisation