How ex-convicts benefit from a Social Impact Bond

In the Netherlands, some forty thousand adults are incarcerated every year. Once they’ve sat out their sentence, a mere 20 per cent of former inmates find a long-term job and many of them become repeat offenders. A Social Impact Bond set up by ABN AMRO, the Ministry of Security and Justice, Start Foundation and Oranje Fonds is going to help former inmates find work and reduce recidivism.

The Ministry of Security and Justice calls it a win-win-win situation. The Social Impact Bond ‘Work after Prison’ is set to help 150 former inmates in two-and-a-half years’ time. This should result in a 25 to 30 per cent decrease in applications for benefits by former inmates (win 1) and a 10 per cent decline in repeat offences (win 2). Moreover, investors in Start Foundation, ABN AMRO and Oranje Fonds will make returns on the resulting savings (win 3).

Dennis van Breemen, programme manager at the Directorate General for Youth and Sanctions of the Ministry of Security and Justice, adds a fourth, surprising benefit: the Social Impact Bond encourages civil servants to think more in terms of results. ‘The manner in which private parties, especially banks, calculate risks has made us more alert. It has taught us to evaluate a project in order to set realistic targets. This is how we discovered that only twenty of all former inmates find long-term jobs. Based on this fact, we were able to formulate our targets.’

Emerging market

‘Work after Prison’ is the third Social Impact Bond compiled and co-financed by ABN AMRO. The first one was launched by Gerrit Zalm in 2013: a project aimed at helping 160 unemployed and unqualified youths in Rotterdam find a job or go back to school. In 2015 a second project followed, helping 540 unemployed youths in Utrecht find a job, get a degree or start their own company. Two more bonds might be launched in the future. ‘The Netherlands will then have seven Social Impact Bonds, five of which were created with the aid of ABN AMRO,’ says Ruben Koekoek, Social Impact Bonds manager. ‘This is a small but emerging market: worldwide, there are some sixty similar deals.’

Koekoek had read about the concept of a Social Impact Bond in an article on bonds in Dutch daily Het Financieele Dagblad and, in collaboration with the city or Rotterdam, introduced the idea in the Netherlands. ‘Two years later, the first bond was launched. It was all over the news at the time.’ That first bond has become quite a success. The first group of 80 youngsters that have found a job thanks to the bond is already yielding a return of 12 per cent.

Programme manager Van Breemen believes these bonds have huge potential. ‘This model can be applied to lots of areas of public policy, although not all social issues are suited for it. The return generated by savings needs to be quantifiable, the project needs to be scalable and you need to avoid perverse incentives that would lead to excessive or inappropriate savings. Basic health care, for instance, would not be suitable for SIBs.’

Best price

Koekoek is also optimistic. ‘The Social Impact Bonds market has grown most strongly in the United Kingdom. Tender procedures are used to challenge the market to solve a social issue based on predefined targets. Entrepreneurs respond in collaboration with social investors who are prepared to bear the risk if a project doesn’t succeed. This enables the government to select the best plan at the best price.’

The Social Impact Bond ‘Work after Prison’ will require an investment of 1.2 million euros. Over the next nine months, reintegration bureau USG Restart, Stichting 180 and Exodus, a network of volunteers, will recruit participants among inmates serving sentences of three to twelve months. These prisoners usually receive counselling from the city, the intensity of which varies from one city to the next. Participants of ‘Work after Prison’ will follow a more intensive programme: USG Restart will connect them to an employer, Exodus will provide support and a buddy, and Stichting 180 will supply the project method and coach the social workers.