SIBs in the Netherlands: Part 2 - Way forward

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.

What are the main barriers to mainstreaming the impact bond model in the Netherlands? How can these be addressed?

Björn:  We identified three main barriers towards mainstreaming this approach. First of all, SIBs have been developed bottom-up across outcome payers. This in itself is not a barrier, but it has been hard to share learnings or facilitate co-development. We think there are opportunities to organise capacity building better for potential stakeholders and create funding that can facilitate more different outcome payers. The Life Chances Fund in the UK would be a good example to look at for our central government, to allow for further scaling of SIB approaches. 

The second barrier we saw was a lack of transparency in deals; giving the public more insights into the deals and agreements will allow for more shared learnings and easier future implementation. 

Finally, all active SIBs have struggled with low referral rates to the programmes, for a number of reasons. Partially this might change when addressing a wider variety of social issues, but it also means that we need to think through more flexible referral procedures and ways to adapt the target groups when external circumstances change.

There have been 11 SIB projects launched in the Netherlands to date. From the experience in the Netherlands, what is the potential of SIBs to transform the way public services are provided?

Björn:  There is a huge potential for SIBs to deliver on systems change. With the first 11 SIBs we’ve not always seen this potential being utilised as well as one might want to, however they have succeeded in sparking enthusiasm across the field and deliver first case studies to further build upon. With Social Finance NL we now aim to get deeper into the core of the social issues and develop the best methodologies to tackle those issues. 

This will mean that other solutions are also going to be outcomes of this process, but typically when a SIB is a good match the reason is that a systems change is needed that a SIB is able to deliver to. In this light we usually also find that for government, the process of developing a SIB already creates a lot of value in the way that they think about valuing and contracting for their policy areas. SIBs allow them to take a more holistic approach and work with different partners than they would otherwise do.

In your report, you urge government and other key stakeholders to include a transparency clause in SIB contracts as an indispensible condition. Why do you think this is important and what is required to bring more transparency to the field in the Netherlands and globally?

Björn:  For us, a basic principle when working with public money is that this should be done in a transparent way. SIBs have the potential to create more clarity on how spending directly relates to social outcomes in ways that in traditional systems are hard to do, but this requires transparency in the financial and outcomes aspects of the deals. 

Furthermore, working on a SIB provides all partners with countless lessons, both in the design and execution phase. It has proven hard to transfer those lessons across stakeholders or even across different government bodies. Particularly work around contracts and research done, this is troublesome as a lot of SIBs have now gone through the process of reinventing the wheel. When it is your primary goal to find better ways of addressing social change with the full ecosystem, as ours is, this can only be done when you implement full transparency in those contracts to allow all parts of the ecosystem to benefit from this, but more importantly create the opportunity to further scale successful solutions that help beneficiaries that are in the most vulnerable positions in society.

What does the road ahead look like for SIBs in the Netherlands?

I think we will see SIBs and outcomes-based contracting scale up further in the future. It can be a tricky balance at times as we need enough scale to allow for a sustainable market and create the conditions for a SIB to flourish, however we can never prioritise scale over bringing about social change that actually works for the local beneficiaries.  

Over the coming years it would be great to see more central government agencies pick up the topic of outcomes funding, either directly or in a facilitating capacity to more local authorities. We see a growing appetite for SIBs at all levels of government in the Netherlands and it would be great to see an outcomes fund being launched by central government, following the launch of the first regional outcomes fund by the Province of Brabant this year. This will also allow us to focus more strongly on some of the more complex social issues such as youth care and debt. Other thematics that we see a growing appetite for are healthcare and development aid. Impact bonds have the opportunity to be game changers for both fields, but the size of the issues in those fields will require scale as well. If done right, with a strong focus on impact, we can see a lot of work being done in the Netherlands in both of those fields over the coming years.

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.