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Published December 9, 2015

Private investment to boost employment of immigrants

Social impact bond to be used to help more immigrants find work in Finland.

The Ministry of Employment and the Economy and Sitra, the Finnish Innovation Fund, are preparing a project to promote the employment of immigrants through private investment. The aim is that immigrants will enter the labour market quickly and pursue integration training while working. On 3 December 2015, the Ministry published a prior information notice for potentially interested parties to manage the project. 

The project will be funded through a social impact bond (SIB), which is a form of payment by results. In SIB funding, activities are financed by investors who also bear the financial risk. The public sector will only pay for the verified outcome.

A pilot project next spring

A three-year pilot for the employment of immigrants will be launched in spring 2016. It usually takes a long time for immigrants to enter the labour market after integration training. To speed up this process, the new project will build flexible links between work and integration training and explore how to meet employers’ recruitment needs.

“A possibility to work clearly contributes to the well-being of immigrants and their integration into Finnish society. Businesses interested in employing immigrants and providing them with training during the employment relationship are welcome to the pilot project. There could be jobs in sectors with high demand for labour, such as trade, building, property maintenance and care work,” says Ms Sonja Hämäläinen, Ministerial Adviser at the Ministry of Employment and the Economy.

Ministry looking for parties to manage the project

The Ministry of Employment and the Economy has published a prior information notice of competitive tendering to manage the project. Project managers will build the co-operation network required for successful activities and collect the necessary funding from one or more investors. Investors may be private individuals or institutions. The actual competitive tendering will be launched immediately.

The SIB model requires that the project have measurable objectives. The aim of the pilot project is that immigrants will find a job two months after entering integration training. Rapid employment will result in savings in government labour market support and integration training costs, and increase tax revenue. If the objective is achieved, the government will pay a proportion of these savings back to the investors as a return of capital and as a reasonable return on their investment.

“The costs of immigration other than work-related immigration can be reduced by piloting new models of operation and funding. The SIB model enables private capital to be used for activities that the public sector cannot afford,” says Mika Pyykkö, who leads Sitra’s Impact Investing focus area.

Impact investing a new way to operate

For over a year now, Sitra has been building an impact investment model to be introduced in Finland. It has also been preparing SIB pilots together with different partners. As a result of this work, the first SIB project in Finland and in the Nordic countries was launched in November. It aims to promote well-being at work in the public sector. The first investors in the project comprise the foundation Me-säätiö, Sitra and a private financial investor.

The SIB model originated in the UK. It has been applied internationally to prevent the placement of children in care, to support prisoners on release and to promote employment for people with low employability.

The prior information notice of the project has been published in the Finnish public procurement register web portal HILMA at www.hankintailmoitukset.fi/fi/notice/view/2015-027330/ (in Finnish).

Inquiries:

Ms Sonja Hämäläinen, Ministerial Adviser, Ministry of Employment and the Economy, tel. +358 29 504 7112

Mr Mika Pyykkö, Senior Lead, Impact Investing, Sitra, tel. +358 29 461 8259

Ms Taru Keltanen, Specialist, Communications and Public Affairs, Sitra, tel. +358 40 674 3246

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