Facing the consequences of an upcoming Brexit, we realise that the relationship between the UK and mainland Europe has always been intense and complicated.
Compared to the rest of Europe, the Dutch have always been very close to the United Kingdom. Not only geographically, but also historically, culturally and economically, our two nations are closely connected. Both nations have explored the oceans and not many know that in the 17th century, England had a Dutch King by the name of King Willem III. Even today, the United Kingdom is the second most important export country for the Netherlands (€52 billion) and we share ownership of the two biggest Dutch multinationals; Royal Dutch Shell and Unilever. If we look at the upcoming market of social finance, we can observe that the United Kingdom is miles ahead. But the Dutch delta can also be a frontrunner in growing the movement of social finance and Social Impact Bonds in particular, to mainland Europe.
Since 2012, the idea of social entrepreneurship and social finance has gained popularity in the Netherlands. In 2012, Social Enterprise NL was founded and in December 2013 ABN AMRO, together with her partners, launched the first Social Impact Bond of mainland Europe. Since then, the movement has been growing slowly but surely. There is an increasing demand for a special legal status of social entrepreneurs, several impact first funds have been launched and this week the sixth Social Impact Bond of the Netherlands has been announced.
Why Social Impact Bonds are popular in the Netherlands
First of all, the Netherlands has one of the world’s most comprehensive welfare systems. Because we pay relatively high benefits for unemployed citizens, the savings on benefits can also be high when the unemployed are successfully reintegrated into the workforce.
Secondly, Social Impact Bonds came exactly at the right time. In the last four years, the Dutch government decentralised many tasks to municipalities. Since then, unemployment benefits and youth care are executed and paid for by municipalities. This gave municipalities a strong incentive to find interventions which could reduce the costs of these new responsibilities. Each of the ten biggest cities looked into the possibility of pay for success contracts and three of them set up Social Impact Bonds.
Thirdly, the Dutch have a culture of cooperation and public private partnerships. Most of the Dutch live below sea level and for centuries we fought together in our battle against the sea. The Dutch truly believe that this common battle united labourers, employees, and the government to cooperatively solve problems. We call this the Delta model (poldermodel).This tradition makes it easier for entrepreneurs, investors and the government to work together towards new Social Impact Bonds.
From closed to open partnership
However, those closed partnerships can also be a disadvantage in accomplishing the best social outcomes. Most Social Impact Bonds are constructed in a partnership with investors, entrepreneurs and the government. Through these partnerships, some great interventions are funded. But closed partnerships can’t guarantee the best social outcomes for the government. Therefore the Dutch should follow the English example and start a more thorough procurement procedure, in which the government can remain in charge by tendering pay for performance contracts. Investors and entrepreneurs can team up and try to hand in the best proposal. Through this procurement procedure, we as a society get the best results for the lowest price. Furthermore, like in the United Kingdom, the government should invest in their workforce, so they have the opportunity to gain the skills and expertise to set out the right question into the market and to negotiate with the different market players.
Even though the United Kingdom is leaving the political European Union, they are still leading the international social finance coalition. The Dutch Delta is a fruitful breeding ground for social finance and impact bonds in particular. However, before scaling up, it is important that the right procedures are in place and that Dutch public officials have the right technical expertise to get the best deals out of the market. For this, we have a lot to learn from the UK, whether they are in or out of the EU.
Ruben Koekoek works for the Public Sector Clients team of ABN AMRO Bank. ABN AMRO initiated the first Social Impact Bond in continental Europe, together with the municipality of Rotterdam. ABN AMRO is involved as an investor and structurer in four of the six Social Impact Bonds in the Netherlands. Please read more about the ABN AMRO efforts on Social Impact Bonds at www.abnamro.com/en/socialimpactbonds.