To increase the sustained employability of vulnerable populations in Bogotá, Cali, and Pereira (Colombia), Instiglio was contracted by IDB/FOMIN, to design the first SIB in a low/middle income country in late 2016/early 2017. The objective of this Social Impact Bond (SIB) was to achieve greater cost-effectiveness in the employability processes of the ‘difficult placement’ population. The SIB was also set out to be used as a learning and knowledge development tool for Prosperidad Social and other Governments.
Type of Project
RBF Design or Implementation
The lack of employment is still a widespread problem in the region regardless of the advances made in the last 10 years. Despite significant economic growth in recent years (average growth rate for 4.2% between 2000-2014), inequality remains a significant issue in Colombia (Gini index of 0.52 in 2015). If vulnerable populations had access to education, health and employment, inequality would be drastically reduced. However, unemployment among the most vulnerable is still problematic. Youth unemployment rate (15-24 years old) in Colombia remains one of Latin America’s highest, reaching 16.5% in 2016.
In this context, the first Social Impact Bond (SIB) in a developing country seeks to increase effective job placement and job retention for people living in poverty or in a state of vulnerability, who do not have a formal job, have graduated from college, and have not participated in any Prosperidad Social employability programs. The SIBs.CO program in Colombia consists of a number of SIBs aimed to be implemented over the next 5 year. The program also counts with two additional components: market-building and dissemination of learnings.
The first SIB aims to achieve greater cost-effectiveness in workforce development projects for difficult to place populations (while also serving as a learning and knowledge development tool), by funding interventions which aim to ensure long-term employment outcomes for vulnerable populations in Colombia.
This project has illuminated the opportunities, limitations and barriers of RBF instrument’s implementation with central government entities.
Instiglio designed and evaluated the “Employment Alliance” (Alianza por el Empleo) pilot in 2014 -2015 with Fundación Corona, Activos, and Fundación Mario Santo Domingo which was the basis for the design of the Social Impact Bond. Instiglio started conversations with the IDB /MIF and SECO in October 2015 in order to scale up the pilot and was hired in 2016 by the IDB/MIF to provide technical assistance to Prosperidad Social, IDB/MIF, and relevant stakeholders on the design of a Social Impact Bond to reduce unemployment of vulnerable population in targeted cities. This included leading conversations with stakeholders regarding the structuring of the outcome metrics, price per outcome, payment function and verification mechanism.
The ultimate aim of the project is to develop a market for investments in social programs which will be able to scale up the Government’s work and take on the risks associated with innovation. In addition, this is the first Social Impact Bond in a developing country, which provides a proof of concept for the use of this instrument in developing countries in workforce development. This project will hopefully build momentum on the experimentation and adoption of the model in international development.
In other words, the project will test key hypotheses on how to effectively structure the model, best engage stakeholders, and best add value to the beneficiaries of the program.
- “Colombia leads the developing world in signing the first social impact bond contracts” (The Brookings Institution) March 2017
- Official Press Release (Spanish version) March 2017
- “Lanzan los primeros bonos de impacto social en Colombia” (El Espectador – in Spanish) November 2016