UNDP Serbia is experimenting impact investing through Youth Employment Bond together with Finnish Innovation Fund Sitra.
The high cost of youth unemploymentThe youth unemployment rate is very high in Serbia, which requires more attention and also innovative ways to tackle the challenges. The youth unemployment rate in 2015 was 43.2 %, which is significantly above the general unemployment rate in the country (18.2 %
Having 4 out of 10 young people (ages 15-30) neither in employment, education or training (NEET youth) costs the Government over EUR 1.6 billion a year. You read it right- EUR 1.6 billion. This figure includes costs of various unemployment related social benefits and foregone income taxes (EUR 0.6 billion or 0.5% of Serbia's GDP) and foregone wages and productivity loss (EUR 1 billion).
This cost outstrips current investment in active labor market aimed at the youth and does not even account for indirect costs such as social isolation, loss of skills and
Long-term unemployment has a particularly adverse effect on youth and their position on the
To tackle the challenges and negative impacts of long-term youth unemployment, UNDP together with Finnish Innovation Fund Sitra and the Government of Serbia is designing a Youth Employment Bond pilot with the Social Impact Bond (SIB) mechanism. Social Impact Bond is a
Impact investing opens up an innovative way to engage
Social impact bond modality, one of the instruments of impact investing, reduces the funding risk of
The first SIB was launched in 2010 in
There are successful examples of youth employment projects with SIB modality. For example, the ThinkForward
Finnish Innovation Fund Sitra has launched two SIBs in Finland on occupational wellness and fast integration and employment of immigrants. In addition, they are currently developing three more bonds focusing on
To justify the activities and estimate the impact that could be created through impact investing, Sitra has estimated the cost of some current welfare problems to the Finnish Government, which could be prevented with early interventions: For example, child in custody care EUR 100.000/municipality, social marginalized youth EUR 20.000/municipality or physical inactivity EUR 1-2 billion and smoking EUR 1.5 billion cost for the society annually. SIB modality shifts the focus from paying for activities to paying for results. "A change of mind set is still needed in public sector to start paying for the
Youth Employment Bond in partnership
The Finnish example to promote integration and fast employment of immigrants through SIB to avoid a long unemployment period raised the interest of the partners in the Government of Serbia. The Government of Serbia is looking for new innovative ways to tackle the challenges Serbia is facing and creating jobs and promoting entrepreneurship is high on the agenda. The Youth Employment Bond is responding to this challenge.
To reach out to partners, UNDP Serbia together with Sitra and the Embassy of Finland organized an
In addition, a task force with relevant stakeholders, such as Office of the Prime Minister, Ministry of Youth and Sport, Ministry of Labour, Employment, Veteran and Social Affairs and National Employment Service, has been set up to support the development process of SIB.
UNDP and SITRA have embarked on designing the pilot for Serbia, based on similar principles of Finnish SIB modality, applied to Serbian conditions. Detailed analyses are under preparations on the financial and legal framework as well as on the service gaps in the youth employment services. The business rationale is that approximately only a fourth of the currently unemployed youth is covered by the active
The Youth Employment Bond brings together different actors from private, public and development sectors with
P.S. A
Author: Elina Jarvela
Alternative Finance Lab (AltFin Lab) is an internal startup, run out of UNDP Istanbul Regional Hub for Europe and CIS