Finland’s children’s welfare social impact bond
Promoting preventative care
Case study
Finland
Social Impact Bond (SIB)
The Children’s Welfare Social Impact Bond (Lapset-SIB) in Finland uses private investment to fund preventative child welfare services across five municipalities. Designed to reduce harm to children and lower the cost of expensive remedial care, the SIB enables municipalities to pay only for successful outcomes.
Context and problems addressed
In Finland, child welfare and protection services are primarily remedial, leading to interventions that are often too late, after the child has likely already suffered some kind of harm. In addition, these services are expensive, with the highest costs associated with foster care. This cost is borne by municipalities, who are responsible for the provision of child welfare services. It is estimated that removing one child from foster care results in EUR 43 000 of annual saving for municipalities. Municipalities nevertheless face financial constraints to transition from remedial to preventative approaches.
Intervention and financing model
To address this challenge, Finland launched the Children’s Welfare Social Impact Bond, also known as Lapset-SIB, in January 2019 for a period of 6 to 12 years. This SIB aims to promote the welfare of children, young people, and families across five municipalities: Helsinki, Hämeenlinna, Kemiönsaari, Lohja, and Vantaa. It also intends to reduce the harm to children and the cost of expensive remedial services. The SIB is designed to provide upfront private investment to fund novel preventative services without impacting on the funding required for remedial services in the short term. If pre-specified outcomes are achieved, the municipality should save money on the cost of remedial services. Part of this saving will then be used to repay the investment fund, with interest, which allows municipalities to pay only for successful outcomes, ensuring cost-effectiveness.
The intervention involves multiple service providers, including SOS Children’s Village and Icehearts, that deliver tailored programmes to address specific needs within each municipality. Investors contribute to the project through a private equity fund through which services are financed. As of January 2020, the fund raised a total of EUR 5 million with investment from eight Finnish organisations. The five municipalities involved in the SIB each pay for outcomes that are achieved in their programmes, with a maximum possible outcome payment of EUR 10-12 million.
Creating a single SIB structure – while having five distinct projects – enabled to make it more appealing for investors as the risk is shared across different municipalities with different approaches.
If pre-specified outcomes are achieved, the municipality should save money on the cost of remedial services. Part of this saving will then be used to repay the investment fund, with interest, which allows municipalities to pay only for successful outcomes.
Key outcomes and associated measurements
The results are monitored by measuring improvement in well-being and financial savings generated for municipalities. Despite the SIB being at an early stage, wellbeing data already indicate a significant improvement in the well-being of young people and families who benefited from the support and services provided through the SIB.
Additionally, it is also apparent that the new operating model has influenced municipal service culture, procurement practices and costs, as well as the well-being of children and young people through prevention and by identifying service gaps.
So far, approximately EUR 8.5 million has been invested in interventions and approximately EUR 4 million in performance-based bonuses have been paid for effectiveness. The programme has already enrolled 600 children and young people. A longitudinal study is underway to determine the long-term cost-effectiveness of these preventive measures.
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