In Palestine, skills training that works

Our thanks to Jalil Hazboun (Finance for Jobs Consulting Services) for also contributing to this blog.

* This article was updated in November 2022 to reflect the latest learnings.

Unemployment in Palestine is stubbornly high, especially for educated youth and women, in part due to a mismatch between skills required by employers and those available among young graduates. This mismatch exists despite limited job opportunities overall; a situation made worse by Covid-19 in a country that relies heavily on tourism to its holy sites. 

A better match between skills and employer needs would increase both employment and private sector productivity. Through Finance for Jobs (F4J), a Palestinian Ministry of Finance project financed by the World Bank and implemented by DAI Global, Social Finance UK designed an employment development impact bond (DIB) that provides skills training and employment readiness services that would better match training to employer needs. An impact bond is a results-based financing tool that allows donors to procure services based on actual results, rather pay for activities or inputs, such as in traditional grant mechanisms that are prevalent in Palestine. 

This mechanism requires socially motivated investors to provide working capital to local service providers that provide such services, that would otherwise not be able to do so, due to their limited financial capacity. The F4J impact bond is implemented by 9 local Palestinian Service Providers, with oversight from a dedicated performance management company, Finance for Jobs Consulting Services, through funding from four social investors, who pre-finance service delivery through the impact bond: the European Bank for Reconstruction and Development (EBRD), the Palestine Investment Fund (PIF), Semilla de Olivo (a Palestinian diaspora Fund based in Chile), and FMO (the Dutch entrepreneurial development bank). 

Those investors pay for a portfolio of employment services, including skills training, and are repaid if – and only if – independently verified results are achieved. Incentives to achieve tangible employment results are strong: the impact bond is structured so that the investors make a significant loss unless they meet ambitious targets for the number of trainees achieving sustained employment status. 

The DIB only recently completed its second year of implementation, and although the programme is still ongoing for at least another year, strong results have been achieved; over 400 young Palestinians are now in new employment. Crucially, over 300 of those employed have now been in sustained employment for more than six months. This is the key measure of success for the programme, as it is the point at which an employee becomes less likely to leave their place of work and is an indication of employer satisfaction. The programme also emphasises female employment; to date, 40% of all employment is secured by women, including sustained employment. 

The programme was to trial a new approach to demonstrate that it could readily be scaled up to tackle much larger employment needs. A World Bank blog highlighted the early successes of this pilot, including how the inherent adaptability of the impact bond delivery model enabled it to quickly and effectively reprogramme its training when Covid-19 struck. Additionally, a rigorous Independent Impact Evaluation is underway, commissioned by the World Bank, to assess the DIB’s effectiveness as a tool for tackling unemployment through innovative financing.

Since its launch in May 2020 the key elements driving the success of the programme are: 

1. Job-focused selection of training providers and sectors: Providers are contracted for their ability to get trainees into jobs, with a focus on their connections with employers (mainly private sector), and the number of sustained jobs they commit to securing. This approach differs in two key ways from traditional input or activity-based training programmes:
   
   – The criterion for selecting providers is the number of sustained jobs secured, rather than the number of people trained;
   
   – Variation in sectors and skills training. The sectors for which training is provided are not decided in advance but are based on the ability of Service Providers to provide proof of sustained jobs, while providing added value to targeted youth and/​or employers. The DIB is sector agnostic; providers work across a wide range of sectors and target a variety of job types, including health, education, ICT, construction, light manufacturing, business administration and marketing, furniture manufacturing, etc., reflecting a diverse portfolio of sectors, and broad demand from employers. Therefore, while the focus on employment outcomes is the common thread linking all service providers, the sectors in which they work, how they achieve employment outcomes, and what skills are prioritised is flexible and contextualised. 
2. Demand-driven consortia: Providers work in consortia with prospective employers from the inception of the programmes to tailor their services (skills training, mentorship, on-the-job training, etc.) to employer demand, so that the service offering reflects the types of skills that are required for available jobs.
3. Flexible and iterative implementation: Close collaboration between employers and service providers not only produces better-designed employment programmes, but also generates continuous insights to improve future training offerings for new cohorts.
4. Data driven decision-making: Data to inform training and employment support is at the core of this programme, enabling timely and effective responses to implementation issues to maximise sustained employment outcomes.
5. Independent verification: Rigorous and independent verification of jobs achieved, undertaken by one of the Big Four global accounting firms, following up with each employed trainee, to ensure an objective measure of the proportion of trainees who achieve sustained employment. This independent verification is unique, and not commonly practiced in traditional skills training programmes, and is proof that the DIB claimed jobs are all real and verified.

So far, the impact bond’s approach to skills training and employment support has proven to be a highly effective way of securing sustained employment for young Palestinians, especially women. There is now interest in replicating it at larger scale, both in Palestine and elsewhere in the world.