Creating employment opportunities for Palestinian women and youth

The impact bond was developed by a partnership of the Palestinian Authority, World Bank, DAI and Social Finance, with implementation funded and managed by four investors in partnership with Finance for Jobs Consulting Services and Social Finance, and outcomes payments made by the Palestinian Authority with World Bank funding. 

Palestine’s youth unemployment rate is stubbornly high, recorded at 22% in the West Bank and Gaza in 2021. Lack of suitable employment opportunities is particularly severe for educated youth (54%) and women (64%), in part because of a mismatch between skills required by employers and those available among young graduates. 

The impact bond is addressing this problem by supporting training that is tightly tailored to employers’ real world labour needs. The key to this intervention has been a flexible, adaptive approach, with success measured by the number of trainees in sustained employment, rather than the number trained. 

The impact bond is a component of the wider Finance for Jobs (F4J) initiative, a four-year economic development programme of the Palestinian Ministry of Finance. Launched in late 2019, the F4J impact bond is now in its third year of implementation. A World Bank blog  published in 2021 highlighted the early successes, including how the inherent adaptability of the impact bond delivery model enabled it to quickly and effectively reprogrammed its training when Covid-19 struck. 

Since the World Bank blog was published even stronger results have been achieved, with over 390 young Palestinians now in new employment (around 40% women). Crucially, as of September 2022, over 250 of the early trainees 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 is considered a permanent employee, with additional protections afforded them by Palestinian labour law.

While this is a small number compared to overall needs, the ambition of the programme was to test a new approach to funding, designing, and managing skills training programmes, and to demonstrate that it could readily be scaled to tackle much larger employment needs. 

The investors pre-financing service delivery through the impact bond are EBRD, the Palestine Investment Fund, Semilla de Olivo (a Palestinian diaspora Fund based in Chile), and FMO (the Dutch entrepreneurial development bank). The 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 are strong: the F4J 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 programme also emphasises female employment specifically, which is incentivised through a payment premium. To date, 40% of those achieving sustained employment status have been female. 

Since the F4J DIB’s launch in November 2019, the key elements driving its success include job-focused selection of training providers, demand-drive consortia, flexible and iterative implementation, data-driven decision-making, and independent verification. We have discussed these success factors in this accompanying blog.

So far, the impact bond 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, with particular opportunities in supporting a just green economy transition.