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Mobilizing Private Finance to Generate Jobs in the West Bank and Gaza

Mobilizing Private Finance to Generate Jobs in the West Bank and Gaza

The World Bank Finance for Jobs (F4J) Series of Projects (SoP) has successfully mobilized $47.811 million in private capital since February 2018, to support job creation as well as the first private investment in solar energy in Gaza, supported jointly by IBRD, IFC, and MIGA. In late 2019, the SoP launched the World Bank’s first Development Impact Bond (DIB), – an innovative instrument that blends impact investing, results-based financing, and public-private partnership to achieve skills development and employment for the youth. So far, DIB has mobilized $1.8 million in private investment and enrolled more than 800 youth in the program, leading to more than 300 program participants finding employment. The project also supported 48 startup enterprises through its Entrepreneurship Ecosystem Matching Grants (EEMG) and COVID-19 response program2 , which mobilized about $39.4 million in private capital and created 466 jobs.

Beneficiary Story/Quote

Amjad Rahal

“The Engineers Qualification and Employment Program had a huge impact on getting to where I am today. As a Mechanical Engineer from Hebron, I am proud of completing 6 months of internship in Al-Haddad Steel Company, and I got employed immediately in the same company.” Amjad Rahhal, Engineers Qualification and Employment Program (EQE)- Health & Safety and Quality Control, Palestinian Engineers Association

Christina Ganim

"F4J has supported Kenz's success greatly since 2017. With the EE-MG grant contribution of business development services, Kenz has been able to work with high-level specialists in digital marketing, graphic design and software engineering who would have otherwise been inaccessible due to the high associated costs." Christina Ganim, Kenz Co-Founder and CEO, E-commerce site selling lingerie from international brands to women in the Middle East.

Challenge 

Jobs are a high priority for economic and social development in settings affected by Fragility, Conflict, and Violence (FCV), given the contribution that jobs can make to growth, poverty reduction, and households’ resilience and social protection. Tackling unemployment, especially among youth and women, and in the West Bank and Gaza, remains one of the major development challenges in the Middle East and North Africa region. In 2021, unemployment reached close to 50 percent in Gaza, while the national average stands at 24.2 percent. The youth unemployment rate is even worse, reaching nearly 70 percent in Gaza, one of the highest in the world. Women are disproportionately affected; the unemployment rate for young women in the West Bank and Gaza is 54 percent, compared to 29 percent for male youth. To address this challenge, more must be done to strengthen human capital through sector-specific training. And on the demand side, job growth needs to be private sector-led and must crowd in financing from new types of investors.  

Approach 

The F4J SoP supported innovative financing instruments to facilitate job creation through the deployment of private capital in the West Bank and Gaza. 

addressed constraints on both the supply and demand sides of job creation. It supported early-stage financing for startups through the EEMG; co-financed the medium-sized private investments through the Investment Co-Financing Facility (ICF); and launched the World Bank’s first skills-focused DIB, where private sector investors provided up-front capital to service providers to deliver skills training for unemployed young people in the selected sectors. Contingent on the achievement of results (i.e., enrollment of the trainings, successful employment after the training completion, etc.), the World Bank repays the investors their principal plus an agreed-upon return on the investment.  The overall objective of the SoP was to test the effectiveness of these new and innovative instruments in targeting youth unemployment, gain citizen trust by promoting social and economic inclusion, and create jobs in the private sector. F4J’s financial instruments were highly adaptable to changing environments and addressing new challenges given that private sector investors are incentivized to achieve results to be reimbursed. 

Results 

The project focused on private sector engagement and leveraged private capital by using innovative financial instruments in early-stage financing and DIB. Together these instruments had financed 48 start-ups, facilitated over 700 jobs, and provided skills training for more than 800 youth with a significant gender focus. The project also provided immediate support to struggling businesses during the COVID-19 pandemic. Therefore, the project is fully aligned with i) the FY22-25 Country Assistance Strategy, specifically: Objective 1.3 - Achieve better Human Development Outcomes; Objective 2.1 - Stimulate Inclusive Private Sector Development and Diversify Financial Products; ii) the Middle East and North Africa (MENA) strategy that promotes peace and stability building on the following priorities: harnessing the region’s human capital and putting emphasis on private sector engagement as a mechanism to renew the social contract; iii) World Bank Gender Strategy (FY16–23); and iv) the country framework on gender for the West Bank and Gaza.  

By March 2022, the project had achieved key results in mobilizing finance, catalyzing enterprise, and creating jobs.    

The project mobilized $39.37 million in private capital from investment deals signed under the ICF and DIB components. This included the first private investment in solar energy in Gaza, supported jointly by the World Bank, IFC, and MIGA, which was signed in February 2018.   

The initial five investment deals signed under the ICF contributed to creating more than 340 jobs directly and indirectly. By April 2022 a total of nine investments were supported in the amount of $ 6.8 million in grants across several sectors of the economy.  

As part of the EEMG component, more than 200 tech start-up jobs were created (of whom 41 percent were women). COVID-19 support created more than 140 additional jobs (of which 47 percent went to women). The project also launched the World Bank’s first Development Impact Bond (DIB) on jobs and skills development in late 2019. The DIB was leveraged at the early stages of the COVID-19 pandemic to support critical sector needs such as healthcare and education. By April 2022,816 young people have been accepted into the DIB program, and 588 individuals had already completed the training. Of those who completed the training, 304 had started a new job. Around 50 percent of program participants and those who secured new jobs were women.  

Bank Group Contribution 

F4J I, approved in Dec 2015 and closed in Jan 2022, was financed by a $5 million grant from the Trust Fund for Gaza and West Bank (TFGWB). The F4J II Project, approved in July 2017 and currently under implementation,is financed by a grant of $8 million from TFGWB and $1.5 million from the State and Peacebuilding Fund ($9.5 million total). In 2018, F4J II received additional financing from the TFGWB for an amount of $5 million. On top of these, a COVID-19-related additional financing in the amount of $10 million was approved in March 2020. A $500,000 Bank -Executed (BE) grant from the SPF finances an impact evaluation on the DIB instrument.  

Partners 

IFC and MIGA participated in the first mover Gaza solar project. 

The Jobs Group - advised on jobs measurement and designed the “Social Rate of Return” methodology for screening projects in the ICF component. 

The DIB is financed by four impact investors (EBRD, Palestine Investment Fund, Semilla de Olivo, and FMO). Social Finance UK and Brookings Institution played advisory roles in its design and implementation. Partners also include service providers and the verification agent (Deloitte). 

The Ministry of Finance and DAI provided overall project implementation.  

Looking Ahead  

F4J was designed as an initiative to pilot new approaches and generate lessons learned, with the objective to scale up the instruments that deliver results. Based on positive results so far, the ICF has already been scaled up through two additional financings, from $3.5 million in original project design to a total of about $15 million in ICF funding. Discussions are ongoing about raising additional donor financing for further scale-up of the ICF instrument. As the DIB has continued to achieve its targets, DIB investors have raised the idea with the World Bank to think about future additional resources to continue or scale up the DIB.