September 25, 2016

Stage 1: Settlement

Settlement of migrants and refugees is the primary need in this immediate and short-term period. Government and locally-based settlement agencies play the primary role in assisting newcomers to adjusting to their lives in Canada. This includes, but is not limited to, orientation to Canadian society, access to housing and other essential services (e.g., health care and child care), language training, social and emotional supports, and access to employment opportunities. 

There are two primary social finance models that serve this first stage of settlement: (1) micro-lending programs and funds and (2) pay-for-performance contracts.


Most social finance models that target newcomers in this first stage do so through the provision of micro-loans to individuals for education, training, and/or certification leading to employment in their field. These loans are usually up to a maximum of $15,000, and individuals are referred to the lender by a community partner (usually a settlement agency). The most useful loans for newcomer settlement are offered on the basis of character lending rather than credit history or hard assets, as many newcomers need these small loans to assist them in gaining employment in their field and beginning to build assets and credit history in Canada. Most mainstream financial institutions continue to exclude individuals who lack credit histories and hard assets from accessing financial services.

In most cases, these micro-loan programs are offered by credit unions, working in partnership with community-based programs. Both financial inclusion and financial literacy are key aspects of newcomer settlement, and are equally important for social finance.1 This means having an understanding of personal and broader financial matters and applying that financial knowledge in everyday life. Settlement agencies, mentors and social finance models themselves play a role in helping develop financial literacy geared to the Canadian financial system, by working directly with newcomers in this area.

In some cases, the use of the loans is flexible, and loans can cover a range of needs that allow access to training and education (i.e., immigration fees, child- care, shelter costs etc.) The referring agency usually works closely with the newcomer, often helping the newcomer navigate the range of requirements to achieve their goals and access employment in their field. In several instances, community partners provide mentors and/or advisors that work closely with the newcomer in their community.


Pay-for-performance contracts vary in design, but the general structure involves governments making payments to service providers or intermediaries on the basis of achieving pre-agreed performance targets. Pay-for-performance differs from fee-for- service contracts. In a pay-for-performance model the government pays only for the results that are achieved, thereby shifting risk of failure to the private sector. The most widely regarded benefit of the pay- for-performance model is the ability to encourage innovation in service delivery.

Social Impact Bonds (SIBs) are a unique form of pay-for-performance contact that provide financial return to investors that have committed funding upfront based on achieving specified social outcomes. There are now several examples of SIBs used to finance early-stage settlement programs, such as language training and employment mentorship for newcomers.


[1] The Task Force on Financial Literacy in Canada suggests that, “Financial literacy is having the knowledge, skills and confidence to make responsible financial decisions.”

*The content on this page summarizes information presented in the Social Finance for the Settlement and Integration Sector in Canada Market Assessment Report (April 2016), produced by Purpose Capital and the Carleton Centre for Community Innovation. Please consult the full report before making any attributions or references to this work.