India's first 'Skill Impact Bond' launched, fund to benefit 50,000 youth

The National Skill Development Corporation (NSDC) launched the first-of-its-kind and the largest ‘Impact Bond’ for skilling in India in partnership with global partners, involving a US$ 14.4 million fund which will help 50,000 youth by making them job ready.

In conjunction with the NSDC, the global alliance comprises of HRH Prince Charles’s British Asian Trust, the Michael & Susan Dell Foundation (MSDF), The Children’s Investment Fund Foundation (CIFF), HSBC India, JSW Foundation and Dubai Cares, with FCDO (UK Government) & USAID as technical partners.

“The Skill Impact Bond (SIB) is also the first impact bond involving public, private partners and a public private partnership organisation, NSDC,” a report stated.

CIFF, HSBC India, JSW Foundation and Dubai Cares aid the outcome fund.

NSDC and MSDF are the risk investors that have pledged US$ 4 million to offer upfront working capital to the service providers to execute the plan for the lifetime of the impact bond, currently four years.

If outcome delivery is accomplished, risk investor support will be then reinvested each year, the report added.

“The alliance has brought together a US$ 14.4 million fund to benefit 50,000 young people in India over four years,” it added.

The target group comprises 60% women and girls and the aim is to equip them with skills and vocational training and offer entry to wage-employment in Covid-19 revival sectors including retail, apparel, healthcare and logistics.

The investors will work towards encouraging successful interventions, helping research and enhancing the impact of the skill development programme.

Mr. A M Naik, Chairman, NSDC, and Group Chairman, Larsen & Toubro Ltd stated that “Skill Impact Bond is a cooperative attempt of NSDC and renowned global organisations and individuals who communicate their vision to improve skilling outcomes in India. This historic financial tool applies an entrepreneurial approach to philanthropy and safeguards accountability which contributes to accomplishment of set goals. The plan has the ability to make a transformational influence especially in the lives of women,”.

The training will be taught through NSDC’s affiliated training partners, including Apollo Medskills Ltd, Gram Tarang Employability Training Services Pvt Ltd, Learnet Skills Ltd, Magic Bus India Foundation and PanIIT Alumni Foundation.

“The consideration of the impact bond is to focus on the youth employment crisis and specifically that for young women,” the statement added further.

Expounding upon the requirement for the bond, it said the focus on women in the Skill Impact Bond is a critical response to the adverse impact of the pandemic on women and employment.

“Millions of Indians lost their jobs during the Covid-19 pandemic. Youth have been hit badly than adults (25 yrs +) in the current crisis and risk bearing higher longer-term economic and social costs,” the statement stated.

It stated that women were more prone to have lost jobs during the national lockdown than men.

“Women made up 24% of the workforce before the pandemic, yet accounted for 28% of all job losses as the pandemic took hold,” the statement stated.

Additionally, India has the least female labour force participation in South Asia at 20.3% and recent outcomes of skilling for them are highly unsatisfactory. Out of every 100 women enrolled in skilling programmes, only ~ 10 stay in post-skilling jobs for 3 months or more.

Impact bonds are pioneering financing instruments that leverage private sector capital and expertise, with a focus on attaining results. It swings the focus from inputs to performance and outcomes. Instead of a government or a contributor financing a project upfront, private investors (risk investors) initially finance the initiative and are reimbursed by ‘outcome funders’, only if agreed-upon outcomes are attained.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.