India's first impact bond to drive employment outcomes; a financial innovation pioneered by NSDC

May 31, 2023

New Delhi [India], May 31 : The first-of-its-kind Skill Impact Bond is fifteen months into its journey and has enrolled close to 18,000 young Indians from 18 states and Union Territories so far.
Pioneered by the National Skill Development Corporation (NSDC) - a one-of-a-kind public-private partnership model in India under the aegis of the Ministry of Skill Development and Entrepreneurship - and a coalition of mission-aligned partners, the Skill Impact Bond is aimed at transforming the way skill training programmes are implemented, with a focus on bridging the gap between skilling and employment, especially for women.
Even though India has seen tremendous effort and investment being channelled into improving employment opportunities from both the private and public sectors, employment rates - particularly for women - remain low. The country's female labour force participation rate (FLPR) has been consistently low at around 30 per cent and research has found that only 10 out of 100 women enrolled in skilling programmes continue to stay in jobs for three months.
Recognising this, the NSDC and a coalition of partners launched the four-year Skill Impact Bond in 2021 as India's first development impact bond to drive an outcomes-based approach to focus on job placement and retention.
Alongside the NSDC, the coalition draws strength from a set of funders and partners who have deep experience with innovative finance, skilling, gender, monitoring and evaluation, and data-driven decision-making - the British Asian Trust, the Michael & Susan Dell Foundation, The Children's Investment Fund Foundation (CIFF), HSBC India, JSW Foundation and Dubai Cares, FCDO (UK Government), the United States Agency for International Development (USAID), Dalberg Advisors, and Oxford Policy Management. The skill training is delivered on-ground by Gram Tarang Employability Training Services Pvt Ltd, Learnet Skills Ltd, Magic Bus India Foundation, PanIIT Alumni Reach For India Foundation, and Tata STRIVE, each partner selected for their capacity to innovate, scale, and reach diverse target groups.
Applauding the efforts under the Skill Impact Bond, Secretary of the Ministry of Skill Development and Entrepreneurship, Atul Kumar Tiwari said, "Skill Impact Bond has demonstrated its effectiveness in fostering collaboration between governments, private sector entities, and civil society organisations. And by leveraging such innovative financing mechanisms, we are not only increasing the availability of resources but also ensuring their efficient allocation to tackle the persistent challenges of skill gap and unemployment."
"The initiative has been successful as it operates on the principle of outcome-based funding and, I must say that the results achieved till now look encouraging. Also, I am happy to note that so far in the programme 70 per cent of beneficiaries are women. We appreciate the efforts made by all the training partners and firmly believe that such effective interventions are leveraging the potential of India's youth and creating livelihood and meaningful opportunities," he added.
Speaking further on this landmark initiative, CEO of NSDC Ved Mani Tiwari said, "India's youth have big dreams, and even bigger potential - all they need are the right skills and tools to unleash this. With its focus on supporting 50,000 young people, most of them first-time job seekers, the Skill Impact Bond is a financial innovation helping young people build core skills and competencies required to successfully enter and grow within the workforce. As an outcomes-based instrument, the impact bond takes an innovative approach to actualise this, and the National Skill Development Corporation is keen to promote good practices and knowledge exchange to catalyse further innovation in the skilling ecosystem."
The impact bond is strategically designed to link fund flows to outcomes such as certification, job placement and retention, moving beyond a focus on enrolment alone.
This focus on outcomes, rather than inputs and outputs, aligns incentives for all those involved and enables all partners to work together towards a shared goal.
To date, the Skill Impact Bond has successfully supported close to 18,000 first-time job seekers from low-income families, of whom 72 per cent are women.
Alongside the high female enrolment rates, the first cohort of Skill Impact Bond indicates a promising retention rate, where 1 in 2 women who have enrolled in the training have continued to work in wage employment for three months.
Beyond the innovative financial design that drives the Skill Impact Bond, the coalition has prioritised the use of performance management, technology, data-driven decisions, and tight monitoring and evaluation to ensure that the impact bond is robust, and rigorous, and builds a strong evidence base.
This also aids its longer-term goals - to create a paradigm shift within the skilling and employment ecosystems from their current state to an aspirational state where the focus is centred around gainful employment, retention in the workforce and overall well-being.