Skill India Impact Bond: Relevance
- GS 2: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
Skill India Impact Bond: Context
- National Skill Development Corporation (NSDC) in collaboration with global partners including USAID, has launched the first-of-its-kind and the largest impact bond for skilling.
Skill India Impact Bond: Key points
- The Skill India Impact Bond will support 50,000 young people in India over four years, 60 percent of whom will be women and girls.
- The target group will be provided with skills and training and access to wage-employment in Covid-19 recovery sectors including retail, apparel, healthcare, and logistics.
- The coalition has brought together a US$14.4 million fund to benefit 50,000 young people in India over four years.
- The Skill Impact Bond (SIB) is also the first impact bond involving public, private partners and NSDC.
- The stakeholders will work towards promoting effective interventions, supporting research and enhancing the impact of the skill development program.
Skill India Impact Bond: Why needed?
- Millions of Indians have lost their jobs during the Covid-19 pandemic.
- Youth have been hit harder than adults in the immediate crisis and risk bearing higher longer-term economic and social costs.
- The pandemic had a negative impact on women and employment.
- In addition, India has the lowest female labour force participation in South Asia at 20.3% and current outcomes of skilling for them are highly inadequate.
- Out of every 100 women enrolled in skilling programmes, only 10 stays in post-skilling jobs for 3 months or more.
What is an Impact Bond?
- Impact bonds are innovative and results-based finance mechanism that leverage private sector capital and expertise, with a focus on achieving results.
- It shifts the focus from inputs to performance and results.
- Rather than a government or a donor financing a project upfront, private investors (risk investors) initially finance the initiative and are repaid by ‘outcome funders’, only if agreed-upon outcomes are achieved.
- The outcomes to be measured are agreed upon at the outset and independently verified.
How Skill Impact Bond Works? Or Impact Bond Structure
- The risk investor will commit an upfront of up to US $4Mn to fund service provider interventions.
- Outcome funders will commit US$14.4Mn over 4 years.
- Service Providers will deliver skilling interventions to improve employment outcomes.
- Skilling outcomes will be measured by an independent evaluator.
- Verified achievement of skilling outcomes that translate into employment triggers outcome payments to repay the risk investors.