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© 2022 Opportunity International Education Finance functions under its US and UK affiliates. Opportunity International United Kingdom is registered as a charity in England and Wales (1107713) and in Scotland (SCO39692). Opportunity International United Statesis a 501(c)3 nonprofit.

Financing Technical and Vocational Training in India: Partnership with the National Skill Development Corporation

By Sakshi Sodhi

Opportunity EduFinance and the National Skill Development Corporation (NSDC) have formed a partnership which takes an important step towards expanding meaningful income generating opportunities for young people in India. Technical and Vocational Education and Training (TVET) is on the development agenda for many countries. Vocational, or skill-based education, is very important as many employers expect their new employees to have practical, applicable skills and experience rather than just academic degrees. TVET can enable young people to seize work opportunities, and positively impact global poverty and social stability.

India’s government has outlined an agenda to empower its huge workforce with new-age skills. They are very keen to bridge the global labour shortage by providing skill trainings and certifications benchmarked to international standards. Historically, lending for Technical and Vocational Education Training (TVET) presents various challenges, as the skill sector is generally unorganised and unregulated. However, the existence of an entity like the National Skill Development Corporation in India is a huge differentiator. NSDC is creating a modern infrastructure for TVET centres, while also ensuring that training partners extend courses which are National Skills Qualifications Framework (NSQF) aligned to globally recognized qualification frameworks for ensuring quality and uniformity.

UNDERSTANDING THE DEMAND FOR TVET STUDENT FINANCING

Financing is a huge barrier for students who wish to enrol for TVET courses. In June 2021, Opportunity EduFinance undertook a market research study to better understand the demand and interest in financing options by students who enrol for TVET courses in India. This research was aimed to provide guidance to financial institutions to formulate loan products and credit policies that can cater to the unmet demand of students for whom financing is a bottleneck to accessing these courses. Since TVET courses are generally short to medium in duration and offer immediate employment after completion, financial institutions may find these loans as less risky in comparison with other longer term education loans for university. 

As part of our market research, we investigated the sectors that promise maximum employment opportunities to students after course completion. Our research scope also considered factors that would encourage Non-Banking Finance Companies (NBFCs) to finance the skill development segment. Through our study we identified a market demand of USD $163 million by potential TVET students seeking loans for courses that could be financed by NBFCs. The study found healthcare, IT-ITES (Information Technology and Information Technology Enabled Services), banking and financial services, IT hardware and retail as the highest potential sectors to extend loans for skilling courses.

TVET STUDENT FINANCING: BUILDING A NETWORK OF LENDERS

Opportunity EduFinance and NSDC are partnering to create a conducive lending environment to benefit more students across India seeking access to TVET courses.  We have now invited leading financial institutions such as Avanse, Varthana, Satya Microcapital, Protium Sakshara, Auxilo and Neev Credit to develop customised loan products to meet students’ financing needs.

EduFinance and NSDC identified like-minded, socially driven financial institutions who intend to bring human capital transformation in India via education to offer our technical assistance services. These financial institutions already have outreach for this student market segment and are sensitised towards the financing requirements for skilling and up-skilling. Through the branch-networks of these financial institution partners, we will be able to offer TVET student financing to almost all states in India.  The ultimate goal of the initiative is that more Indian youth will be able to access finance so that they can improve their skills and have better job opportunities.

Photo: Opportunity EduFinance representative Sakshi Sodhi, Senior Technical Assistance Advisor, and NSDC leadership present partnership agreement

PARTNER REFLECTIONS ON TVET EDUCATION IN INDIA

We asked some of these financial institutions to reflect on this initiative and the future of TVET education in India.

What do you see as the business potential of offering vocational training financing to students?

Neev Credit: Neev was incorporated with an objective of enabling education by making it affordable for the students to pay course fees. Skill Loans started as an extension of our School Fee Loans. However, during the pandemic there was an enormous interest from students and working professionals who wanted to up skill. Now Skill Loans is an integral part of our overall portfolio.

Varthana: Varthana focuses exclusively on the education segment, which includes financing to schools and institutes as well as students at any level. We focus on education because we believe it is a powerful way to help unlock the potential that every individual has. Skills and vocational training is an important part of the broader educational ecosystem, complementing the traditional school and higher education segments. Vocational training is more important than ever given that the pandemic has led to significant increases in school dropouts and graduates with substandard learning levels.

Auxilo:  Unlike the traditional lending approach, at Auxilo we determine financial access and design our loans keeping in mind the student. We all know India is at its best stage of leveraging the advantage of its demographic dividend. At Auxilo our omni-channel loan service engine has been built to serve loans to a wide variety of courses and serve students across the country.

Satya MicroCapital: Skill loans help to build a skilled workforce ready to be employed in various industries which require a specialized trained workforce. We see a potential to tap into this segment, as a vast number of young people need to be skilled or upskilled under the Skill India Mission.

Avanse: Skills development is extremely crucial, as it can contribute to structural transformation and economic growth by enhancing employability and labour productivity. India is one of the youngest countries in the world. This creates a large pool of human resources with high-untapped potential for development.

By offering this financing to TVET students, what is the impact you wish to achieve?

Neev Credit: According to India Skills Report 2022 by Wheebox, only 48.7% of total youth in India is employable. Out of the 150 corporates surveyed, 75% expressly stated that there was a skill gap in their workforce. There is an urgent need for the youth of India to up skill themselves to become employable. Our long-term vision is to contribute towards reducing the employability gap in India by supporting students with affordable financing option for various skilling courses.     

Varthana: Varthana offers financing to aspiring students to help them access opportunities to invest in themselves. We hope that the training they receive will help them pursue careers and livelihoods that are both satisfying and allow them to support and care for their families economically.

Satya Microcapital: Satya visualizes holistic development by offering financial products encompassing the entire lifecycle needs of a client. By offering financing facilities to aspiring students, Satya intends to create an empowered workforce ready to take up world class employment in various sectors of the economy and ensure a better livelihood and to uplift standard of living.

Avanse: About 79% of Indians have looked for such courses during the last couple of years to stay relevant and boost their learning. This provided us with the impetus to collaborate with NSDC and Opportunity EduFinance so that we can amplify our reach and design financing solutions to fulfil our mission of making education financing seamless, affordable, and accessible for every student.

How can this initiative and the support of NSDC and EduFinance add value to your business?

Neev Credit: The initiatives undertaken by NSDC and Opportunity EduFinance will go a long way in creating a win-win situation for all the players in the eco-system, namely Educational Institutes, Students, Lenders & Employers. As Lenders, we get research pertaining to skill segments and its participants which gives us relevant information on the Educational Institutions. This supports us in doing the due diligence on the delivery capability of educational institutions, and helps us to price our products and loans prudently.

Varthana: New business opportunities are risky by nature. The paucity of data and lack of understanding of a new segment leads most businesses to avoid serving the vocational training and skilling segment in a robust manner. The support of NSDC and Opportunity EduFinance enables private companies like Varthana to enter and serve this important segment in a much more comprehensive fashion than would otherwise be possible. 

Read more about our work in India – What’s next for Low-Cost Private Schools in India?

 

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