Midline Report Finds Vocational Training Loan Scheme Benefiting Lower-Income Households to Access Affordable Courses

Having its largest ever youth population, India’s workforce largely depends on the education, skills, and potential of its youth. Technical and Vocational Educational Training (TVET) courses – more commonly known as Skilling courses in India - are a means of short, comprehensive, and low-cost training that boost trainees’ employability with job-specific skills and close networks with industry sectors for job placements.

Ensuring access to finance is one of the most effective ways of enabling greater interest and enrolment in skilling courses. Market research carried out in July 2022 enabled Opportunity International EduFinance (“EduFinance”) to recognize that the existing loan products and credit policies underserved the skills training market in India. EduFinance estimates a market demand of USD 1.6 billion for skilling courses.

PARTNERING FOR GREATER IMPACT

Based on these market findings and opportunity for impact, EduFinance and the National Skills Development Corporation (NSDC) partnered with the overall objective of ensuring Indian youth are equipped with skills relevant to emerging industries in India. The partnership aims to eliminate barriers to financing as well as non-financing for students wanting to access loans for skills training; this is particularly directed to students from low-income and marginalised backgrounds.

This pilot first identified financial institutions (FIs) in India willing to lend to students for skilling loans via training center partners. The partnership then leveraged NSDC’s subsidized loans to financial institutions for Skilling course on-lending to students, combined with EduFinance’s technical assistance equipping FIs to effectively vet training center partners and design skilling loan products to meet the needs of prospective student borrowers.

The below diagram outlines the flow of credit, technical assistance and course delivery between partners in this Skilling course ecosystem.

To better measure the impact of the pilot, NSDC and EduFinance agreed to conduct a midline review with the following three objectives:

1. Assess the extent to which access to Skilling courses for low-income students has increased.
2. Understand the value of partnerships between financial institutions and Skilling course training providers by evaluating enrolment, course sectors and innovation.
3. Consider students post-Skilling course employability based on the usefulness of career counselling provided by training partners and their networks with employers.

The following presents key findings from the midline review. To read more on the partnership model and details from the midline survey and key informant interviews, download the full report here.

FINDING 1. Increased Access to Skill Development Financing for Low-income Students 

Key Findings

Skill fee loans have made it easier for students from lower income households to access affordable Skilling courses.  This midline report finds that the Skill Development financing pilot programme largely caters to students from households that earn a monthly salary of 10,000-25,000 INR (US$120-$300), and that FIs offer loans that cover at least 80% of the total course fee incurred by students. Overall, analysis finds that the intended target audience of low-income students is being served through the course fee financing programme, which is also being taken up by students from middle-income families.

Additional Observations

• Total loan amounts are higher than the loans disbursed at the midline of this programme. As of June/July 2023, all FI’s have disbursed loans to each student ranging between 12,000-40,000 INR (US$140-480). It is significant to note that this is range is depictive of the midline scenario of the Skill development financing initiative and that the average loan per student
• Most FIs have disbursed course fee loans to more male students, with the exception of Eduvanz. This largely aligns with the initial market research conducted by Opportunity EduFinance which estimated that only 40% of TVET students in India are female.
• Most student borrowers have an undergraduate degree but are pursuing Skilling course to enter new sectors like Data Science, Computing, Computed Aided Manufacturing and Design.
• There are highly varying interest rates across FIs, which are benefited by the NSDC provision of capital. However, without the subsidized capital it appears FIs may increase course fee loan interest rates to cover higher costs of capital and also price the associated risk to on-lend.

FINDING 2. Enhanced Demand and Supply of Skill Development Courses due to the Partnership between FIs and NSDC Enlisted Training Partners 

Key Findings

FI lending processes for skill development course fee loans and borrower interactions are meeting student demand for a simple financing option.94% of surveyed students described the process of applying for a loan as ‘easy or extremely easy.’ Similarly, 80% of students reported being either ‘extremely happy’ or ‘happy’ with their experience with the loan process.

Most training institutions are planning to expand course offerings, crediting the increased student demand to the FI partner financing option.Three of the training institutes have and/or are planning new course offerings driven by increased student demand. These training centres note that they have the capacity and desire to expand enrolment, launch courses, or hire more instructors. One institution specifically highlighted a change in student profiles, with recent increasing demand from more rural households and lower income levels now applying for courses.

Additional Observations 

• Course offerings vary across the training providers partnered with each FI, but the most popular courses include hospitality, aviation, investment banking, manufacturing design, and engineering.
• The course fee financing is being marketed by most TVET training providers. However, one provider explained they do not actively advertise the fee financing option but would do so if they had more than one FI partnership to offer students. 
• Training institutions recognise the pivotal role NSDC plays in attracting students to pursue Skilling courses. It is reported that students feel more confident taking up skilling and up-skilling programmes affiliated with the NSDC.
• All Training institutions reported interest in financial literacy training for a variety of reasons and audiences, including for students and for the institutes sales staff interacting with prospective students. 

FINDING 3. Increased Meaningful Job Opportunities for Students post Course Completion

Key Findings

Early evidence suggests training institutes selected by FIs for partnership offer quality career counselling, strong employer networks, and support for job placement, but more time is required for surveyed students to complete courses and seek employment. As anticipated, this midline analysis was limited in its ability to broadly assess students’ success with job placements, as most surveyed are still completing courses.  

The smaller sample of students surveyed that have completed their course reported they “feel prepared” for the job market  due in part to the institutes career counselling provision. As of the midline report, the students with course completion reported >70% placement rate in aggregate.

Additional Observations 

• Training institution selection is part of the technical assistance provided by FIs through this pilot, using a robust evaluation matrix. Based on this early evidence, it appears FIs have been largely successful evaluating and selecting strong Training partners with good career counselling and employer networks, like Emirates Airlines, Ford Motors, HSBC.
• Placement rate minimums required by the NSDC encourage training institutes to place students at a suitable place.One training institute reports that the NSDC requires a 70% placement rate to continue the institutes affiliation with them. Using these placement rate requirements robustly, NSDC enhances the outcomes of the  Skilling courses.
• Post course completion, placement salaries vary highly depending on the course study and size of employer. While the highest salaries in emerging sectors go up to 4,000,000 INR (US$48,000), the average salaries are between 200,000-600,000 INR (US$2,400-7,000).
• Since the greatest portion of students surveyed reported enrolling in Skilling courses to enhance their job prospects, it will be important to further evaluate in the endline assessment how well these courses perform at ensuring students meaningful jobs.

Next Steps

EduFinance will aim to utilize the findings of this midline report to share knowledge, expand future research goals, and make improvements to the current programme, in partnership with NSDC and financial institutions. A final pilot endline evaluation will be conducted in early 2025, with a focus on further interviewing students that have completed their courses to better understand successes and challenges in employment, and specifically those from lower-income households. Endline findings are expected to inform any expansion, replication or adjustments to this Skilling course partnership model.

Read the full report here: TVET Fee Financing – Measuring NSDC-Opportunity EduFinance Partnership Impact