Expanding skills-training access through microloans

Carlin Carr, Mumbai Community Manager
Mumbai, 18 December 2014

India's massive youth population has the potential to be an enormous asset in the coming years. It was recently announced that India has 365 million 10-24 year olds — the largest demographic in the world, even outpacing China by nearly 100 million — and if given appropriate access to opportunities, education, and training, this up-and-coming workforce could set the country on a trajectory toward epic growth. In order to fulfill this goal, India has invested heavily in the National Skills Development Corporation (NSDC) to expand vocational training opportunities. The focus on skills training provides a variety of new opportunities for a highly socio-economically diverse youth population, but one of the keys to making the training programs truly accessible is to better link financial access to vocational training — an area more and more microfinance institutions are exploring.

EduBridge, based in Mumbai, is one of these organizations working to close the skills gap. The training center helps underprivileged youth develop the skills to work with corporate India in the future. It has received accolades for being one of the NSDC's most successful investees. While the tuition fees are usually not outrageous for programs such as these, they can still be out of reach for many youths. The Times of India reports that on average a three-month program costs between INR 8,000 and INR 30,000 (USD $130-$480). However, as the push to improve the quality of training courses continues, associated costs are likely to go up, further expanding the gap in ability to pay.

"As students will be required to pay more, access to loans will become crucial. In fact, allowing trainers to charge the market rate will also pull big trainers to start skill development schools," said Nimish Mehta, a researcher at Dr Reddy's Cell for Employability and Skill Development at the Indian School of Business, in the Times of India article.

Springboard is one of a growing group of financial services institutions linking up loan access to skills training. The company has a four-step process to evaluate the trainee's potential as a loan recipient. Loan officers look at the cost, duration, and timing of the vocational program as well as the recipient's potential to repay. The idea is to base decision-making on the potential of the youth, evaluating the course of instruction and work prospects, rather than on their current circumstances. Once granted, loans range from INR 5,000 to INR 50,000, similar to costs for courses.

The NSDC has also seen this need to link youth with appropriate lending opportunities, and has recently tied up with the Indian School of Business to extend credit to needy students. The NSDC has high hopes for the year to come. It has pledged to skill 3.3 million youth in just this one fiscal year. The fast pace and ambitious goals are a product of the government's overall plan to upgrade the country to a trained workforce of 150 million by 2022. The plan is ambitious, but doable — but only if all youth have equal access to the programs that could not only transform their individual futures but also that of the entire country.

Photo: Wayan Vota

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