Bond route to improving female presence in labour

Outcome-based financing tools like Development Impact Bonds show promise in addressing skilling challenges for Indian women

American economist Claudia Goldin’s Nobel Prize win last year threw into focus the conversation on women and work. Many of the challenges she highlighted in her research have parallels in India, which has historically struggled with low female labour force participation. However, 2023 saw early signs of an upswing, with the Periodic Labour Force Survey reporting that 31.6% of women across urban and rural India are part of the workforce. But this is still far below the global average and the quality of work available to Indian women continues to be poor.

Skilling programmes need to ensure that being able to stay and grow in the workforce is the end goal. (Shutterstock)

Similar to Goldin’s observations regarding the US, several factors prevent women from actively seeking work. The challenges persist even after women enter the workforce. This is even as India continues to spend a substantial amount on skilling development and training programmes — ₹4,000-5,000 crore annually, as per the ministry for skill development and entrepreneurship.

A big part of the challenge stems from the lack of integration between supply and demand forces: The skills provided often don’t align with the skills that employers are seeking. A majority of training programmes focus on enrolling participants in courses that provide classroom-based skilling, but do not prioritise hands-on experience, networks that can help them secure jobs or support systems once they’re in the job market. For women, this could include the lack of safe commuting options or inadequate health and hygiene infrastructure at the workplace.

To address this misalignment, skilling programmes need to ensure that being able to stay and grow in the workforce is the end goal — and work backwards from there. The focus needs to shift from inputs, such as enrolment and certification, to outcomes such as workplace retention. Financing tools that pay upon the achievement of outcomes, such as Development Impact Bonds (DIBs), are fast emerging as a viable solution that allows funders to shape such incentives. DIBs have helped achieve ambitious outcomes in sectors such as education and health care, where funders pay for measured, verified outcomes. Evidence from around the world shows that skilling is a sector well primed for DIBs, including learnings from the Refugee Impact Bond in Jordan, the KOTO Social Impact Bond in Finland, and the Colombia Workforce Development Social Impact Bond.

In India, we are midway through implementing the first such tool for the skilling sector. The Skill Impact Bond (SIB), supported by a consortium of actors led by the National Skill Development Corporation (NSDC), was set up to enable 50,000 young people from low-income backgrounds to secure and retain jobs. The programme aims to equip young Indians, particularly women, with the technical and life skills required for workplace readiness, and to place them in long-term jobs. In two years, the programme has reached more than 24,000 people, 72% of whom are women. Evaluations of the first cohort of 3,248 women trained show that approximately 66% have secured jobs and 48% have stayed in these jobs for at least three months.

The sizable share of women impacted within the SIB is not incidental, but an outcome that is built into the design of the bond. The structure of the DIB allows funders to incentivise outcomes for women through strategies such as gender-specific targets and differential pricing between outcomes. This gender intentionality encourages the DIB implementers to focus on removing bottlenecks: Counsellors help women trainees navigate concerns during and after placement, migration assistance eases the process of relocation, and resources are provided to support trainees with administrative tasks. As outcomes are only paid for after rigorous third-party evaluation, impact bonds are accompanied by a rich data environment, allowing for data-backed decisions to arrive at good fit and scalable solutions for women.

With India’s blended finance market standing at $5.6 billion, there is a growing evidence base and strong impact case for outcome-based tools. However, outcome-based financing is not a one-size-fits-all solution. When applied to the right challenge at the right time, DIBs have shown tremendous potential to transform lives. The SIB is evidence that shifting focus on outcomes can unlock promising employment opportunities. This becomes even more relevant as the country’s demographic dividend grows exponentially.

Tushar Thakkar is associate partner at Dalberg Advisors and Abha Thorat-Shah is executive director, Social Finance at the British Asian Trust. (Dalberg Advisors is the performance Manager and British Asian Trust is the transaction manager for the SIB.) The views expressed are personal