Skill finance can play an important role in making job-oriented training more accessible, especially for learners who may find it difficult to afford skill development programmes upfront.
In this conversation, Dr. Madhuri Dubey, Founder-Director, National Skills Network-NSN, speaks with Ms. Vinita Jain, Founder and CEO, Lakshya Skill Finance, about skill finance, its role in the skilling ecosystem, and how financing can help connect training with employment.
Below are a few excerpts from our conversation. You can watch the full video on our YouTube channel.
Q. What is skill finance, and why is it important for the skilling ecosystem?
A. Skill finance focuses on financing the outcomes of skill development. Unlike traditional education loans, which primarily finance the cost of education, skill finance looks at whether a particular skill can lead to a job and whether the learner can repay the financing through employment.
In this approach, the focus is on identifying job-oriented skill pathways and making them accessible to youth who may not be able to afford the cost of training upfront. By linking financing to employment outcomes, skill finance can support a more sustainable model for skill development, while reducing dependence on CSR funding and government programs.
Q. What financing options and government initiatives are available for skill development?
A. Back when NSDC was created, the focus was on ensuring that India’s demographic dividend would not be lost without skilling and employment. Over the years, the government has built a strong skill development infrastructure, but the challenge now is to make the ecosystem financially sustainable.
With around one crore youth entering the workforce every year, government programs and CSR funding alone cannot support skill development at the required scale. This is where blended finance models, such as Skill Impact Bonds, can play a role by linking funding to employment outcomes. However, for a truly sustainable ecosystem, candidates also need to participate in financing their skill development.
The approach should be more demand-driven identify sectors with strong job potential, assess the demand for jobs in those sectors, identify quality training partners, and then make it easier for financiers to support these pathways.
There are also government measures such as credit guarantees for skill development. However, the uptake of skill loans remains limited, and greater awareness and accessibility are needed. Some states have also increased their guaranteed coverage, showing the potential for these measures to support wider access to skill finance. More needs to be done by both state governments and the central government to make these financing options accessible and strengthen the sustainability of the skilling ecosystem.
Q. How does Lakshya Skill Finance make financing accessible, and what is the repayment process?
A. First, we have developed an AI-led proprietary course evaluation tool. It helps us and the youth understand which skill pathways are more outcome oriented. Through our Course Evaluation Score, or CES, we assess a job role on a scale of 100 based on factors such as market demand, employer demand and job listings that remain unfulfilled for a long period.
To support any training partner, we first assess their credentials, quality, experience, affiliations, capacity and existing employer relationships. We want to ensure that the partners we recommend have the ability to deliver quality training and connect learners to jobs.
The next aspect is the borrower. Since young people may not have an income history, we also look at the seriousness of the youth and the parent towards completing the training and moving into employment. Dropout is a significant risk in skill financing, so we have introduced a psychology-based assessment to understand the likelihood of a learner dropping out.
Our underwriting ultimately rests on three pillars:
- Course evaluation score: Evaluates the job pathway based on market and employer demand.
- Training partner quality: Assesses the credentials, experience, capacity and employer relationships of the training partner.
- Dropout fragility of the youth: Assesses the likelihood of the learner dropping out.
Once these are assessed, we also look at the parent’s stability and other relevant factors before recommending the case to our lending partners.
Our model is linked to employment:
- The repayment burden is higher once the learner gets a job.
- The repayment burden is lower when the learner is not employed.
We then work with our NBFC partners to create the right financing and repayment plan. A conventional repayment model may not always work for skill development. That is what makes the product different.
Q. How does the Lakshya Skill Finance platform work, and who does it bring together?
A. Lakshya Skill Finance is not just a fintech platform that aggregates demand and passes on leads. We also play the role of the underwriter and take responsibility for the employment outcome.
Our platform brings together four key stakeholders:
- Youth
- Training partners
- Employers
- Financiers
We assess these different elements to ensure that the financing is connected to real job opportunities, rather than simply processing loan applications.
If a particular skill pathway is unlikely to lead to employment, we are willing to advise the youth to consider another option. We do this without charging the youth because our model is linked to employment outcomes. Our revenue ultimately comes from the jobs created.
This is what makes Lakshya Skill Finance different. We aim to be not just an aggregator, but also a job creator and an intelligence layer for the skilling economy.
Q. How is AI helping improve the speed, transparency and efficiency of the financing process?Â
A. AI has made our approach to job roles much more data-driven and scientific. Earlier, it would have been difficult for a person to track demand for a particular job role across multiple job portals. Today, AI can analyse public job listings within minutes and provide insights into market demand. This helps us assess job roles more objectively.
AI also makes our processes easier and faster. For example, our AI-enabled call centre can communicate in multiple languages. If the AI agent is unable to handle a query, it can transfer the call to a person. This makes the process more accessible while reducing the need to maintain separate language teams.
The key advantages we see are:
- Transparency
- Ease
- Speed
AI also provides additional intelligence for credit underwriting. For example, when we assess a parent’s business, AI can analyse an image of the business premises and provide insights such as the stock value, the number of people present, and whether details such as the QR code and business name match the information provided.
These capabilities would otherwise require a largely human-led process. By combining a digital model with AI, we can make the financing and underwriting process more efficient and data-driven.
Q. How can training institutions benefit from being part of the Lakshya Skill Finance platform?Â
A. Skill finance creates a win-win situation for training institutions because it can serve as a working-capital solution. Instead of receiving course fees in instalments over several months, institutions can receive the payment upfront, while the financing is provided to the learner.
This reduces the working-capital pressure on training providers and gives them greater scope to scale their programs. It can also encourage learners to take the training more seriously, as they have a financial commitment towards the course.
So, the model brings:
- Ease to the youth
- Scale to training partners
- Comfort to financiers
- A trained talent pool for employers
We have seen training institutions come forward quickly because they recognize the value of this model. It benefits both institutions and learners. For example, a job-oriented course costing ₹1 lakh may be difficult for a learner from a low-income family to pay upfront. Financing linked to future employment can make such courses more accessible.
Q. Is there anything else you would like to share with policymakers, youth and training institutions?
A. My message to policymakers would be to bring greater depth and ease into skill financing. Financiers still face challenges, including the cost of funds, so strengthening the financing ecosystem is important for sustainable skill development.
For training partners, the focus needs to be more strongly on employment outcomes. Moving beyond simply meeting program targets and focusing on employment can help build a more sustainable ecosystem, where training, financing and jobs are connected.
My third message is to give greater importance to micro-entrepreneurship. We cannot expect every young person to find a formal job, so we also need to create more opportunities for young people to start businesses and generate employment for others. I believe we need to create around 2–3 million micro-entrepreneurs over the next three to five years, with each creating employment for four to five people.
This will require all of us to think about how we can support, anchor and mentor young entrepreneurs as they start and grow their businesses. From my experience in lending at NSDC, I have seen the potential of this approach. I hope policymakers, training partners, financiers and other stakeholders can collaborate to build a more sustainable ecosystem around employment and micro-entrepreneurship.
