Results-based Financing - Employment Fund Nepal
Vocational training makes sense only when it leads to gainful employment. Over 90% of the young graduates trained by the Employment Fund in Nepal found a job. Read how this worked in practice and the impacts it has on disadvantaged groups.
How skills training changed the lives of disadvantaged young people in Nepal
The Employment Fund supported training for about 100,000 young Nepalese women and men. Over 90% of the graduates found employment, 75% earned an income above the official minimum wage, and 80% were from disadvantaged groups. The most disadvantaged group, young Dalit women, stated that the most significant impacts of the training programme were greater recognition within their communities, enhanced self-confidence and independence.
The programme applied a results-based payment system that rewarded success in securing employment rather than the training in itself – a successful mechanism for including disadvantaged young people in the labor market. The inclusion of several Employment Fund modalities in the Nepali government’s Vocational Education and Training policy is a clear indication that the Employment Fund enjoys national recognition.
Context
Helvetas has a strong commitment to measuring the outcomes and impact of its interventions. Helvetas projects apply a comprehensive monitoring and evaluation (M&E) system with standardized performance indicators and reports on results. Such result-oriented M&E systems are crucial for project steering, organizational learning from the project and showing accountability to stakeholders and donors.
Additionally, Helvetas conducts regular internal or external evaluations and reviews the sustainability of the outcomes and systemic changes. Tracer studies – a survey method that gives information about the employment, contract and income situation of graduates after training – are applied in many Helvetas Vocational Skills Development projects.
Helvetas regularly commissions specialist research institutions to assess the impacts of its signature projects. In the case of the Employment Fund, Helvetas contracted the Nepalese research firm RIDA (Research Inputs and Development Action) and the Department of Geography of the University of Zurich (UNIZH). They jointly studied the overall impact of the Employment Fund as well as its specific impact on the lives of marginalized people.
Additionally, Helvetas conducts regular internal or external evaluations and reviews the sustainability of the outcomes and systemic changes. Tracer studies – a survey method that gives information about the employment, contract and income situation of graduates after training – are applied in many Helvetas Vocational Skills Development projects.
Helvetas regularly commissions specialist research institutions to assess the impacts of its signature projects. In the case of the Employment Fund, Helvetas contracted the Nepalese research firm RIDA (Research Inputs and Development Action) and the Department of Geography of the University of Zurich (UNIZH). They jointly studied the overall impact of the Employment Fund as well as its specific impact on the lives of marginalized people.
The Employment Fund in Nepal
An estimated 500,000 young people enter the Nepalese labor market every year. Attaining gainful employment is a challenge for these young people especially those who come from disadvantaged backgrounds. This is due to a variety of reasons including poor formal education, family responsibilities and limited technical skills, but also because of a poorly developed private sector. Therefore, the Employment Fund was established in 2008 with the aim of providing gainful employment to disadvantaged, unemployed out-of-school youth. The project ran until 2016.
The Employment Fund was financed by the Swiss Agency for Development and Cooperation, UK Aid and the World Bank, with an overall budget of about 35 million Swiss francs. Helvetas operated the secretariat of the fund, which covered 87% of all districts in Nepal and approximately 80 occupations in different sectors (e.g. construction, hospitality, garments and textile, agriculture, electronics, etc.), and collaborated with 57 training providers. The training courses usually lasted three to four months. 80 % of the content was practical; theory lessons made up the remaining 20%.
The Employment Fund applied a results-based financing approach, paying training providers based on their success in training and then connecting young people with the labor market. Moreover, the Employment Fund placed special emphasis on the inclusion of women and other disadvantaged groups in the courses, doing this, for instance, through targeted incentives, communication campaigns and counseling.
The Employment Fund was financed by the Swiss Agency for Development and Cooperation, UK Aid and the World Bank, with an overall budget of about 35 million Swiss francs. Helvetas operated the secretariat of the fund, which covered 87% of all districts in Nepal and approximately 80 occupations in different sectors (e.g. construction, hospitality, garments and textile, agriculture, electronics, etc.), and collaborated with 57 training providers. The training courses usually lasted three to four months. 80 % of the content was practical; theory lessons made up the remaining 20%.
The Employment Fund applied a results-based financing approach, paying training providers based on their success in training and then connecting young people with the labor market. Moreover, the Employment Fund placed special emphasis on the inclusion of women and other disadvantaged groups in the courses, doing this, for instance, through targeted incentives, communication campaigns and counseling.
Employment for the masses
The results presented in this section are mainly based on the project’s monitoring database, a tracer study carried out in 2012 by Development Division Nepal Ltd. and, to a lesser extent, a tracer study conducted in 2013. The methodology for the 2012 tracer study is explained here. A random sample was taken (stratified per trade group) – in total 670 of 10,485 graduates, representing 17 different trade groups. While bricklayers represented the largest trade group with 1,481 graduates, only 52 animal health-care workers were trained, representing the smallest group in the tracer study’s cohort.
All the graduates had attended courses two to three years earlier. Personal interviews were conducted with the graduates using the questionnaire from the Helvetas Tracer Study Tool Kit. Employers, training providers and representatives of support institutions were also interviewed or participated in focus group discussions.
Training and employment results
By the end of 2015, the Employment Fund had financed skills training for about 100,000 Nepalese young women and men, of whom over 90% were employed and 75% gainfully employed. More than 50% of the trainees were women. The results-based financing model had brought about a paradigm shift in the implementation of skills development projects in Nepal: training and employment services focused on the employer’s needs, and these services could only be considered successful if the trained person was in gainful employment.
All the graduates had attended courses two to three years earlier. Personal interviews were conducted with the graduates using the questionnaire from the Helvetas Tracer Study Tool Kit. Employers, training providers and representatives of support institutions were also interviewed or participated in focus group discussions.
Training and employment results
By the end of 2015, the Employment Fund had financed skills training for about 100,000 Nepalese young women and men, of whom over 90% were employed and 75% gainfully employed. More than 50% of the trainees were women. The results-based financing model had brought about a paradigm shift in the implementation of skills development projects in Nepal: training and employment services focused on the employer’s needs, and these services could only be considered successful if the trained person was in gainful employment.
From training to employment
The transition period between the completion of training and employment lasted on average less than two months. It did, however, vary greatly from one profession
to the next. In some trades, there were significant differences between men and women, but overall these differences were insignificant (women: 1.8 months; men:
1.9 months).
The transition period between the completion of training and employment lasted on average less than two months. It did, however, vary greatly from one profession
to the next. In some trades, there were significant differences between men and women, but overall these differences were insignificant (women: 1.8 months; men:
1.9 months).
The analysis of the transition period from training to employment was important for the future selection of trades and training providers and for decisions about gender-specific measures and job placement, as well as for tracing and ensuring that graduates find employment within a reasonable period of time.
Employment status over time
80% of graduates became self-employed or found wage employment within the first three months, although not all of them were in gainful employment. 92% were employed six to nine months after their training course. There was a trend towards self-employment over time. Immediately after graduation, 56% of those employed were in wage employment, while 44% were self-employed. The opposite was the case two years later when 44% were wage employed and 56% self-employed.
About half of the entrepreneurs were successful, while the other half were struggling with their businesses, mainly due to a lack of relevant additional skills and unfavorable markets. Self-employment was challenging because it requires not just technical but other skills such as financial literacy, risk-taking and, above all, an “entrepreneurial mindset”. The tracer study results showed that 91% of the students preferred self-employment if they had access to funds for initial investment. That may explain why graduates often started out in wage-employment and then changed to self-employment after a few months of contracted work.
Many graduates hoped for a more secure working environment, a higher income and more autonomy when self-employed. In the informal economy, which is dominant in Nepal, employees often lack formal work contracts with clear details of their salary, working hours, duties and rights. They therefore also lack any social security or pensions, which constitute important employment benefits in developed economies.
Overall, the tracer studies showed that 93% of the self or wage-employed graduates were satisfied with their current job. Nonetheless, the main challenges identified were low salaries, no scope for further training and discrimination. Two years after graduation, 70% of graduates were still working in the same profession they had been trained for.
Income
After the training course, the average monthly income rose from NPR 2,471 to 8,933. Before the training, the graduates contributed 48% to their household income, whereas after training this rose to 67%.
Further information
Selected projects
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