Skill Impact Bonds

What are Impact Bonds?

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  • Impact bonds are innovative financing instruments that leverage private sector capital and expertise, with a focus on achieving results. 
  • It shifts the focus from inputs to performance and results. 
  • Rather than a government or a donor fina­ncing a project upfront, private investors (risk investors) initially finance the initiative and are repaid by outcome funders only if agreed-upon outcomes are achieved.

Skill Impact Bond

  • It is a public-private partnership model in India for the skilling and employment sector.
  • As an innovative outcomes-based financing tool that leverages private sector capital and expertise, the Skill Impact Bond shifts its focus from inputs like training and certification to outcomes like job placement and retention for India’s youth.
  • The collaboration also aims at strengthening the capacity of India’s technical and vocational education ecosystem through knowledge exchange, evidence and data generation and mainstreaming good practices.
  • Under the Skill Impact Bond:
    • Risk Investors such as NSDC provided upfront working capital to the trainers to implement skill development programmes. 
    • Service Providers deliver skilling interventions to improve employment outcomes. 
    • Outcome Funders repay risk investors initial investment for each positive outcome achieved. 
    • Third-party Evaluator: The employment outcomes are assessed by an independent third-party evaluator.
  • Targets: To skill and provide employment to 50,000 youths over four years. Sixty per cent of the youths will be women and girls. 
  • Sectors: The trainees are being skilled and provided access to wage employment in sectors that are recovering from the Covid-19 economic shock, such as retail, apparel and logistics.
  • Nodal Authority: It is pioneered by National Skill Development Corporation (NSDC) under the aegis of the Ministry of Skill Development and Entrepreneurship (MSDE) and a coalition of mission-aligned partners.
  • Objective: To transform the way skill training programmes are implemented in the country, with major emphasis on bridging the gap between skilling and employment, especially for women.


  • Until May 2023, the Skill Impact Bond had skilled more than 18,000 first-time job seekers from low-income families, of whom 72 percent were women. 
  • The first cohort of the Skill Impact Bond also indicates a better retention rate in jobs, as one in two women who have enrolled in the training have continued to work in wage employment for three months.
  • This is in stark contrast to other skilling initiatives, as the retention rate in employment hovers at as low as 10 per cent, once the training gets over. 
  • Post-placement tracking and guidance such as regular check-ins with candidates and migratory assistance are unique features under the impact bond that helps women adapt to new environments and challenges, thus reducing dropouts.

PYQ 2018: With reference to Pradhan Mantri Kaushal Vikas Yojana, consider the following statements:

  1. It is the flagship scheme of the Ministry of Labour and Employment.
  2. It, among other things, will also impart training in soft skills, entrepreneurship, financial and digital literacy.
  3. It aims to align the competencies of the unregulated workforce of the country to the National Skill Qualification Framework.

Which of the statements given above is/are correct?

(a) 1 and 3 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2, and 3

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Answer: (c)

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