Innovative TVET Financing in Lao PDR TVET Financing in Lao PDR Results from a Fact Finding Study Presentation in the Group Session “TVET Finance and ... › Develop a Financing Instrument

Innovative TVET Financing in Lao PDR

Results from a Fact Finding Study

Presentation in the Group Session “TVET Finance and Funding”

Regional TVET Conference 2015, Vientiane

December 15, 2015

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2

Presentation Outline

1 Background and Objectives of the Study

2 Key Findings from Situation Analysis

3 Proposed Model: Cooperative Training Fund

4 Next Steps

Innovative TVET Financing in Lao PDR / Regional TVET Conference / Vientiane, December 2015

Background and Objectives of the Study


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Background and Objectives of the Study


Challenges of sustainable TVET Financing

Fund Generation

Fund Budgeting and Administration

Fund Allocation

› Outcome- or

demand-oriented

mechanisms rare

› Allocation processes

intransparent

› Real training costs

widely unknown

› Public budgets not

based on real costs

› Inefficient

institutional

structures

› Government budget

as the main funding

source often not

sufficient

› Limited involvement

of private sector

› Limited ability to pay

by TVET students


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Background and objectives of the study


Guiding Question & Objective

› How can innovative, demand-oriented TVET financing approaches

promote high-quality vocational education?

› Develop a Financing Instrument to

› increase quality of TVET through integration of practical/ enterprise-

based training into TVET, in particular Dual Cooperative Training

› foster demand-oriented fund allocation mechanisms


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Background and objectives of the study


Positive framework conditions for establishment of TVET financing model

› Dual Cooperative Training is supposed to

be implemented as one of the key pillars

of TVET according to the new TVET Law

› With the National Training Council (NTC),

a national governing body for TVET is in

place (although its capacity needs to be

further strengthened)

› A levy-funded National TVET and Skills

Development Fund (NTSDF) is envisaged

as per Labour Law and the new TVET Law

Key Findings from Situation Analysis


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Key Findings from Situation Analysis


Involvement of companies in TVET limited, but for diverse reasons

Large Enterprises

SMEs Micro Enterprises

› 1 – 4 employees;

23% of enterprises

› Limited potential to

absorb additional

labour

› On-the-job training

› Demand for skills

upgrading of their

staff

› 5 – 99 employees;

75% of enterprises

› Great employment

potential

› Limited involvement

in TVET, considered

costly

› Qualified labour and

investment into

productive

capacities needed in

context of AEC

› >100 employees;

2% of enterprises

› High and increasing

demand for qualified

labour

› High willingness and

ability to invest in

TVET (financing no

constraint)

› Cooperations with

TVET institutes are

rare


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Key Findings from Situation Analysis Constraints for TVET institutes to engage in cooperative training schemes


› High work effort to establish effective

collaborations with companies and to

develop and set up cooperative training

courses

› Supply-oriented budget funding does not

provide incentives for TVET institutes to

set up private-sector cooperations

› TVET institutes need a good reputation to

attract especially large enterprises to

cooperate


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Key Findings from Situation Analysis Conclusions for model set-up


› Enterprise-based training can increase quality

of TVET offers

› Dual Cooperative Training (DCT) as efficient

model to ensure demand-orientation of TVET

› Strengthening of DCT included in the new

TVET law, but so far no appropriate (financial)

incentives in place

› Core priority of this model on the

strengthening of DCT by setting appropriate

incentives, targeting at both TVET institutes

and enterprises

Proposed Model: Cooperative Training

Fund


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Cooperative Training Fund


General Set-Up

Grant via BoL

& partner

bank

KfW funding

Grant

via

MoF

Window 4

TVET

Students

(priority trade areas)

TVET student

stipends

Stipends

Window 1

Strengthening DCT

SMEs

(5-99 staff)

TVET

Institutes

Grants Grants

Window 3

MSEs

(1-19 staff)

TVET

Institutes

Skills upgrading for

MSE

Grants Grants

Window 2

TVET

Institutes

Large

enterpri-

ses

(>100

staff)

Upgrading industry

relevant skills

Grants

Loan

Fund

Grant

element

Loans

MoES

Contracting

Forms part of

Funding policy

Cooperative Training Fund (CTF)

Fund Manager (Consultant)

CTF Board Information


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Purpose of Grant Funding

Initial funding to launch DCT schemes:

› TVET institutes: › Position of a DCT coordinator for a period of 3 years

› Equipment needed to offer courses in connection with

DCT, spare parts / consumables to a limited extent

› Training and further education of teachers and

school management

› SMEs: › Further training of in-company training personnel

› Compensation for internal training costs and

allowances paid to trainees (only during practical

training in the first year)

› Large enterprises: › Further training of in-company training personnel


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› Competitive application process for funds to strengthen bottom-up initiatives of

applicants

› TVET institute and enterprise form partnership and develop joint proposal for

establishing DCT

› Calls for proposals at regular, pre-defined dates

› Proposal Facilitators support the applicants to prepare proposals

› Assessment of the proposal by the Fund Manager based on clear selection

criteria

› Number of formal cooperation agreements

› Number of in-company trainee positions

› Occupational field

› Outline of Implementation Strategy


Design Features: Challenge Fund Approach


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Subsidised TVET loans to SMEs

Rationale:

› SMEs need to invest in productive capacities

› Access to credit/funding identified as a major challenge for SMEs

› Increasing involvement of well-trained trainees has a positive effect on growth

and the need for investment in productive capacities

› Modernized production equipment raises attractiveness of enterprises

› Subsidized loans as an incentive to engage in cooperative training scheme


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Subsidised TVET loans to SMEs

Grant via MoF

Grants TVET

Loans

Partner Bank

Bank of the Lao

PDR KfW funding

Local

currency

loan from

BoL

Grant

via

MoF

Subsidy

element

Info exchange

Cooperative Training

Fund (CTF)

(LAFF)

Interested and

creditworthy

SMEs

Window 1

SMEs


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Timeline

Year

-1

Year

0

Year

1

Year

2

Year

3

Year

4

Set up

of CTF

1st tranche of proposals

2nd tranche of proposals

Project Phase 1 (4 years)

Phase 2

Full-time int. Fund Manager Part-time int. Fund Manager

3rd tranche of proposals

• Feasibility,

• Appraisal,

• Financing

Agreement

• Selection of

Fund Manager

Preparation


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Risks

Risks Mitigation Measures

› Low quality of grant proposals

and limited outflow of funds

› Proposal Facilitators and capacity

assessment of TVET institutes by fund

manager

› Lack of demand for subsidised

TVET loans (open issues)

› In-depth analysis of financing needs and

detailed design of loan product

› Sustainability of DCT schemes › Outline of sustainability of the

cooperation in grant proposal

› Sustainability of the CTF itself

and transfer to NTSDF

› Constant stakeholder dialogue and

publications on lessons learned

Next steps


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Next steps


› Discussion and Feedback on the concept by stakeholders and partners (MoES,

BMZ, GIZ, other donors etc.)

› In-depth feasibility study to develop detailed programme design, including

comprehensive demand analysis of SMEs and TVET institutes

› Clarification of governing structure / role of NTC

› Clarification of transition process to locally funded financing mechanism / NTSDF

Contacts

KfW Germany:

Ms. Irina Sareika,

Project Manager

Phone: +49 69 7431-4121

Email: [email protected]

Ms. Eva Schneider,

Country Manager for Lao PDR

Phone: +49 69 7431-3648


KfW Office Vientiane:

Mr. Lorenz Gessner,

Office Director

Phone: +856-21-353 605


Ms. Thavivanh Phanakhone,

Project Coordinator

Phone: +856-21-353 605


mailto:[email protected]




Documents

Innovative TVET Financing in Lao PDR TVET Financing in Lao PDR Results from a Fact Finding Study Presentation in the Group Session “TVET Finance and ... › Develop a Financing Instrument