The Challenge
Students from low-income households often face systemic barriers in accessing loans for skilling courses that can lead to aspirational careers. Many belong to families that are dependent on agriculture or informal work, with limited or no credit history and low CIBIL scores. Traditional underwriting processes used by lenders rely heavily on these metrics, leading to high rejection rates. Without financing, such students cannot afford course fees, limiting their ability to enroll in quality training programs. The challenge is to design an inclusive financing approach that assesses future earning potential, not just past credit records, and connects students to credible training providers.
Blended Finance in Action
TBFC has set-up a skills financing facility to enable student’s future income-based underwriting and provide partner NBFCs loss support to unlock course fee financing. Through extensive due diligence TBFC ensures a curated list of training providers for students to choose from and NBFCs to support. The training providers ensure that courses are demand led and the content is relevant and aligned to industry’s requirements, leading to high placement rates. A guarantee cover is provided by philanthropic funders to support NBFCs with the additional risk taken on due to change in underwriting criteria.. We work closely with the training providers and NBFCs to structure student friendly loan products to ensure most of the repayment is made from the student’s future income and hence, reducing the financial burden on the household.
By structuring a risk-sharing model between the training providers, NBFCs and students, the facility aligns the incentives of each stakeholder towards ensuring strong placement outcomes and loan repayments. We are in the process of scaling up across various sectors and geographies in India to maximize the coverage and impact of the program.
