HELVETAS Counting on Impact Report

© Patrick Rohr/ Helvetas

COUNTING ON IMPACT

RESULTS-BASED FINANCING FOR YOUTH TRAINING AND EMPLOYMENT Mulatu Melkamu (trainer) with his trainees

HOW WE GOT HERE For the past 65 years, Helvetas has committed to helping poor and disadvantaged groups improve their livelihoods all over the world. With a strong focus on development cooperation and humanitarian response, Helvetas operates in 30 countries today.

In one of our partner countries, Nepal, we took a resultsbased financing approach to launch an employment fund for struggling young people. Beginning in 2007 with support from the World Bank, UK Aid and the Swiss Agency for Development and Cooperation, we were able to train 100,000 Nepali youth over the next eight years, ultimately bringing 90% of them into employment.

The resounding success of this model in Asia prompted us to pilot versions of this program in several countries in Africa. This case study takes a closer look at one of these pilot projects: SKY in Ethiopia.

THE CHALLENGE: YOUTH EMPLOYMENT IN ETHIOPIA Over the past 15 years, Ethiopia has experienced strong economic growth, with marked improvements in social service delivery and financial security: per capita income, for example, more than doubled from $396 to $862 between 2010 and 2017.

However, this young nation also has the world’s largest out-of-school population. And with nearly 70% of the country’s population under 29, these upward trends simply cannot be expected to endure.

The World Bank estimates youth unemployment in the country to be almost 27%. This staggering figure can be attributed to multiple factors, including poor education quality, high dropout rates, limited skills development programs, inadequate employment opportunities in the formal sector, and the lack of market-orientation in Technical and Vocational Education and Training (TVET).

IN AMHARA: • 17% of the total workforce is unemployed • Youth are 23% less likely to be employed than the rest of the workforce

• In urban areas, women are half as likely as

What makes SKY unique, though, is its incentive model: institutions are not paid full fees for the training itself.

Instead, the project withholds large portions of the total payment until trainees are able to find steady employment, or successfully establish businesses of their own.

This Results-Based Financing Model (RBF) incentivizes training providers to innovate, plan and work toward the goal of helping trainees find gainful employment.

men to be employed

• In SKY’s first phase, more than 2,000 young women and men found employment

PRINCIPLES OF A RESULTS-BASED FINANCING APPROACH

For youth who manage to overcome these stark obstacles, disparities in socioeconomic class, gender and geography can present additional barriers to entering the labor force – in the Amhara region, for example, unemployment has proven itself to be an urban and female phenomenon.

Traditionally, enrollment, attendance, and graduation rates have defined training program success. But by tying funding to post-training employment, RBF completely transforms the metrics of achievement: What truly matters in this system is whether trainees can establish a dependable source of income.

But despite this array of challenges, the appetite and demand for technical and vocational education and training programs remains high.

RBF also encourages innovation by training providers. In traditional models, training institutions have often been content to rely on the methodologies and value systems that worked in the past. With RBF’s focus on measurable outcomes, though, training institutions are forced to innovate and adapt to make sure their programs most effectively prepare young professionals to succeed in today’s workplace. Funding is tied directly to performance.

OUR INTERVENTION: SKILLS AND KNOWLEDGE FOR YOUTH Since 2015 in Ethiopia’s Amhara region, Helvetas has run the Skills and Knowledge for Youth (SKY) program to boost employability, create jobs, and encourage entrepreneurship for disadvantaged young people.

The program works like this: SKY staff conduct labor market studies to identify occupations that are in high demand. In Amhara, these include hairdressing, tailoring and carpentry, as well as jobs in food processing, urban poultry farming and auto repair. Project staff then vet and select accredited training institutions within these fields, who in turn provide three-month courses for young trainees.

INPUTS

And in a competitive funding world that relies increasingly on analytics and measurable outcomes, embracing RBF sets project implementers on a course to more easily prove their worth: from being able to provide more rigorous impact evaluations, to giving funders an opportunity to quite literally pay for quantifiable outcomes. This has strong potential to attract more impact investment funding, and to more easily scale up a successful pilot program.

OUTPUTS

OUTCOMES

IMPACT

Classroom materials

Classroom set-up

Employment rate

Improved living conditions

Text books

Time of instruction

Earnings

Curriculum & manuals

Instructors trained

Equipment

Training completion

Training consumables

Students trained

Instructors

Skill test success rate

Figure 1: Principles of a Results-Based Financing Approach

RBF APPROACH FOR SKILLS AND GAINFUL EMPLOYMENT PAYMENT

NO OR SMALL PAYMENT

PAYMENT (3-6 months after graduation)

(middle of training)

0-20%

30-50%

AGREEMENT

TRAINING

SKILLS TEST

(Contract)

(3-6 months)

(official certificate)

of total price

of total price

EMPLOYABILITY (output level)

40-60% of total price

GAINFUL EMPLOYMENT

EMPLOYMENT (outcome level)

Figure 2: How RBF Works in Practice

HOW RBF WORKS IN PRACTICE First, we conduct an initial assessment to identify labor market needs. Based on what skills are in demand, project implementers identify training providers, and settle on an agreement.

In broad strokes, an RBF agreement looks like this: Providers finance a training upfront, and are paid a first installment once trainees have graduated and passed a skills test. Once an agreed-upon percentage of graduates get jobs or start their own businesses, providers are paid the balance for training, and then given incentives for social inclusion.

“

This result-based system is a very good idea. Splitting payments into three rounds makes the trainers work harder. I think that governments and other organizations should also work this way.”

Chalachew Mulat, Private Trainer

In the SKY program, the payment structure is as follows:

• Training providers are paid 25% after the first six weeks of training.

• Once training is complete and 80% of graduates have received national and institutional certification, SKY pays a second installment of 45%.

• When 80% of graduates find gainful employment

– defined in this project as a job that earns at least $2 per day for four consecutive months – training providers receive the 30% balance, plus incentive payments for matching youth at extreme disadvantage with employment.

While these agreed-upon conditions are clear-cut, RBF itself is not rigid. Instead, it is a flexible practice that encourages strategic thinking about the power of financial incentives and their ability to motivate stronger program performance. There are endless ways of structuring, tweaking, and adapting RBF to fit a given context.

SKY PROJECT: AT A GLANCE START YEAR: 2015 CURRENT PHASE: II (2018-2021) CURRENT PHASE BUDGET: $1,173,790 2018-2019 RESULTS: • Of 1,123 total graduates, 788 were women • 84% of graduates found gainful employment • 74% reported improved living conditions

TRAINING DISADVANTAGED YOUTH SKY places a particular emphasis on the inclusion of youth at extreme disadvantage, including those with little formal education, single mothers, people living with HIV, internally displaced people, and youth with disabilities. In these cases, the project provides additional social inclusion incentives to training institutions for each graduate who finds gainful employment, allowing trainers to offer services that otherwise may not seem possible, and to make the extra effort to advocate for the most marginalized youth (If less than 40% of overall program graduates find employment, the social inclusion incentive is not offered).

“

Before the training, I was trying to find work on my own.

I was a shoe-shine girl. After I registered as a job seeker in the Kebele, I came in contact with Helvetas and started training in weaving. After the training, we were organized into a group of five and given a place to work.”

SKY also provides extra support and flexibility to women with familial duties, allowing them to enter the program until they turn 35. Men, in contrast, must begin the program by age 30. At least half of each project cohort is made up of women: In 2019, all SKY trainees belonged to disadvantaged groups, and 509 out of a total of 817 graduates were female.

SKY PROGRAM CATEGORY

DEFINITION

Wubalem Gelaw, 25, Weaving Trainee

PAYMENT FOR TRAINING & GAINFUL EMPLOYMENT

SOCIAL INCLUSION INCENTIVE IN CASE OF GAINFUL EMPLOYMENT

PAID TO THE TRAINING PROVIDER

A B C D

43 USD

Women with special needs people with disabilities, living with HIV, single parents, displaced people

33 USD

Men with special needs

120-240 USD

(depending on the trade)

27 USD

Economically disadvantaged women unemployed, disadvantaged men and women Economically disadvantaged men

Figure 3: Training Disadvantaged Youth

17 USD

© Helvetas/Simon B. Opladen

The regional government of Amhara has declared the SKY curriculum as the standard for short training courses for the entire region.

RESULTS, CHALLENGES AND LESSONS LEARNED In the program’s first phase (2015-2018), SKY’s 2,000 program graduates experienced quantifiable success: 76% found a job or started their own business within a month of graduating from the three-month training program. In SKY’s second phase, currently underway, we are confident that 3,000 additional young people will enjoy similar levels of achievement.

We have also seen positive results within the private sector – training providers now collaborate regularly with outside consultants to design curricula – and within the regional government of Amhara, which has not only invited Helvetas to use state-owned training facilities for this program, but has declared the SKY curriculum the standard for short training courses for the entire region.

Along the way, we have identified opportunities for improvement in the following areas:

• Program participants. SKY works with sub-city

administrations to identify disadvantaged youth.

For a more fair and transparent process, implementers must share their project vision at the start, and more actively collaborate with administrations in selecting new trainees.

• Career choices. Due to a lack of guidance and

counseling, trainees often enter the program with limited career aspirations. To broaden the horizons of future participants, we must recruit community leaders, past graduates and representatives from civil society to spread the message about the program and available employment opportunities.

• Training providers. In some sectors, there are sim-

ply not enough high caliber trainers familiar with the RBF approach. To reverse this trend, SKY must build capacity and create a peer network to “train the trainers” and recruit new ones.

Cooking class in Bahir Dar, Ethiopia Cook (Trainee) Temesgen Yenework Cook (Teacher/Trainer): Amare Nedebe

We have also learned many lessons in the first five years of this project:

• RBF is still a new concept for most – and initial

skepticism is to be expected. Training providers may shy away from financial risks associated with guaranteeing employment, while government partners may question whether a project based on this payment model can succeed.

• Training quality is critical. For RBF to succeed,

training providers must be introduced to its potential, and expected to adhere to an established curriculum.

• Social inclusion requires flexibility. It is especial-

ly important to design flexible training programs for disadvantaged women, such as offering classes on nights and weekends. Those from marginalized groups often lack confidence that they will find employment upon graduation, making employment counseling an increasingly important element of the RBF model.

Based on our experiences with this project and its precursor in Nepal, we have developed a 30-page manual for local partners that provides practical guidance on how to most effectively utilize RBF (available upon request).

© Helvetas/Simon B. Opladen

• Trainings must be oriented to the labor market and to practical experience, focusing on skills that are currently in demand. At the most basic level, if trainees do not acquire the skills relevant for a particular job, they will not be employed. Training providers must be well organized, have access to a broad employer network, and established links to financial institutions to facilitate entrepreneurship.

MOVING FORWARD Helvetas is working to scale its RBF practice to other regions within Ethiopia, and throughout several other African countries. The overarching aim is to ensure the sustained participation of disadvantaged youth in the labor market.

To do this, we need:

• New partnerships with groups within government and the private sector to establish an employment fund: by pooling together financial resources, RBF will be bolstered and replicated to benefit African youth.

Tailoring training in Bahir Dar, Ethiopia Tailor: Sahilemariam Shibabaw

POLICY RECOMMENDATIONS • It is essential to establish a multi-stakeholder

employment fund. In Nepal, we had tremendous success thanks to buy-in from both the government and individual donors. By subsidizing the Helvetas contributions to the SKY fund, government and private actors will help pave the way for the project to both scale and achieve lasting impact.

• Ongoing collaboration with like-minded development actors who are also promoting economic growth. By linking the SKY project with other private sector development initiatives, we will boost opportunities for vulnerable youth to join the workforce.

• Financial support from donors and founda-

tions. By subsidizing the SKY fund, these donors will pave the way for the project to both scale and achieve lasting impact.

• Governments should be open to working with

project implementers hoping to institutionalize the RBF approach. Without public sector trust, participation and ownership, private training providers will have a difficult time scaling up.

• Monitoring systems must be rigorous and

transparent. Training providers must be able to have complete trust in monitoring systems and evaluations, since they are the basis for payment.

Results must also be made available for independent verification.

• Private sector training providers must be willing

and incentivized to fight for trainee employment. It is necessary to both create an environment where RBF is valued by trainers, and properly explain the incentive mechanism at the start.

CONTACT US In Ethiopia: Fanaye Gebrehiwot, Deputy Country Director, Helvetas Gender and Inclusion Expert, fanaye.gebrehiwot@helvetas.org In Switzerland: Bettina Jenny, Helvetas Head of Skills Development and Education, bettina.jenny@helvetas.org In the USA: Christian Steiner, Helvetas USA CEO, christian.steiner@helvetas.org