Blended Finance

Risk Guarantee structure is tool that can enable lending institutions to pump in sizeable commercial capital to augment the lending portfolio in skilling ecosystem. Under this model of financing, NSDC provides risk guarantee to lending institutions to deploy commercial capital for onward lending in the form of skill loans to aspiring candidates pursing in-demand market led skill courses. Risk of default for such lending in borne by the risk guarantee provided by NSDC. 

Alternatively, donor capital is taken as guarantee by NSDC to provide concessional capital for outcome based social projects to finance working capital / project finance needs of implementing organizations / service providers. The guarantee structure boosts supply of institutional credit for development projects and significantly scales up the beneficiaries especially from economically weaker sections of the community. Upon successful outcome of the project, the repayment of working capital / project finance loans is done by the outcome funder / grant provider. The risk of under-performance is subsumed by the guarantee provider and implementing organization.

Under this structure, NSDC along with other impact investors provides risk capital upfront to fund the service provider for pre-determined social interventions. The service provider delivers the interventions to achieve pre-determined outcomes. The outcome is verified by an independent third-party evaluator. The under-performance of the project, if any, is borne by NSDC as risk investor. However, upon successful outcomes, the risk investors get repaid by outcome funders. The result is maximum impact as capital commitment by risk investors is responsibly deployed, service provider’s performance is outcome oriented as its payout is linked to its performance and outcome funder can replace traditional grant model by paying only if project delivers predetermined outcome of the project. 

Impact capital from government and impact investors is deployed for outcome-based skilling programs 

Social Stock Exchange functions as a unique fund-raising platform for Social Enterprises to mobilize funds for Skill Development Projects / Programs through private placement or public issue of its instruments listed on SSE. 

SSEs will make use of mature financial and capital markets to channelize and leverage resources towards social causes whose impact will be measurable. Social Enterprises can choose from a variety of instruments such as Zero Coupon Zero Principal Bonds, Development Impact Bonds, Social Impact Bonds, etc for issuance and listing on SSE. SEBI has notified ZCZP as eligible security for registration on Social Stock Exchange. These are issued for raising funds for a particular project. The outcome of the project will be evaluated by the social auditor. 

NSDC is now registered with SSE Platform of both National Stock Exchange, Bombay Stock Exchange and is eligible to raise funds on its SSE platform. It will soon be listing an instrument on SSE for specific Skilling Projects.