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Why is the topic of funding in TVET important?
Technical and vocational education and training (TVET) is considered a powerful tool to prepare youth for the labour market and provide lifelong learning opportunities to adults. It plays a strategic role in the achievement of the 2030 Agenda for Sustainable Development.
In particular, Sustainable Development Goal 4 on Education calls on Members States to “ensure inclusive and quality education for all and promote lifelong learning”. It notably targets “an equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university” (SDG4.3) and a “substantial increase in the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship” (SDG 4.4).
and informal employment (formal salaried jobs only represent half of the jobs available worldwide), gender inequalities (less than 50% of women occupy a job worldwide, against almost 80% of men), urbanization (54% of the world population lives in urban areas) (WDR, 2013). These developments will bring significant changes in the skills required in the labour market and will have an impact on the type of TVET offered. It notably implies a paradigm shift, as underlined by the European Commission (2012), to take into account not only a school-based approach of TVET, but also “non-formal programmes which may be delivered in the workplace”, which “do not lead to formal qualifications and encompasses training in the informal economy”. TVET Funding in Kenya
In order for TVET systems to change and adapt to these and other developments and contribute to the achievement of the global sustainable development agenda, the financing of TVET systems will become a topic of key importance.
Objectives and scope
These targets encourage a vision of TVET that supports the transition towards inclusive and sustainable societies and economies. The vision also means that TVET systems will need to develop, transform and adapt to remain relevant.
Despite the priority displayed by the States and the international community to skills development, TVET remains largely underfinanced. First, because it is expensive compared to general education (given the high costs of material, equipment, facilities), but also considering the low share of public budget dedicated to TVET compared to other levels of training.
Demographic data and the World Bank’s World Development Report entitled “Jobs” (2013) also provide a number of insights on the challenges facing training systems in the near future. These include:
•Demographic changes: in the next 15 years, the global population is expected to increase by more than one billion people, reaching 8.5 billion in 2030 and 9.7 billion in 2050 (World population prospects, 2015). This demographic trend will mechanically result in a considerable increase in the training offer needs, and thus in the necessary resources to support it;
The Virtual Conference organized from 16 – 22 January 2017 on the topic of “Diversifying the funding sources for TVET” was attended by 219 participants from 81 countries. It facilitated the sharing of experiences, tools and best practices on funding for TVET, and built on comparative studies on the financing of skills development conducted in South-East Asia (French Development Agency, UNESCO, Gret), in Latin America, and in Sub-Saharan Africa (French Development Agency, Association for the Development of Education in Africa, Gret). TVET Funding in Kenya
•Changes in the labour market: today’s labour market is characterized by a high share of self-employment
Creative Commons © Flickr/Global Partnership for Education – GPE In the next 15 years, the global population is expected to increase by more than one billion people.
READ ALSO: TVET Opportunity for Form Four Graduates
Main questions under discussion
The conference was mainly organized around three main topics:
•Improving the cost-efficiency of public resources: A first step to address the lack of resources to fund TVET is to promote a cost-efficient use of public resources, notably through the implementation of output-based funding approaches. The conference focused on possible approaches and advantages and risks of output-based funding strategies. It also asked the question how output-based systems should be designed to function appropriately;
•Supporting the development of income generating activities by training providers: training providers are increasingly pushed to develop income generatingactivitiestocomplementtheirresources. The conference offered the opportunity discuss how training providers can be supported in developing income generating activities, the risks associated with implementing such a strategy, and how these activities should be implemented;
•Mobilizing the industry through the introduction of tax- or levy systems: one of the ways to improve funding for TVET involves mobilizing the industry through the implementation of tax or training levies. The conference focused on participants’ experiences with such systems, recommendations for the implementation of tax/levy systems, and on how they can be managed and used strategically. TVET Funding in Kenya
Summary of the virtual conference discussions
The lack of resources raises the questions about of funding priorities
A common concern that was shared by all participants of the conference relates to the lack of funding.
In many countries, it was underlined that the current funding for TVET is often barely sufficient to sustain the existing network of public training institutions, let alone its development to ensure equitable access for all. The training offer is often limited to the capital city and other major cities, but rarely reaches the rural and often poorer areas. TVET Funding in Kenya
“There’s little or no funding in Nigeria, because attention or priorities are not placed on skills development. Right now, funding of TVET remains a mirage due to the economic recession that has engulfed the country.”
(Akpokiniovo Duke Ejaita, Nigeria)
“In our country (Somalia), we are facing huge financial problemsbecauseofourweakandunsettledgovernment which cannot reach all the regions, except the capital. The financing agents are very limited and the number of youngsters who are eager to get such training are increasingdaybyday.[…]Irecommendthat:1)financing strategies should be based on equity and equality approaches; 2) more resources are needed for needy countries to improve the number of skilled persons.” TVET Funding in Kenya
(Duale Ali Muse, Somalia)
The lack of resources available for TVET raises the question of the State’s funding priorities when it comes to TVET, reflected in the proportion of the education budget that is spent on skills development. The funding of TVET often represents a small share of the education budget compared to general education, while many statistics on
the outcomes of training systems show that TVET students integrate faster in the labour market. TVET Funding in Kenya
One of the reasons for the relatively limited spending on TVET is the poor image governments and families have of the sector, with many considering it as less prestigious than general education. Another reason for the limited investment in TVET is the higher costs induced by TVET compared to general education. TVET Funding in Kenya
“I think that TVET needs to be recognized seriously as really a powerful tool that prepare labour force for economic development and poverty reduction.
But the way I see it is that most of the decision
makers neglect it, probably because of higher costs involved in running TVET institutions. But looking at the rewarding side or advantages provided, such as the increase in employment and even for reduction in crime levels, more priority should be devoted to it.” TVET Funding in Kenya
International partners (such as the World Bank, African and Asian Development Banks, etc.) were often mentioned as an important source of funding, but only complement available resources for TVET (mainly investment costs). TVET Funding in Kenya
Using public resources more efficiently through output- based approaches
Participants also discussed the possibility of improving the funding of TVET by ensuring a cost-efficient use of available resources.
States are gradually moving away from budget-oriented funding (where budget is based on inputs such as the number of trainees, the cost of utilities and material, teachers’ wages, etc.) to adopt funding approaches that take into account the quality and relevance
of training and strategic priorities and sectors. In such approaches, public budgets are allocated based on performance criteria, enabling governments to use scarce resources in a more efficient way.
Three main approaches were presented in this regard:
•funding training providers based on performance indicators, where a given percentage of a training provider’s budget is subjected to:
•the achievement of specific outputs, such as graduates’ employment rate;
•the compliance with quality indicators that are relevant for vocational training, such as industry participation in the governance of the institution, the inclusion of workplace training in curricula, industry experience among teachers, etc.;
•funding on a contract-base, where budget is allocated through tendering for training programmes;
•a trainee-centered funding, where public budget is allocated via the trainee who selects the training provider (through voucher, student loans, scholarships). TVET Funding in Kenya
Source: G. Sprecht, 2014
These funding approaches are synthetized in the diagram above.
Participants also discussed the risks associated with performance-based funding. They include:
•difficulty in monitoring the outcome: the implementation of performance-based funding requires efficient and transparent tools and institutional capacities to assess if the funding criteria is fulfilled. It may also be expensive and time-consuming with regards to monitoring ad evaluation;
“The approach for output-based funding that works well for the Fundación Paraguaya is market-oriented programs.Thisway,wemakeanefficientuseofresources and get good results such as a high rate of employability, scalability of our programs. To mention a disadvantage, themarket-orientedapproachissubjecttoworkdemand, whereby requiring a constant update and monitoring.” TVET Funding in Kenya
(Solange Rios, Paraguay)
•difficulty in accessing such schemes by poor and less-favoured regions: poorly defined performance criteria may lead to the concentration of training offer in the most dynamic areas, where it is easier to fulfil performance criteria such as employment rate after graduation. They may also incite training providers to recruit well-
performing students to the detriment of those facing academic difficulties in order to improve the average graduation rate of their centre;
•performance-based funding: may also expose training providers to financial risks if they are not able to fulfil the performance indicators. TVET Funding in Kenya
“Here are some of the risk associated with
performance based funding: difficulty in effectively monitoring the outcome, difficulty in accessing the scheme by the poor… It is also risky for the training providers should the Donor refuse to pay.”
(Akpokiniovo Duke Ejaita, Nigeria)
Possible approaches to mitigate these risks were presented, such as:
•keeping direct financing (not related to
the achievement of performance indicators) for vulnerable groups or regions;
•introducing control factors to mitigate aspects that are not attributable to training providers’ efforts.
The Finnish experience was shared on this aspect (see Bibliography). When designing their indicators to measure the performance of their TVET system, background factors that affect student outcomes were taken into account in order to improve comparability between training providers, namely:
•Characteristics of the trainee: age, gender, mother tongue, family status (marital status, children), average grade on the leaving certificate from comprehensive schooling, qualifications completed before the reference period;
•Characteristics of education: starting term of studies, field of education, type of education (e.g. apprenticeship training), enrolment in a special needs programme;
•Characteristics of the region: individuals’ sub-region of residence. TVET Funding in Kenya
This enabled the Finnish State to take into account equity aspects related to regional location and social background. To mitigate the financial risks for training providers while maintaining incentives to improve performance, the share of training providers’ budget that is subjected to the attainment of performance criteria was limited to 3%, while simultaneously maintaining a core funding from the State. TVET Funding in Kenya
It was also recommended during the Virtual Conference that output-based criteria should be linked to
long term national development strategy and the role of TVET in the National Development Plan.
“Output-based funding is a serious consideration but
must be linked to long term national development and the role of TVET in the National Development Plan. The best approach would be a centralised regulated approach. The State, through consultation with stakeholders and research, decides on the areas for target training and monitoring of trainee and facilitators output and performance. A major risk is areas left undeveloped, but becomes critical at a later stage. A major advantage would be if the limited funds available would be used for critical areas of training that can contribute to national development.” TVET Funding in Kenya
(Tricia Gilkes, Trinidad and Tobago)
The Finnish example provided interesting insights on this aspect also. TVET’s performance was evaluated on the basis of the objectives that the legislation and the Ministry of Education responsible for TVET had set. These Performance Indicators have been developed by the Ministry of Education and Culture in close cooperation with education providers, researchers and data producers to ensure the feasibility of their output-based funding system. TVET Funding in Kenya
One participant stressed the importance of defining funding priorities, and that funding one priority sector should not be to the detriment of another:
“The crucial thing is to ensure that the capitation from the government does not discriminate one sector from the other.”
(John W. Simiyu, Kenya)
The South Korean experience was presented as particularly illustrative of a sequenced approach to education funding that is designed to support the needs of the economy. In the 1950s, the Korean government conceived a six-year Plan for Completing Primary Education and invested around 80% of the education budget in primary education in order to switch to labour-intensive light manufacturing in the 1960s. After universalizing primary education, the government shifted its investment focus to secondary education in the 1960s to supply skilled workers to heavy and chemical industry. It then shifted to higher education in the 1980s and 1990s as Korea’s economy moved to more advanced level. Realizing in the 1970s that the education system alone could not supply the workforce needed to implement the economic development plans and support their competitiveness strategy, the Republic of Korea also introduced a levy system in 1976 aiming at encouraging companies to provide continuing training to their workers (see AFD/ UNESCO/GRET comparative study in South-East Asia).
The topic dedicated to tax- and levy systems provided more information on these aspects.
Income generating activities as a tool to complement resources
The Virtual Conference also focused on income- generating activities (IGA) as a means to complement training providers’ resources.
The discussions led to the identification of three main approaches to develop IGA.
The first consists in creating business by selling the goods and services produced by trainees. The example of Fundación Paraguaya was mentioned. The institution creates productive units in its training centres in order to sell goods and services to the local market. Other interesting cases were shared by participants from Ghana and Nigeria:
“In Ghana, quite a number of approaches have been carried out but the one I wish to share with you is the settinguporre-vitalizationofProductionUnitsintheTVET Institution where they select a trade area or department that they view as having a high business potential are supportedwithequipment,fundingandtechnicaladvice.”
(Samuel Thompson, Ghana)
“In Nigeria, it is the government policy for each technical college in the country (state or federal) to establish a Production Unit. This is meant to serve two purposes: for students to have practical hands on experience, especially since there is a dearth of industries, and secondly to generate funds for the institutions. The take-off grant is provided by the state government. The resources generated are used to sustain the Unit and pay the relevant departments involved in the job. Monitoring is carried out by the regulatory body.”
(Amina Idriss, Nigeria)
An interesting illustration was also provided by Maria Baier D’Orazio, from Germany, on CAPA (Centre d’Apprentissage Professionnel et Artisanal), a private centre for vocational and skills training in the Democratic Republic of Congo, whose strategy to diversify its funding sources, and notably develop incomegeneratingactivities,hasbeenwelldocumented. CAPA obtained in 2013 an important construction contract from Doctors Without Borders which they used to train 39 young people to become masons
by learning on the job at the construction site.
The second approach identified to develop IGA consists in bringing businesses within the school by renting the equipment to local entrepreneurs. The example of Young Africa’s training centres was mentioned, where local entrepreneurs can rent the tools and equipment from the centre, but these entrepreneurs are also requested to train and supervise students.
The last approach that was discussed consists of delivering services outside of the school’s premises through community projects. In Thailand, public training providers are involved in community projects such as small scale construction, repairing houses and facilities, or electrical
wiring. This was also introduced as a means to develop public awareness of the value of TVET.
The implementation of IGA brings many benefits to training providers. It helps them develop their relations with companies, deepen their understanding of labour market needs and provide opportunities
to their students to gain real life experiences, while supplementing their primary source of income.
The documentation shared on CAPA also shows that the development of IGA helped the training center rationalize and optimize the use of its
© Young Africa
Young Africa gives disadvantaged youth the chance to gain skills for employability. To learn more about the initiative, please visit the UNESCO-UNEVOC Promising Practices Database
resources. The training center no longer artificially produces goods and products “just in order to trash them.” Rather “CAPA now uses everything that the school has access to in an efficient and productive way” (Guitars, bricks and sailors, 2011).
It was stressed that the development of
IGA is however often limited by:
•lack of business mentality of training providers: having competent administrators and quality trainers does not mean that the centre has the human resources to become a successful business. The mobilization of a manager with business abilities among the school’s staff could be a first step;
“I think that one of the biggest problems with regards to successful income generating lies in the fact that schools or training centres are not business people. Sometimes schools do have assets but they are not able to use them forincomegenrating.Tobegoodadministrators,excellent pedagoguesorcompetenttrainersdoesnotmeanthatyou also show the characteristics for successful business. If a training provider has to finance itself, it would be wise to have a manager with business abilities among its staff.”
(Maria Baier-Dorozia, Germany)
•lack of quality equipment and even technical capacity of teachers with regards to the needs of the labour market: training centres’ equipment is often obsolete compared to the equipment used by modern companies and teachers are not trained in the latest technical developments and techniques. The companies that could actually pay for services from training centres therefore do not solicit them. Some training centres in Laos have tried to narrow this gap by developing win-win relationships with companies. Here, when a new technology is introduced on the market, international companies (such as Ford, Kubota, Toyota) donate equipment to the training centre and organize the training of their trainers so that, in return, the trainees would be trained accordingtotheirneeds(seeAFD/UNESCOStudyon Financing TVET in South-East Asia, forthcoming);
•status of the training centre: the implementation of IGA implies that training centres have the right legal framework to be allowed to sell produced goods.
“Unfortunately, the current status of our training centres do not allow the selling of produced goods. We would need to develop a new status in collaboration with the concerned key-stakeholders, such as the Ministry of finance and budget.”
(Hary Lala Razafinimpiasa, Madagascar)
One participant also raised the idea of opening public procurement to training providers, which could represent an opportunity for them to develop IGA:
“I wonder whether anyone attending the conference
is aware of any public procurement measures in place that support income generating activities in VET? I imagine this may open up some possibilities for production in a more protected environment.”
(Maria-Carmen Pantea, Romania)
Another participant also warned that training centres should not ‘lose sight’ of their primary objective; to teach. Other risks involved with the development of IGA included:
•unfair competition with local enterprises;
•diversion in the use of training equipment for commercial purpose: an example is provided in one of the documents that was shared during the conference (see Baier D’Orazio et al. (2016)). After the centre developed a well-functioning garage, the trainees were not allowed to touch the cars anymore because the management was afraid they might damage them;
•extent of IGA: they become so developed that they interfere with the training programme;
•linking training to IGA can also hinder the diversification of training: for example when students only receive training on the activities linked to the workshop.
When a training centre tries to diversify its resources by combining training with production, the key is therefore in finding a good balance between training and commercial activities. The documentation that was shared on the experience of CAPA in Congo provides interestingrecommendations(BaierD’Orazioetal.2016):
allocate a dedicated staff member to each one
of the two activities (training and production)
with specific training or production targets;
•employees of the two units should be strategically aligned so that they understand the utility
and the complementarity of their activities;
•each activity should have a specific portion of time allocated to it each day and should be closely monitored;
•paying a small amount to the trainees involved in production is a way to motivate them and prepare them for their work situation in the future;
•since disagreements appear from time to time between the two units with regards to the use of tools, it is best to try and equip each of the units with its own tools;
•a training centre’s self-financing activities should not compete with the graduates’ work on the mar¬ket. Whenever possible, a training centre should create production units or services that are profitable while being different from what graduates are able to do (either by innovating instead of carrying out standard activities, locating production/services activities in areas that are more difficult to access for individual economic operators; or by involving graduates in orders for the training centre).
Many other interesting recommendations can be found in the bibliography that was shared (Baier D’Orazio et al. 2016; 2011).
Creative Commons © Flickr/ Australia Pacific College
Individuals and family contributions to the funding of TVET can ensure that all students are able to have equal access to quality and affordable TVET.
Individuals and families can also contribute to the funding of TVET
The mobilization of individuals and families in the funding of TVET through tuition fees was also mentioned during the conference. One participant commented that students can be asked to pay at least a small amount, even if they come from a disadvantaged background:
“Let all students at least pay a small amount, even if they are poor. This helps you select the most motivated students. It gives them self- esteem and it increases your sustainability.”
(Cees Van Breugel, Netherlands)
Some countries/training providers have introduced “Study first, pay later”schemes for poor students, or a “payment in kind” either by working for the training centre after the end of the training, producing items that the training centre can sell, or asking trainees to become helpers in workshops owned by the centre during the training. More structured approaches
consist in the development of education loan systems, where the cost of training is repaid later.
Other training providers have chosen to cross subsidize the cost of training to maintain their social purpose (as opposed to a strictly commercial approach of training).: This is done by asking “normal” students to pay the full costs of training and using these resources to subsidize the training of poorer ones (example of CAPA in Congo).
Other training providers have chosen to cross subsidize the cost of training to maintain their social purpose (as opposed to a strictly commercial
approach of training). This is done by asking “normal” students to pay the full costs of training and using these resources to subsidize the training of poorer ones (see example of CAPA in Congo).
“For example Don Bosco in Egypt offers and sells short TVET courses to yearly thousands of participants, which have to pay the full costs for their training. the income helps Don Bosco to finance training for poor youth.”
(Thomas Gerhards, Germany)
These short-term courses are provided in high demand labour market sectors, which enable the trainee to recover the cost
of training in a very short period. In the example of the course on washing machine maintenance that was presented, trainees recovered the 75 euros training fee in an average of 14 days (since the monthly income once in activity was on average 165 euros). In
Don Bosco’s approach, the number of applications is regarded as an indicator for the demand of the labour market and helps them monitor their training offer.
Specific attention should nevertheless be given to the amount of training fees, since the contribution of individuals/families to TVET (especially compared to general education) is already high. Raising the number of trainees to increase the training centre’s revenue might also be a trap, since it may affect quality of training.
Apprenticeship and alternance- based training help share
the financial burden
One of the participants mentioned the introduction of apprenticeship as a relevant approach. Apprenticeship and alternance-based training indeed presents many advantages, because it helps mobilize companies in the implementation of training activities, while improving training relevance.
The introduction of alternance-based training can also be considered as a means to diversify funding. In such an approach, part of the training costs is transferred on companies who bear the:
•direct costs of training (apprentice wage, salaries for training personnel, teaching material, equipment, building infrastructure etc.);
•indirect costs, such as opportunity costs (forgone earnings as unskilled workers) and drop-out costs.
Specific recommendations to implement apprenticeship systems were shared:
“I consider it essential that:
1. Specific training programmes should
be implemented. They should be complementary
to the training paths already provided by the institutions. This will require funding for technical equipment and material resources;
2.Establish agreements approved by the State between educational institutions and companies to delineate the trainingrequirements.Oneresponsemaybetomodifythe curricula or to train the teaching staff in practical skills.
3.Financing granted by the State (through scholarships) for training.”
(Claudia Migliaccio, Argentina)
Internationalexperienceshowsthatcompaniesmightbe reluctant to take on apprentices, which can be overcome by introducing incentive or compelling mechanisms:
•tax exemption mechanisms for companies who take on apprentices (incentive approach): this is for example the case in Thailand, where tax reduction can reach up to 100% of the expenses incurred by apprenticeships;
•the introduction of an apprenticeship tax (compelling approach), as in France, where the apprenticeship tax reaches 0.68% of payroll on all employers, except those who train apprentices;
•in Denmark, an Employers’ Reimbursement Fund, financed by employers themselves, was introduced in 1977 to provide incentives for firms to engage in the provision of apprenticeship places.
These financial mechanisms go hand-in-hand with awareness campaigns amongst companies on the benefits they gain from alternance- based and apprenticeship training, notably:
Creative Commons © Flickr/MadsPhil
Participants discussed the implementation of alternance-based training as a way to train students and ease the costs of TVET.
•benefits gained during the training, which arises from the trainee’s productivity;
•benefits gained when a company recruits the trainee after completion of training, notably:
i)lower risk of inappropriate hiring and staff turnover; ii) avoiding costs of replacement; iii) long-term differences in productivity between self-trained employees and externally recruited workers; iv) improved reputation of the company;
v)no costs of recruitment and induction; vi) no costs of firm-specific continuing training.
Cost-benefit studies on apprenticeship training can be used as tools to raise awareness among companies. An illustration of such a cost-benefit analysis that looked at the Filipino Dual Training System was shared with the participants (see Mapa et al. (2016) in the Bibliography).
Where they have been implemented, these approaches have helped not only to increase the training offer by mobilizing companies, but also to improve trainees’ employability who have acquired hands on experience during their training (here also, see AFD/UNESCO/GRET comparative study in South-East Asia for more information).
Mobilizing the industry through the implementation of levy- or tax-systems
The last topic the Virtual Conference focused on was the mobilization of the industry in the funding of skills development through the introduction of tax or levy-systems. Two main approaches were presented:
•an approach commonly called “Train or pay” where only companies that do not provide
training (up to a certain number of workers or a certain number of hours) have to pay a tax, generally calculated on payroll; and
•the introduction of a training or apprenticeship levy commonly imposed on companies’ payroll (less often on company profit tax, value product, foreign workers, fixed amount per worker, etc.). The percentage of the training levy generally ranges from 1 to 3% of the payroll.
The introduction of such levies is often concomitant with the setting-up of a training fund, a specific body which provides a secured channel for the management of the training levy, often distinct from State. Such trainingfundsdefine and manage trainingschemeswith the aim to promote skills development according to the needs of the economy and national economic priorities.
The levy collected can be used to finance various types of training (see Johanson, 2009):
•pre-employment training, notably supporting work-based training or alternance-based/ apprenticeship training, with the aim to
increase the supply of qualified workers according to the skills needs of companies;
•continuing training for active workers with the aim to increase productivity and competitiveness of firms by raising the skills of their workers;
•equity training which specifically targets disadvantaged groups (informal workers, unemployed, youth, etc.) that are not covered by enterprise training schemes.
These training funds can be:
•sectoral, in which case the levy is raised on the companies of a specific sector and reinvested in the development of competencies
of that sector (e.g. South-Africa);
•inter-sectoral, in which case the training levy is pooled from various sectors, mutualized at national level and reinvested in the economy according to national policies and priorities (e.g. Malaysia, Singapore, various countries in Sub-Saharan Africa);
•or integrated in a global unemployment- insurance scheme, as it is the case with the employment insurance fund in South Korea. TVET Funding in Kenya
month. This fund is used to reimburse approved trainings with a cap of up to 200 % of the employer contributions through two main training schemes:
•short term skills upgrading programs from 80-120 hours;
•apprenticeship from 1-3 years.
One participant stressed the difficulties facing the levy system in Kenya and made suggestions to overcome them:
“The industry may view the contribution as a tax because only about 22% utilize the Levy Fund to train their operatives. This is due to the fact that most industries do not understand the processes of seeking authority to train and requiring reimbursement of training cost from National Industrial Training Authority. Perhaps an awareness campaign should be instituted by NITA to counteract the perception that the Levy Fund is a form of tax and also inform the industry on the process of application for training of operatives and refund of the costs.” TVET Funding in Kenya
(John Simiyu, Kenya)
The issue of organizing training for SMEs and the informal sector was also raised. Many training funds around the world have tried to simplify their procedures to ease the access to training and adapt to the constraints of their targets. SMEs have received particular attention in that respect given their large contribution to employment, national income and exports. In Malaysia for example, the Human Resource Development Fund (HRDF) has implemented an “SME on the Job Training” scheme, which was introduced to help SMEs train their workers and minimize work interruption when they send workers to external training. According to this scheme, in-house training
Two participants shared the experience of the Kenyan levy-system. In Kenya, a training levy fund was established in 1971. It is managed by the National Industrial Training Authority (NITA), that is empowered to collect from registered employers in all sectors a levy of
50 shillings (approx. 0.45€) per employee per
Creative Commons © Flickr/ILO in Asia and the Pacific Involving industry in the financing of TVET is one way to diversify the funding of TVET,
is delivered by an SME’s own employee (who is a skilled worker or the trainee’s supervisor). SMEs are reimbursed on the basis of $1.12/trainee/hour.
It is also interesting to note that, through the various schemes the HRDF has implemented, the total amount of levy reinvested in micro and small businesses is higher than the amount they actually paid through the levy. Of the $137 million contributed in 2015
for all businesses, 24% came from micro and small enterprises but 35% of the levy was reinvested in the development of skills within these micro and small enterprises (see AFD/UNESCO Study on Financing TVET in South-East Asia, forthcoming).
The Singaporean Skills Development Fund (SDF) is another example: it has set up special incentives for SMEs to train by introducing a training voucher to companies with less than 50 workers. In this approach, SMEs pay 30 to 50% of the training costs upfront while the rest is supported by the SDF. This training scheme was introduced in order to alleviate cash flow problems incurred by the training. According to Johanson (2009), the voucher helped SDF reach 65 percent of enterprises with 10 to 49 workers and 14 percent of those with fewer than 10 workers. SDF has also mainstreamed a widerangeofpre-approvedtrainingprogrammes,which can be subscribed through its “Approved-in-principle system” that targets small companies who have neither the resources nor the competencies nor the critical mass to formulate and run their own training programmes.
It is also worth mentioning that some countries pay particular attention to the development of skills in the informal sector and rural areas. This is the case in Côte d’Ivoire where the Fund for the Development of Vocational Training (Fonds de Développement de la Formation professionnelle – FDFP) has created a unit that is dedicated to the management of training projects from the informal sector, including the agricultural and rural sector.
Finally, it was stressed that the levy rate is often adjusted according to the size of the company or according to the sector, in order to take into account the dynamism of a sector and the contributive capacity of a company. Various examples were presented.
In the case of Malaysia, the categories of employer subjected to the levy vary according to the sectors. It concerns employers with 50 Malaysian employees and above in the manufacturing, mining and quarrying sectors; employers with 30 Malaysian employees and above in food and beverage services; employers with 10 Malaysian employees and above in 38 selected industries in the services sector. These categories of companies are subjected to a mandatory payment imposed at a rate of 1% of total payroll.
In the case of South Korea, it is the rate of the levy that varies according to the size of companies:
•enterprises with 1-149 employees pay 0.25% of their payroll;
•priority Support Enterprises with 150 employees or more pay 0.45% of their payroll;
•enterprises with employees 150-999 except Priority Support Enterprises pay 0.65% of their payroll;
•and enterprises with 1,000 employees and more pay 0.85% of their payroll.
In the Brazilian system, the levy rate varies according to both the size and the sector of the companies:
•in the industry sector (SENAI Training Fund): the levy amounts for 1% of monthly payroll and an additional levy of 0.5% is raised on industries with more than 500 employees;
•in the Commerce sector (SENAC Training Fund), the levy is 1% of payroll of all commercial and service sector enterprises;
•in the Agricultural sector (SENAR Training Fund), a 2.5 % levy is raised on the sale of agricultural products;
•and in the Land Transport sector (SENAT), a 1.5 % levy is raised on land transport firms, including self-employed (“trabajadores autonomos”) owners of taxis and trucks.
Other participants mentioned that their country (Mozambique and Madagascar) just started the process of setting up a training levy-system. TVET Funding in Kenya
In Nigeria, Amina Idriss presented the example of the Education Tax Fund (ETF), introduced in 1993 and later renamed Tertiary Education Trust Fund (TETfund). The Fund receives a 2% tax that is imposed on the assessable profits of all companies in Nigeria, and uses it to finance the rehabilitation, restoration and consolidation of all level of public tertiary institutions.
Many interesting reports were shared (e.g. international review of training funds in 70 countries; comparative study of 12 training funds in Sub-Saharan Africa) for in-depth information on the subject (see bibliography).