1. FINANCING TVET
TVET COSTING, DIVERSIFIED FINANCING SYSTEMS AND COST REDUCING STRATEGIES

2. Content
Part 1: Formal, non formal and informal TVSD: characteristics and respective weaknesses
Part 2: reforms, with a main focus on NVQF.
Part 3: Proof of evidence?
Part 4: Any alternative tracks to make NVQF work?
BTC Education Sector Days Burundi december 2012

3. Part 1: TVET COSTING TVET is more expensive than general education:
Lower student teacher ratio (higher recurrent cost)
Higher capital cost
Higher cost of training material
Higher administrative cost (curricula, standards, testing)
Huge differences between tvet streams (source: adea):
Center based: 61% en 267% of the GDP/student
(mostly Input based financing)
On the job training (apprenticeship, internship): 1/3 of center based training
BTC Education Sector Days Burundi december 2012

4. Tvet costing: continued
What about the return on investment?
Enterprises:
Income through productivity of trainee
Opportunity gains in case of recruitment (selection, lower additional training costs)
Training institution
Income through production during training
For profit training courses
Country level
Lower social costs
Higher taxation
BTC Education Sector Days Burundi december 2012

5. TVET costing
Is there a formula to measure the costs and benefits of training?
At a country level:
Net cost of training= total gvt budget for TVET – gains of training (taxation benefits + less social expenses)
At the level of the trainee
Net cost of training= (tuition fee + opportunity costs + foregone income) – expected financial and social gains after training (= expected salary)
At the level of a firm:
Net cost of training = gross cost of training – (expected improvement of) productivity of trainee
BTC Education Sector Days Burundi december 2012

6. 2. TVET financing: three main financing sources
Houselhold contributions
Government budget
Private sector contributions
How does this relate to formal, non-formal and informal skills development?
BTC Education Sector Days Burundi december 2012

7. TVET-financing: household contributions
= Financial Contribution of parents/pupil
Tuition fees +work for free (or salary < productivity during training)
Demonstrate motivation (commitment to learn)
Appropriate price for the individual return of training (increased job and income opportunities)
Huge variation
Between 1% of total training costs up to 50% or more
Perverse effects:
Higher tuition fees make TVET even more inattractive and less accessible
Mitigating measures
Loan schemes, exemption of poor trainees, public or private scholarships
BTC Education Sector Days Burundi december 2012

8. TVET financing: government budget
= national budget allocation for TVET
Source= taxation, donor funds,
Often not sufficient to cover all costs
Can be a ‘sheltered’ training fund (earmarked for TVET)
Types:
General allocation per TVET institution / can be differentiated
TVET vouchers (funding the individual training demand)
Strategies to Increase the available funding
Higher tuition fees
Introduction of training levy (training tax)
National (all employers)
Sectoral (only some sectors)
BTC Education Sector Days Burundi december 2012

9. TVET financing: private sector contributions
Direct contribution
Private scholarships
Internships and apprenticeships
In service staff training (continuous training)
Direct donations / voluntary pledges
private company training centre (large enterprises): in service and pre-service
Indirect contributions (often forced)
Training levy or other forms of taxation
Sector training funds
Incentives
Tax deduction of training costs
Training levy – grant scheme (exemption of paying levy if enterprise has invested in training)
Public co-financing for training of employees
BTC Education Sector Days Burundi december 2012

10. TVET financing: what about income generating activities (IGA)
=income for training institution through commercialisation of products and services
Tailor made training programmes for a specific target group on a contract basis
Evening courses for the general public
Sales of products produced during training
Training through off site production (construction work, …)
Lending and commercial use of equipment
Cost recovery rate varies between 10% and 80%
Concerns:
Balance between training and production?
Unfair competition, child labour, …
Allocation of the extra resources (investment, salaries,…)
BTC Education Sector Days Burundi december 2012

11. Management of TVET funding
Often centralized (TVET body or ministry) and public
Few examples of PPP in SS-Africa
Input allocation: based on existing training supply, not on labour demand
Often not based on a calculated unit cost
Can be through (sector based) training funds
BTC Education Sector Days Burundi december 2012

12. How to raise efficiency, reduce costs and involve the private sector
Decentralisation and autonomy for schools
Privatisation of TVET delivery
Increase share of on the job training (apprenticeship, …)
Direct financing of the individual training demand
Vouchers
=> social corrections
=> qualitative selection of providers by its users
=> competition between training providers
BTC Education Sector Days Burundi december 2012

13. Raising efficiency (ctd)
Performance based financing
Introduction of per capita funding
Fixed amount per pupil per specific course
Introduction of output and outcome funding
Allocation per graduated student (improve internal efficiency)
Allocation per graduate that has a job
Tendering of training
Based on a TNA
For a certain cohorte (X students for Y profession for Z region)
BTC Education Sector Days Burundi december 2012

14. Group discussion
Are there any examples of a balanced IGA – policy? What measures can a government take to facilitate IGA?
What are the examples of private sector contribution for TVET. Are these legally enforced? How can we increase private funding?
Are tendering of training or introduction of TVET vouchers a feasible strategy in SS-Africa (increasing competition between training providers)
How can we help our partner countries in calculating the costs and benefits of TVET? Is this already done thoroughly?
BTC Education Sector Days Burundi december 2012