Project: Dignity in Labour Platform
State of development: Current
Stage of development: Final negotiations
Stage notes: Scale Up
Type of instrument — Impact Bond: No; Outcomes Fund: No; Social Impact Incentives (SIINC): Yes; Social Impact Guarantee: No; Payment-by-results (no pre-financing): No; Technical Assistance and Market-building program: No; Other: 
Rationale for using outcome-based finance: "The Platform's interventions are designed to enhance the creditworthiness of user groups by addressing the credit market failures caused by information asymmetry. As a result, the project ensures financial inclusion and the economic growth of beneficiaries even after its conclusion.

1. When informal workers successfully secure a loan through the platform, it not only boosts their creditworthiness but also establishes their credit history, ensuring their continued access to formal credit sources in the future.
2. Positive outcomes, such as a high on-time portfolio rate (or low GNPA and NNPA), reduce lenders' risk perceptions towards a particular cohort. This solidifies consistent credit access for that type of borrower.

This Phase of Dignity in Labour Platform will be followed by a successive phase with an anticipated loan book of $15-20 Million by adding the additional underserved cohorts to the platform.  "
Key challenges to launch: "Financial Additionality:
1. Risk Mitigation and increased capital allocation: Considering the credibility gap that informal workers encounter in accessing formal credit, the introduction of credit guarantees by the Platform mitigates associated risks with its concessional capital. This risk reduction enhances the platform's attractiveness to potential private investors, consequently leading to an increased capital allocation to tackle the developmental challenge.
2. Funding Co-ordination & Match-making: Enabling the platform to connect with a network of outcome funders and strategic partners can expand the pool of capital, thereby reaching more borrowers.

Non-financial Additionality: 
1. Market Building: The success of the upcoming phases and this project hinges on creating a credit market that offers solutions specifically tailored for informal workers. The Accelerator can promote sustained growth of a fit-for-purpose credit market for the underserved. By leveraging the Knowledge Hubs and nurturing activities within its network, it can support, shape, influence, and facilitate high-quality transactions."
Social/developmental challenge: Over 85% of India's non-agricultural workforce consists of informal workers, and the grey economy accounts for about 50% of India's GDP. Following the COVID-19 pandemic, employment in the informal economy saw a significant increase. In 2021, 76% of workers in rural areas and 65% in urban areas were employed in informal non-agricultural sectors.

Informal workers are confined in a low-skill low-productivity trap, with limited opportunities to train or upskill themselves. They are highly susceptible to exploitative practices, abuse, and conditions akin to forced labor, and lack adequate social protection.

Since these individuals lack any formal documentation of gainful employment, formal credit avenues are inaccessible for them. As a result, many within the informal sector resort to acquiring loans from unregulated entities, which typically charge exorbitant interest rates. Such engagements with the informal credit market can inadvertently ensnare workers in crippling debt traps, at times leading to bonded labor situations.
Expected intervention model: Dignity in Labour platform is a multi-stakeholder blended finance facility that will connect vulnerable, new-to-credit customer groups to suitable lending partners and enable access to relevant government social security programs for all workers that interact with the facility. The platform aims to assist ~10K workers across five user groups: artists, aspirational youth, self-employed individuals, migrant workers, and e-rickshaw drivers. Platform offers fit-for purpose loan products to these groups and provides technical assistance to help them access social security schemes. It also assists them in acquiring requisite KYC compliance documentation. 

This project started with a pilot "Labor Dignity Bond" in 2021. The pilot was a working capital facility that pooled concessional debt from private investors, aiming to promote the ethical treatment of construction workers by micro-contractors, culminating in a loan book of around $265K.

The Dignity in Labor Platform is a scaled-up version of the pilot and will utilize both concessional and grant capital to support its interventions. It is projected that the facility will support ~10K users with a loan book of $2 Mn over a three-year period, with 9.1 times leverage. The structuring of the Platform has been completed, supported by a grant from the Catalytic Capital Consortium.
Policy sectors — Employment and private sector development: Yes; Education: No; Social protection: Yes; Criminal justice: No; Health: No; Agriculture: No; Environment and climate change: No; Water, Sanitation and Hygiene: No; Energy: No; Humanitarian: No; Early Childhood Education: No; Other: 
Primary SDG goal: 1,5,8
Country income classification of beneficiaries — Low-income: No; Lower-middle-income: Yes; Upper-middle-income: No; High-income: No
Notes: Data for this pipeline project was last updated in August 2023
Delivery location: India