Skills Enhancement Project

For onlending, early assessments of the willingness of private institutions and early decision on who bears the exchange rate and credit risks. For Loan B, much of the delay in the beginning was caused by the unwillingness of the private vocational colleges to accept a higher-than-market interest rate for the onlending from the VDB. The VDB was charging the higher rate because initially, it was bearing the exchange rate risk and the credit risk for the loan. The VDB’s involvement in the initial design of the project was modest. It was only after the government agreed to take on the exchange rate and credit risks, and the onlending rate was lowered, that private vocational colleges expressed interest to take on loans. As a result, it took more than three years for onlending contracts to be signed. The implementation of Loan B would have been greatly facilitated if this issue was resolved at the design or the beginning of the project.