Category: Uncategorized

GuateCooks in Action: Celebrating the First Graduates of the GuateCooks Program 

Posted on January 2, 2025 by - Uncategorized

With GuateCooks, “we have the opportunity to learn, to have good experiences, to make money and then to come back [to Guatemala], to see our families again, be with them. And after a certain time to go back again. We have to take advantage of these opportunities,” stated one recent participant in LaMP’s newest project in Guatemala. 

What is GuateCooks? 

GuateCooks is a 10-month pilot program designed to enable international labor mobility opportunities for Guatemalan cooks. This initiative focuses on temporary labor migration pathways to meet the labor needs of international employers while also allowing participants the flexibility of working abroad while periodically returning to Guatemala to see their families. 

The program is designed with three primary pillars in mind. First, participants who are already trained as cooks take a short training course with local training institute partners. The training course is divided into four modules:  1) U.S.-based safety and hygiene protocols, 2) culinary English classes, 3) practical exercises in high-volume kitchens, and 4) professional development and interview preparation. Rather than a beginner-level training course, the GuateCooks modules work to reinforce participants’ already acquired culinary and English skills to accelerate their job readiness specifically for international kitchens.  

 A second program priority is the generation of employer demand to facilitate job interviews for training course graduates with international recruiters and employers. Finally, the pilot program focuses on sustainability through the exploration of financial solutions to ensure the training course’s long-term financial viability. During these 10 months, we aim to train and place at least 60 Guatemalan cooks in the culinary and hospitality sectors, primarily in the United States. However, in taking a three-part program approach, we are also ensuring the longevity and scalability of this pathway beyond the pilot program’s duration.  

Program Progress and First Successes 

Launching just four months ago, LaMP has already made significant strides in implementing the GuateCooks program objectives. In September, LaMP attended Guatemala’s National Food Fair (Feria Alimentaria), the largest culinary event in Central America. There, we strengthened relationships with local educational partners, collaborated with international recruiters to sponsor prizes for the Junior Chefs culinary competition, and promoted the program to Guatemala’s network of culinary students and professionals.  

The following month, our first group of participants began their training course hosted by INTECAP, Santa Lucia, one of LaMP’s training partners. Institute administrators were excited to collaborate on the GuateCooks project, explaining that: “the course is very positive, it really fills a need in the region. It generates job opportunities for our chefs.”  

On November 15, the first 13 Guatemalan cooks graduated from this training course. Participants described the training as very valuable. One participant explained that in GuateCooks “we gained experience. Here, they taught me a lot about improvising. We learned techniques to solve problems quickly because you have to find a way to make things come out well [in the kitchen].” 

Overall, the participants were particularly interested in the course to shore up their culinary skills, to practice English, and to be better prepared for job opportunities in the United States. One participant remarked: “Maybe there were things we already knew, but it was a great reinforcement.” In the month following their graduation, participants have had preliminary interviews with international recruiters and anticipate receiving job offers early this year. 

Path Forward and Next Steps 

These early successes are just the first steps in LaMP’s larger target to develop a sustainable and scalable training-to-jobs pipeline for the international culinary and hospitality industries. In the coming months, we will continue offering the GuateCooks training course with additional culinary training partners throughout Guatemala. The next GuateCooks training program will begin in late January 2025 in collaboration with the Las Margaritas Culinary Institute in Guatemala City.  

During the remainder of the pilot program, we will continue to advance the three core program pillars. First, we will scale up the GuateCooks training ecosystem by collaborating directly with new training partners as well as sharing course materials and bolstering the training capacity of our current training partners. We will also continue to increase labor demand through the fostering of new relationships with U.S.-based recruiters and employers. Finally, in the coming six months we will establish a financial assistance mechanism to ensure that the GuateCooks program continues to grow even after the pilot program ends.  

Stay tuned for more details about this project as well as other LaMP’s work by signing up for our newsletter and following us on Twitter, Bluesky, and LinkedIn!  

If you are interested in learning more about this work or getting involved, feel free to contact us; we’d love to hear from you! For now, thanks to our supporters, partners, and community. 

Balancing Financial Risk in International Labor Mobility Programs

Posted on November 26, 2024 by - Uncategorized

As high-income nations face critical labor shortages, and low-income nations encounter growing youth populations, international labor mobility programs can offer a win-win solution. These programs can raise incomes for workers by 6-15x and fill employment gaps in crucial sectors.  However, participation in cross-border livelihoods programs introduces financial risks for the workers, employers, and intermediaries involved, slowing the adoption of this high-potential opportunity. LaMP aims to reduce these risks by embedding ethical recruitment practices into the private sector1 and developing financial tools to balance risks across stakeholders. 

The timeline of international labor recruitment can be swift or sluggish, depending on the visa and corridor in question.  Some programs (e.g. seasonal agricultural workers in the H2A program of the United States) have a timeline of a few months, while others (e.g. nurses migrating from India to Germany) require a year or more of investment in instruction, exams, job matching, and visa processing.  Numerous recruits may drop out of this process along the way or fail to meet language certification standards at their first examination. Even after migrating for a new job, some new workers may leave the employers who paid their way, opting to work in a different institution. This operational uncertainty in these systems translates into financial risk by introducing the potential for losses at each stage of the process.   

For these reasons, most employers, even those willing to eventually cover all skilling and recruitment costs, are hesitant to advance the full value of the recruitment process at its inception.  Like employers, recruiters and skilling institutions are also generally hesitant to front the full expenses of recruitment and training for aspiring migrants.  Workers, even with a provisional job offer and a promise of reimbursement for all skilling and recruitment costs, generally find these expenses to be out of reach, and migration-oriented credit is not generally available to them from reputable sources. (Taking on ill-suited or informal loans can push workers into crippling cycles of debt.) 

In a future where mobility programs have reached scale, success metrics (e.g. employment and retention rates) will become more readily available, and the cost of dropouts and failures can be incorporated more predictably into recruitment pricing.  However, with or without this data gap, these multi-nation, multi-step processes will always contain some level of uncertainty, and approaches to mitigating risks across our spectrum of actors vary widely.  In some cases, we see workers’ rights oriented programs invest heavily in protecting workers from risk by ensuring that workers neither pay nor deposit any funds for skilling and recruitment processes. However, it is uncommon for these programs to reach scale due to either cash flow constraints, market conditions, or a lack of commitment from recruited workers. On the other side of the spectrum, we see predatory models that insulate employers from risk but offer no protection to workers.   

At LaMP, we believe that balancing this financial risk across actors is at the very heart of effective mobility program design and delivery. Over the next half decade, deploying risk mitigation strategies will be a key factor in accelerating win-win global mobility. As a guiding activity in many of our engagements, we kick off our work with a risk mapping exercise.  Looking at the skilling and recruitment process in context, we assess which actors take on or introduce risk at every stage and attempt to translate these risks into monetary terms. The factors that frequently determine risk are 1) the efficacy of skill training and job matching efforts; 2) expectation alignment and transparency between parties, 3) predictability of visa processing timelines; 4) stability of industry or market conditions, and 5) how successfully employers and host communities integrate hires from abroad.  

In projects or contexts that have stalled or failed to scale, we often find financial risks distributed unevenly across stakeholders or concentrated within specific steps of the process. For example, recruiters that require employers to commit full advances (thus transferring all the risk to their clients) before workers have been trained in key skills (e.g. language or technical training) may find fewer willing corporate partners, leading to demand-side bottlenecks. Such skilling programs, in which there are low or no barriers to entry for aspiring trainees, may experience higher attrition rates, compounding the problem of uncertain or delayed results for employers.  On the other side of the equation, programs that are fully worker-paid (transferring all the risk to the worker) can present prospective migrants with financial hurdles that make migration inaccessible or push them into crippling debt. This not only hurts workers but adds to the global perception that mobility is an inherently abusive industry. In our own research, we have found some evidence to suggest that workers who are overburdened with debt may be more likely to abscond or overstay their visas to recuperate their outsized migration investment. These risk factors may lead receiving country governments and employers to shy away from participation – despite these countries experiencing profound and economically devastating labor shortages. 

The financial solutions in LaMP’s risk mitigation toolkit can serve multiple stakeholders, and are selected for a corridor or scenario based on our assessment of which nudge might be required to balance risk across that system. Ultimately, serving even one stakeholder in a given context might be just the nudge that the system needed to get unstuck.  The solutions we consider in this process include: 

1.Migrant–focused finance as a necessary tool when employers cover recruitment or skilling costs only after workers begin employment. It also supports migrants who wish to invest in their own skills before engaging a recruiter, or in cases where skilling costs are not reimbursed by employers. The financial products relevant to these circumstances include:

    • Migration-specific loan offerings that consider repayment moratoriums, demographics of the market segment (e.g. low-income or rural families without formal jobs or collateral), and provisional job offers abroad as design factors. Examples include BRAC Bank’s migrant microcredit loans in Bangladesh and LaMP’s work on foreign language debt financing for aspiring migrants in India.
    • Income Share Agreements (ISAs) that provide the upfront capital needed and then align worker repayments to earnings proportionally (thus allowing workers who fail to migrate to pay lower installments and net amounts than those who succeed). Examples might include pre-migration skilling or education from organizations like Lumni, Malengo, or other members of the Global ISA Alliance.

2. Insurance products for both workers and employers can help those who wish to mitigate their own risks for any specific areas of concern.  Types of insurance can include:

    • Health, life, and repatriation insurance for workers – especially relevant for those in riskier jobs or in less regulated labor markets.  Examples include Pravasi Bharatiya Bima Yojana (PBBY), an insurance scheme for Indian migrant workers in certain countries, offering life and disability coverage and repatriation assistance, and the Overseas Workers Welfare Administration (OWWA) fund of the Philippines, which provides insurance, healthcare, and emergency support for Filipino workers abroad.
    • Recruitment insurance for employers, refunding recruitment fees or replacing one worker with another in cases where workers abscond or break contracts. (To date we have not found scaled examples of this product; we are starting to design our own.)
    • Surety bonds to refund workers for lost wages in cases of employer contract noncompliance. For example, the H-2A Farm Labor Contractor Bond, is guarantee to the U.S. Department of Labor that the employers of contracted workers will abide by the regulations required; contract term violations require bond payouts to affected workers.

3.Worker payment funds can incentivize desirable behaviors and practices within a labor mobility system.

    • Structured incentive and bonus payments can incentivize worker behaviors like retention and home-country return.  Japan’s Technical Intern Training Program (TITP) aims to retain skilled foreign interns in industries like manufacturing and caregiving. (Japanese companies frequently provide an annual contract renewal bonus ranging from $500 to $1,500 for interns who agree to stay beyond their initial year.) The OFW Reintegration Program of the Philippines provides financial literacy training and access to microloans for business startups for returned migrants. This initiative helps returning workers manage their finances effectively, reducing dependency on future overseas employment.
    • Remediation bonds can repay workers for any illegal or unethical fees charged by recruiters.  For example, Impactt’s remediation bond, enables employers to repay illegal or unethical worker fees rapidly, releasing workers from debt bondage or enabling them to recover valuable capital erroneously invested

Strategically placed within the labor mobility process, these instruments can unblock mismatches between supply and demand and lead to greater earnings across stakeholder groups.  However, lowering risk does not always mean lowering cost. In fact, inclusion of the instruments included above can increase net costs by 5-25% (e.g. through premiums, interest, or fees). (Setting the prices for these instruments can be done through a probabilities-based assessment of the various ‘what if’ scenarios of failure and a financial valuation of those failures – much like an insurance underwriting analysis.) Given that these additional costs are specifically designed to reduce uncertainty, avoid catastrophic failures, and unlock access to greater earnings, many actors will consider the price of risk mitigation instruments well worth it. 

In a context dominated by legal and regulatory barriers, it is easy to believe that financial risks for participating actors have already been mitigated.  The reality is that regulation can only take us so far – and that effective scaling of mobility programs requires thoughtful balancing of risks and incentives at the operational level.  In real terms, risk mitigation often just boils down to taking greater care in determining who pays for each expense, at what point in time, and through which mechanism.   

The team at LaMP is happy to share the lessons we have learned from our own mobility work across global visa pathways and is interested in learning from the experiences of others.  We encourage our peers to reach out to engage in this learning process together. 

 

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1The most glaring and well-known risks related to labor mobility are those workers face in differentiating between reputable programs and scams or trafficking schemes. LaMP is collaborating with several actors in different corridors to reduce these risks.  (See our work with the association of Responsible Recruiters in Guatemala, or GAREX, as an example.) However, even reputable and well-run programs experience their share of risks across stakeholders, and this article examines the nature of those risks, how they translate to financial terms, and some potential mechanisms to mitigate them and encourage scale.

Leading by example: How Germany’s migration strategy sets the stage for scalable and unified solutions 

Posted on November 4, 2024 by - Uncategorized

Germany has taken decisive steps to address its acute skilled labor shortage through innovative policies and by supporting the development of financing solutions to streamline labor migration pathways. These efforts began in 2022 with a targeted worker strategy that acknowledged the country’s need for skilled labor, followed by legal reforms in 2024 that opened the German labor market to a wider group of mid-skilled workers from around the globe. The latest initiative, ‘Skilled Labor Strategy: India – A strong Partner for Germany,’ by the ministries for labor and social Affairs (BMAS) and foreign affairs (AA), focuses on building a robust migration pathway between India and Germany. Key priorities include improved cooperation on migration, labor policies, qualification recognition, and skills training – areas where government cooperation is vital.  The skilled worker strategy also provides an overview of pilot projects and initiatives that are taking the first step in translating these ambitions into actionable outcomes. These include projects like Triple Win in Kerala, which explore best practices and processes for hiring nurses, and Hand in Hand for International Talents, which aims to improve conditions and develop processes for self-managed recruitment for workers in the trades sector. 

The German Development Ministry (BMZ) has also been at the forefront of exploring the use of innovative financing models in labor mobility to achieve financial sustainability, by funding programs such as the THAMM Plus Program partnership with Labor Mobility Partnerships (LaMP) and Roots of Impact. Together, we have been working on designing sustainable financing models and funding instruments that need less public capital and can attract private investment in the future.  

These initiatives demonstrate  the German government’s commitment to addressing Germany’s acute shortage of skilled workers. To further operationalize and sustainably scale these ambitions beyond strategy and pilot, the government could consider: 

  • Merging funding streams across ministries to support a holistic and streamlined vision on labor migration 
  • Structurally and financially supporting the expansion of a responsible private sector  
  • Adopting and funding innovative financing methods focusing on commercial sustainability and scalability 
  • Utilizing blended finance to attract private capital into nascent labor mobility markets.  

From Pilots to Scaled and Cross-Sectoral Ecosystems 

Working independently, various German ministries have invested in labor migration pilots across different industries and pathways, using their pilots as learning opportunities to identify best practices and bottlenecks in processes. The lessons learned through these pilots can be used to inform a broader, holistic strategy that focuses funding on scaling effective practices in labor migration. A multi-ministerial collaborative effort could also pool greater resources and funding to build sustainable and well-functioning migration ecosystem capable of training and scaling labor supply to the German labor market.  

Beyond government collaboration, private sector support is essential to building scalable migration systems. Ministries increasingly recognize that pilot programs are important for learning but cannot scale to meet labor market demands alone. Instead, the focus must shift to creating robust ecosystems in source countries, including accessible language and vocational training, as well as incentivizing fair recruitment practices by private-sector actors. Recruiters play a vital role in this ecosystem, selecting qualified candidates for German employers, guiding them to quality training, and supporting their journey from selection to integration in Germany. Ensuring that recruiters operate responsibly–providing fair and transparent hiring processes that protect workers’ rights–is key to achieving sustainable and equitable scaling of labor migration.  

However, responsible recruiters in the private sector of many labor-sending countries are currently early-stage or informal and face significant barriers, including: 

  • Complicated German bureaucratic processes. Obtaining visas and challenges with recognition of qualifications and labor market permits can result in delays and financial strain on recruiters. 
  • Limited access to affordable working capital loans. The liquidity gap between upfront investments (e.g. language training) and payments from employers for successfully deployed workers limits scale. (In some cases, this problem is transferred from the recruiter to the worker, who assumes the upfront costs required for migration.) There are few financing options available to recruiters that need to bridge this gap. 
  • Challenges in building trust with German employers. Small recruiters often lack a track record or a sizeable pipeline of ready workers for quick deployment. Lack of trust in the quality of a recruiter’s service delivery decreases the willingness of employers to provide upfront payments and consequently creates a greater liquidity gap for the recruiter. 

Innovative financing to support the Private Sector 

To overcome the barriers faced by private recruiters, the German government could consider implementing a cross-ministerial funding mechanism to support private sector recruitment and the broader labor migration ecosystem. Blended finance can be utilized by the government to reduce risks for private investors while accelerating sustainable practices and supporting the development of innovative financial solutions to scale and sustain labor mobility responsibly. 

Blended finance combines public or philanthropic funds with commercial investments to de-risk early-stage markets, making them more attractive to private investors. For labor migration, potential solutions include: 

  • Guarantee Facilities: Absorbing initial losses to unlock commercial investment in migration ecosystems. 
  • Credit Funds: Providing affordable working capital for recruiters and other ecosystem actors. 
  • Innovation Funds: Testing financial tools such as income share agreements and surety bonds to address migration-related challenges. 

These publicly supported mechanisms can help the recruitment sector grow until it becomes attractive to commercial lenders and can sustain itself without subsidy. 

 

Case Study: Guarantee-backed language-skilling loan for aspiring migrant workers in India 

An example of a blended finance solution is Western Union Foundation’s funding partnership with LaMP to create a language-skilling loan product for prospective Indian migrants. Many migrants struggle to finance language costs for German classes and examination, a critical requirement from German employers.  To address this challenge, the pioneering initiative seeks to use a first-loss default guarantee (FLDG) to mitigate risks in this untested market.  

LaMP is currently fundraising for public or philanthropic entities to provide funding to execute this guarantee program, which will enable commercial financial institutions to provide loans to this segment of aspiring migrant workers. This solution bridges the gap between migrant workers and financial institutions, enabling access to affordable loans for language training. The program aims to unlock broader commercial investment in migration-related financing as lenders gain experience in this segment. 

 

Conclusion: Scaling Mobility through Partnerships and Innovation 

Germany’s commitment to addressing its skilled labor shortage is commendable. The country’s next steps could involve enhancing collaboration across ministries and the private sector to translate high-level strategies into coordinated action. By shifting from isolated pilot projects to a more holistic approach, Germany can support fair recruitment practices, strengthen quality language and training providers, and leverage blended finance to attract commercial investment and scale this emerging market. 

LaMP has worked with German ministries to explore innovative financing solutions and streamline migration processes by hosting ministerial roundtables to align on key objectives and develop actionable strategies. We believe the need to move from design to implementation of these solutions is urgent and will only be made possible through collaboration between the public and quasi-public sector, including the involvement of development banks (like KfW), and the private sector. This collaboration can be fostered by deploying win-win blended finance solutions within the context of ecosystem-building efforts.  

Germany is well-positioned to lead the global labor mobility landscape. By further developing innovative financing solutions and multi-ministerial collaborations, Germany can serve as a global blueprint for scalable and sustainable labor migration pathways. 

 

Finance Glossary 

  • Blended Finance: Blended finance refers to the strategic use of public or philanthropic capital to attract private investment for projects that address social or environmental challenges. By mitigating risk and providing initial funding, it creates a financial ecosystem where private investors are incentivized to support initiatives that may not otherwise be commercially viable but deliver broader societal benefits. 
  • Guarantee Facility: A Guarantee Facility is a financial mechanism where a third party (in this case, as a government or development institution) provides a guarantee to cover potential losses or risks associated with commercial investments. This safety net encourages commercial investors to fund projects that have a positive social or environmental impact but may be considered too risky under normal circumstances. 
  • Fund: A Fund is a pool of capital raised from multiple investors, which is then managed and allocated by professionals to finance a portfolio of projects or assets. These investments are typically focused on specific goals, such as supporting sustainable development or innovation, and the pooled resources allow for risk diversification and more significant impact than individual investments might achieve alone. 

Glossary definitions are derived from sources such as the OECD library, and Roots of Impact. 

 

Photo: LaMP’s Sophia Wolpers discussing innovative financing mechanisms and migration ecosystem solutions with Development Minister Svenja Schulze at the 6. Economic Policy Forum of BMZ on 21 May 2024.

Copyright: Kira Hofmann/photothek.de 

From left to right: Carsten Schmitz-Hoffmann (GIZ), Sophia Wolpers (LaMP), Development Minister Svenja Schulze (BMZ), Dr. Friederike Köhler-Geib (KfW) 

Okolabor: Bridging the gap between workers in low-income countries and global labor markets

Posted on October 17, 2024 by - Uncategorized

Employers and recruitment companies face big challenges when sourcing blue-collar workers from abroad. Locating workers with the right skills is both costly and labor intensive, usually done by using field agents in lower-income countries or recommendations from current workers or worksite supervisors. In both cases, the high value of job placements means job offers can become a valuable commodity, creating significant risk for employers, recruiters and workers themselves.   

  

Secure, Transparent Recruitment 

Okolabor is a digital recruitment platform designed to give employers and recruiters direct access to the right workers at the right time. Workers create detailed profiles showcasing their skills, availability, and work history, making it easy to filter and select the best candidates based on employer needs.  

This direct connection reduces costs, improves hiring accuracy, and minimizes business risk: 

  • Connecting directly with workers reduces costs as recruitment partners no longer need to go out into the field for recruitment drives.  
  • Using a large database with tens of thousands of worker profiles improves hiring accuracy as employers & their professional recruitment partners can more easily find workers with the right skills and experience. 
  • Risk is minimized bypassing the need for unverified local agents or referrals from current workers or supervisors who may charge illegal recruitment fees to workers without employers or recruiters’ knowledge. 

 

With support from the Walmart Foundation, LaMP is launching Okolabor within the context of the U.S. H-2A visa program, that grants temporary entry to over 300,000 migrant agricultural workers annually, mostly from Mexico. We are partnered with large industry players, moving over 30,000 workers annually, which helps ensure rapid scaling.  

Beyond H-2A, the widespread adoption of internet enabled phones among lower-income populations in developing countries and migrants in particular makes tech-based recruitment solutions more viable than in previous decades. Our long-term plan is to scale from proof-of-concept to broad application within existing international recruitment systems for blue-collar workers. Our vision is that Okolabor will eventually become a global marketplace where workers can accurately and effectively market their skills across borders and connect with employers through a safe and extortion-free channel.  

This initiative is supported through funding by the Walmart Foundation. The findings, conclusions and recommendations presented here are those of LaMP alone, and do not necessarily reflect the opinions of the Walmart Foundation.

GuateCooks on the Move: Job-readiness training for the international tourism industry 

Posted on September 9, 2024 by - Uncategorized

Labor Mobility Partnerships (LaMP) has initiated a proof-of-concept project that seeks to bolster orderly and effective labor migration pathways for Guatemalan cooks in the tourism and hospitality sectors.  

The initial 10-month pilot will support over 60 talented Guatemalan cooks, equipping them with specialized job-readiness training for international kitchens and direct access to recruitment channels for overseas job opportunities. 

This initiative provides a tailored solution to the growing demand in the international tourism industry for seasonal cooks with the necessary technical and language skills. It also presents Guatemalan cooks with the opportunity to advance their careers and personal development. By participating, Guatemalan cooks will not only showcase Guatemala’s rich culinary talent on a global scale but also gain new skills and experiences. Upon returning home, these cooks will bring back invaluable international insights, fostering the growth and prestige of Guatemala’s culinary industry. 

The vision is for this project to mark the beginning of a sustainable, large-scale labor migration pathway, creating opportunities for thousands of Guatemalans to thrive in the global culinary arena in the long term. 

You can also read a short description of the program in English and Spanish, and find more on the early successes here.

This project is implemented by LaMP in cooperation with the International Office of Migration (IOM) in Guatemala under the “Addressing the Root Causes of Irregular Migration” project which is funded by the United States Agency for International Development (USAID). 

 

For more information, contact:

Diana Zambonino

dzambonino@lampforum.org

 

 

Mobility Finance Network

Posted on September 5, 2024 by - Uncategorized

The Mobility Finance Network is a community of practice that promotes financial solutions to unlock rights-respecting cross-border labor mobility worldwide.  

We seek to: 

  • seed new ideas and collaborations by bringing together specialists in migration policy & practice, finance & investment, skilling, and workers’ rights  
  • encourage financial innovation by curating insights and learning spaces, promoting relevant convenings, cultivating working groups, and sharing funding opportunities among members 
  • establish new financial instruments for scaled labor migration (e.g.  guarantee funds and credit offerings) and accelerate mobility businesses and technologies (e.g. via equity and debt offerings), to provide greater agency and choice to millions of labor migrants worldwide 

Vision 

The Mobility Finance Network envisions a future where aspiring labor migrants and the businesses that support them benefit from the financial tools and instruments required to support a robust, professional, and rights-respecting labor mobility industry. We work towards expanding cross-border job opportunities and eradicating global debt bondage linked to labor migration by deploying ethical financial products designed for the unique needs of aspiring migrant workers and their ecosystems.

Join the Conversation in our LinkedIn Group 

https://www.linkedin.com/groups/13050351/ 

 

The Mobility Finance Network is being incubated inside Labor Mobility Partnerships (LaMP).

 

For more information, contact:

Elicia Carmichael

ecarmichael@lampforum.org

 

 

Prerna Choudhury

pchoudhury@lampforum.org

 

 

 

*Header Photo by AbsolutVision, used under UnSplash License

Creating Cross-Border Opportunities for Kenyan Workers in Japan 

Posted on August 29, 2024 by - Uncategorized

Japan faces growing worker shortages that will reach 3.4 million by 2030, driven primarily by an aging population and low birth rates. As one solution to this problem, the country created visa pathways for foreign workers in multiple sectors including, but not limited to, nursing, automobile repair, food service, manufacturing, accommodation, construction and agriculture.    

Kenya seeks to become a global workforce leader as part of a national strategy to address youth unemployment and increase the size and contribution of its diaspora. Kenya’s President Ruto is making substantial investments in developing the infrastructure for increased labor mobility, including signing bilateral agreements, and aims to move 250,000 workers abroad each year. Currently, Kenyan workers go primarily to the Gulf which often involves unsuitable work conditions and low pay.  

Japan provides Kenyan workers a safer, higher-paying alternative to Gulf migration and presents a new frontier for African labor migration overall. 

Through a grant from the Livelihood Impact Fund, LaMP is developing a pilot program to facilitate the movement of workers from Kenya to Japan across trade and service sectors. While the project focuses mainly on construction, manufacturing, agriculture and accommodation, there is the possibility to explore other sectors. The main objective is to demonstrate the viability of a Kenya-Japan migration corridor.  

To achieve this goal, LaMP is building the ecosystem required to support labor mobility to Japan, including partnering with a responsible recruiter in Kenya, securing partnerships with receiving side organizations and employers in Japan, designing language training programs, defining costs and processes to facilitate movement of workers, and understanding the legal requirements of Kenya-Japan migration. 

Our long-term goal is to gather insights that will inform the development of a formal migration pathway and contribute to the existing knowledge base on labor migration to Japan, an area that is not widely understood outside of Asia, where most of Japan’s migrant workers come from. 

We are also working on advocating for a bilateral agreement between the Kenyan and Japanese governments to ensure scalability and sustainability of this program beyond this pilot.  

Learn more about our work in the Kenya-Japan corridor in our recent blog here.

 

For more information, contact:

Prerna Choudhury

pchoudhury@lampforum.org

 

 

 

Financing Labor Mobility: Financial Modeling for the THAMM Plus Program 

Posted on July 4, 2024 by - Uncategorized

The THAMM Plus project (Towards a Holistic Approach to Labor Migration Governance and Labor Mobility in North Africa) operates under the EU Talent Partnership Initiative to promote sustainable development and demand-driven labor migration between North Africa and Germany. This initiative is led by the German-state development agency GIZ. 

During its initial phase, THAMM focused on enhancing the employability of individuals interested in migration, raising awareness about labor migration procedures, and fostering stronger partnerships between partner countries (Morocco, Tunisia, Egypt) and Germany. To institutionalize these processes effectively, the program recognizes the necessity of a sustainable financing model. 

LaMP has collaborated with the GIZ THAMM team since October 2023 to craft such a model for each country. The aim is to expand labor mobility and enhance private sector participation. Developing sustainable financing structures for transnational skills partnerships like THAMM represents a novel approach in development-oriented programming for labor migration. LaMP seeks to engage key stakeholders to create awareness and garner support for implementable solutions. 

Employing an impact-linked finance strategy, LaMP aims to bridge the gap between the public and private sectors to facilitate scaled labor migration. This approach leverages financial instruments to magnify the impact of public funds, driving more sustainable outcomes over the long term. 

Aligning stakeholders’ interests, understanding their constraints, and exploring innovative avenues to engage the private sector are central to integrating public and private financing. By harnessing public resources to catalyze the scaling process, both sectors can benefit from labor migration in innovative ways. 

The project is scheduled to continue until October 2024. 

 

For more information, contact:

Sophia Wolpers

swolpers@lampforum.org

 

 

 

Financial Solutions for Labor Mobility with German Stakeholders 

Posted on July 4, 2024 by - Uncategorized

On June 27, 2024, LaMP Germany hosted an interactive workshop with representatives from employer associations, recruiters, migration program experts, and key German ministries. This diverse group explored innovative approaches to cost and risk sharing among all stakeholders in the labor mobility process. 

The workshop was conducted with German stakeholders as the country is feeling the pinch of labor shortages, with many sectors experiencing high vacancy rates. Demographic shifts, particularly an aging population and a limited pool of younger workers, have exacerbated the challenge of finding local talent. This scenario opens up significant opportunities for hiring from abroad. 

However, international recruitment comes with its own set of hurdles, including lengthy visa processes, complex recruitment systems, and higher costs for employers. A major challenge is the German language proficiency required for traineeships or skilled work, which necessitates extensive and expensive training (averaging 9 months and costing between EUR 2,000 – 4,000 to achieve B1/B2 levels). 

While various pilot projects in Germany have subsidized language training, there is no long-term initiative capable of supporting such training on a large scale. To establish a sustainable influx of foreign workers to fill critical vacancies, we must address the following pivotal questions: 

  • Who should bear the cost of German language training, and at which stage in the process? 
  • How can we fairly distribute the financial risks of these investments among all actors, including workers, language schools, recruiters, and employers? 
  • What are the key differences in the recruitment processes for skilled workers versus trainees? 
  • How can we finance recruitment systems that are both fair and sustainable? 

The group delved into several critical areas, including: 

  • Innovative solutions to overcome financial challenges. 
  • Practical strategies beyond policy to remove blockers. 
  • Ways to address the issue of time and the unpredictability of bureaucratic process timelines. 
  • Financing recruitment adjacent costs such as language training and other unforeseen expenses. 
  • Supporting small and medium-sized businesses in their foreign recruitment efforts. 
  • Creating additionality and democratizing access to international employment opportunities. 
  • Enhancing the integration of foreign workers to achieve higher retention rates, (e.g. addressing technicalities of the EPP as potential retention blockers). 

For more information on LaMP’s initiatives in Germany regarding financial solutions for labor mobility, and to learn about our broader vision for supporting transnational skills partnerships and sustainable recruitment systems, please reach out to Sophia Wolpers at swolpers@lampforum.org. 

Creating Fair Recruitment of International Workers Through Transnational Skills Partnerships 

Posted on July 4, 2024 by - Uncategorized

LaMP Manger Sophia Wolpers was a key participant in in the Bertelsmann Foundation’s 18-month in-depth working group “Denkfabrik transnational Skills Partnerships” This initiative explored various aspects of transnational skills partnerships and promoted the exchange of best practices among program operators, recruiters, language providers, migration experts, and government stakeholders. 

Besides questions around best practice of language training and other programming improvements, the group focused on scaling and sustainable financing of transnational skills partnerships. Since LaMP is one of the global pioneers in the field of addressing financial challenges in the labor mobility process, the team shared valuable insights from our projects around the world and how we draw on principles from impact-linked and results-based financing (RBF) to find innovative solutions. 

One significant outcome of the working group was a collection of inspiring articles showcasing ideas on how to improve transnational skills partnerships for workers, sending countries, and receiving countries. These articles also explored innovative strategies to enhance the impact and scale of international recruitment. 

Sophia Wolpers and Elicia Carmichael co-authored an article titled “The Potential of Impact-Linked Financing for Scaling Transnational Skills Partnerships.” (only available in German). This article emphasizes the need to align Germany’s role and governmental ambitions on the topic of foreign recruitment. It delves into the complexities of risk and reward for various stakeholders in recruitment and skilling practices, highlighting the necessity for public discussion and policy development to create fair systems utilizing innovative financing approaches and involving new private and public sector actors in the world of finance. 

The article also presents a simplified example of a worker retention fund, designed to ensure fair participation for all stakeholders while adhering to responsible recruitment norms. 

For more information and to access the working group’s other publications (only available in German), click here. 

If you have any questions, please contact Sophia Wolpers at swolpers@lampforum.org. 

Unlocking Migration Through Finance: A Loan Product to Make Language Learning Accessible for Aspiring Migrants 

Posted on July 3, 2024 by - Uncategorized

LaMP is designing a financial solution with a consortium of financial institutions, recruiters, and an innovative finance advisory firm. Our solution will address the constraints that workers face in paying for migration-associated expenses, specifically the high cost of language training. LaMP is now raising funds for a First Loss Default Guarantee (FLDG) that will unlock access to finance for prospective migrants in the India-Germany corridor and demonstrate the borrower viability of the migrant segment to financial institutions worldwide. Please reach out if you are a funder or ally interested in exploring innovative financial solutions for labor mobility! 

The Opportunity  

Unemployment among India’s adult youth is estimated at 23% (73 million people).[1] At the same time, OECD countries face labor shortages costing $1.3 trillion per year (or $3 billion every day), with labor needs estimated to reach 400 million workers by 2050.[2] Countries where economic foresight and political will align have begun opening visa pathways to facilitate the migration of workers to fill these gaps.  

Germany, for example, has created a scaled visa route for mid-skilled workers with a goal of filling a 400,000 annual worker gap in its labor market. In 2022, the Indian and German governments co-signed the German-Indian Migration and Mobility Partnership. In the wake of this MOU, major recruitment agencies have reported an increase in worker demand for job opportunities across sectors and regions in Germany. However, barriers on both sides of the pathway have limited its viability to scale. 

Starting in July 2023, with grant funding from the Western Union Foundation, LaMP has been assessing these barriers and designing financial solutions to overcome them. Chief among the barriers we have noted on the sending side are a lack of foreign language skills among prospective candidates seeking livelihoods abroad. In Germany, migrants must demonstrate B1/B2-level proficiency to receive a work visa. Reaching adequate fluency requires an investment of full-time classwork, course fees, and exams, which, combined with up-front migration expenses or deposits, amount to a minimum of $2,000, and only in some cases will employers fully refund these costs post-migration. Few prospective migrants (typically people at the outset of their careers earning under $250/month) have this amount of capital on hand. Appropriate financial instruments targeting the needs of labor migration candidates are nearly non-existent in India.  

Currently, aspiring migrants who aim to travel abroad are not viewed as viable candidates for credit. Projected future cash flows are generally not considered in loan underwriting, despite the outsized income gains promised by structured migration programs. Candidates report being turned away from banks because no migration lending category exists for their needs. Those candidates who do access a personal loan must do so under the name of a blood relative co-borrower who has a high credit score and a job in the formal economy. These loans must also be paid back starting immediately, with no moratorium during the language learning and visa processing period. This restrictive approach creates a barrier for candidates from families in the informal sectors or from less privileged backgrounds. 

Talented young workers lacking the required language skills to migrate either forgo opportunities to work abroad or take on predatory or ill-suited debt to finance their migration expenses. 

 

The Solution 

LaMP, in collaboration with our partner KOIS, an innovative finance advisory firm, has designed a credit innovation to unlock financial inclusion for prospective migrants who strive to develop careers in trade and service sectors abroad. After exploring a range of financial products that could be offered to workers, employers, or recruiters (or a combination thereof), we decided to focus on designing a loan product for workers. The reasons are as follows: 

  • The quantum required for language training is relatively high compared with basic recruitment costs – employers are not obligated to pay for skilling costs in most contexts, even though they cover the majority of other costs associated with migration;  
  • The labor migration space is still nascent, particularly for newer corridors such as the Indo-German corridor – recruiters and employers are wary of taking on what they view as disproportionate risk for uncertain return (e.g. will the worker successfully complete language training? Is the language training relevant and high-quality?); 
  • A loan designed for the worker balances the dynamics of risk and reward for the primary stakeholder – the worker, who has the most control over their success in upskilling themselves; 
  • We are able to seek impact additionality by designing around the needs of workers – the ability to reach a wider demographic of workers who would not otherwise access finance has the dual benefit of nudging the financial sector to recognize the creditworthiness of a potentially enormous future segment. 
Designing for the migrant 

LaMP and KOIS anchored the design process on the following key features: 1) accessibility to an underserved population, 2) worker-centred design, 3) potential for scale and replication.  

Given the newness of this product, specifically for our target segment, we approached innovation incrementally – enhancing existing features of products to suit worker needs while also accommodating the risk management needs of financial institutions. Incremental developments will provide the data and comfort required for long-term innovation.   

Key elements guiding design process are listed in the table below.  

Objective  Challenge  Solution 
Design for quantum needed 
  • No customized product addressing worker funding needs 
  • Workers have reported receiving a partial loan to cover funding needs which necessitates heavy out-of-pocket expenditures or needing to apply for multiple loans 
  • Tailored loan to cover the costs of the language training program and common pre- and post-migration expenses e.g. living expenses while studying 
Include migrant potential/past record in underwriting 
  • No product incorporates worker characteristics in underwriting e.g. past track record, future employability.  
  • Eligibility for the loan product is solely dependent on characteristics of a blood-relative co-borrower, which limits access  
  • Expanded underwriting to include considerations related to the primary borrower – the migrant – such as projected future income, professional and academic track record, credit score (if available), etc. 
Reduce coborrower requirements 
  • Loans available in the market have stringent co-borrower or heavy collateral requirements, limiting access 
  • Loosened eligibility requirements for the co-borrower, including lowering threshold for credit score and income, and including access to new-to-credit borrowers 
  • Product is non-collateralized 
Incorporate moratorium 
  • Aspiring workers find it challenging to repay a loan during language training, as they have paused their careers to pursue full-time studies 
  • Incorporated moratorium which includes only payments on simple interest during ~12-month training and visa processing 
Offer financial education 
  • Workers reported they struggle to understand the technical features of the products available on the market 
  • A customized financial education program will be implemented to inform worker decision-making across financial options 

 

Derisking for lenders 

Financial institutions are often wary of entering new lending segments due to their inability to predict and manage risk in unknown contexts. Institutions we spoke with cited risk factors such as: lack of borrower experience with credit, uncertainty of migration success (due to unsuccessful completion of language training or job placement), counter-party risk introduced by recruiters and trainers (quality of instruction, ability to match workers with jobs, financial solvency, general management and competency), and cross-border collections. We have considered these factors both in the design of the loan product (e.g. timing of disbursements and payments), and in identifying supplemental derisking support that financial institutions would need to pilot the loan product – in this case, a First Loss Default Guarantee (FLDG) facility. 

Certain lending models take a chance on individuals based solely on their projected future earnings–e.g. the Prodigy loan provides educational financing for enrolment in universities of defined rankings or prestige. This approach could be replicated in the labor migration space, extending the model to migrating workers based on future employability and income. However, in today’s context, a co-borrower is as a crucial de-risking requirement for the primary borrower (the prospective worker) who will move overseas. This local co-borrower requirement provides lenders with legal recourse within the jurisdiction of the credit agreement, regardless of the primary borrower’s location abroad. 

We have also targeted recruitment models that secure conditional job offers for workers while they are taking language classes, thus reducing the risk of uncertainty of employment.  

Finally, we are establishing a 3-year FLDG to encourage financial institutions to offer the loan product at the terms and conditions described. This would mitigate risk for lenders, as losses up to a certain threshold could be recovered while still enabling lenders to test a new product in a promising market. As our proposed credit product is still untested, lenders are “data blind” when it comes to our target segment–unlike microfinance, higher education, or retail lending, there is little comprehensive or structured data related to lending to this segment; financial institutions need to learn and iterate before scaling. 

Our proposed design deploys between $381,000 and $690,000 in FLDG to activate $3.7 million in commercial capital. This design has the potential to leverage a relatively small credit enhancement for remarkable impact. 

Across our demonstration group, the expected value to workers could reach the equivalent of $294 million in additional wages earned over a period of five years, with expectations that approximately $44 million will be sent home to 1,850 families in India over that period. 

Looking ahead  

The loan product is now ready to be tested in the context of a specific geographical corridor. Two Indian financial institutions have agreed to be pilot partners for the loan product under our proposed FLDG program. We intentionally targeted small- to medium-sized non-bank financial companies (NBFCs) as lenders due to their appetite to lend to our target segment, offer flexible loan products, and ability to integrate technology in their systems (including underwriting and results modelling). With sufficient data and experience, we believe these financial institutions will be able to price risk effectively and scale the product while decreasing external support over time. 

We are now actively:  

  1. Fundraising for the guarantee facility that will unlock the deployment of this loan product; 
  2. Fundraising for programmatic support to enhance and scale the product including monitoring and evaluation, financial innovation, and developing the product for multiple sectors and corridors; 
  3. Developing a wider ecosystem of supporters and actors who understand labor mobility and can join us in designing and funding financial solutions that support cross-border livelihoods.   

We believe the time is right do develop financial products that serve low to mid-skilled workers prior to and during their migration experience. Doing so will help overcome barriers to migration that persist despite the formal agreements in place between sending and receiving countries today.  

 

You can download this blog as a PDF here.

 

[1]. “Youth Unemployment Rates in India,” Statista 2024

[2].  “Migration Matters: A Human Cause with a $20 Trillion Business Case,” BCG x IOM for UN Migration, 2022

LaMP Flight: A Promising but Complex Opportunity – Japan as a Destination Country for Labor Migration 

Posted on July 1, 2024 by - Uncategorized

LaMP visited Japan earlier this year to develop a deeper understanding of its labor migration system. We are now developing a pilot to provide opportunities for Kenyan workers in Japan, focusing on trade and services sectors (mechanics, manufacturing, construction, elderly care, hospitality, etc.) Please reach out if you are interested in learning more about the pilot program or want to learn more about Japan’s migration system!

 

FAVORITE QUOTE

  • “Japan is competing with the rest of the world to win the global war of talent” – Official, Japanese government  
  • “We need to promote our workers in Japan, just like we do our tourism and the caliber of our runners” Official, Kenyan government

 

LaMP team met for a dinner with Kenyan diaspora to understand worker perspectives and experiences with cultural integration.

 

DESTINATION JAPAN

The LaMP team traveled to Japan to meet with stakeholders across the public and private spectrum including employers, government, funders and foundations, Japanese International Cooperation Agency (JICA), recruiters, language schools, researchers, diaspora, and diplomatic representatives.  

The objectives of the trip were threefold: 

  • Understand the Japanese landscape for labor mobility and build strategic partnerships; 
  • Develop the design of a mobility project to send workers from Kenya to Japan while exploring initiatives to scale movement of workers between Bangladesh to Japan  
  • Meet with diaspora from Kenya and Bangladesh to understand employment opportunities and integration. The team’s trip coincidentally aligned with Kenyan President Ruto’s visit to Japan and LaMP had the privilege of joining a diaspora event for Kenyans in Japan held by the President’s office.  

Labor mobility is a priority for Japan as the country faces a growing worker shortage that will reach 3.4 million by 2030. These labor shortages are primarily caused by aging of the Japanese population (Japan has a median age of 49).  As one solution to this problem, Japan has created two key migration programs – Technical Intern Training Program (TITP) and Specified Skilled Worker (SSW) – that offer foreign-born workers employment in Japan across shortage sectors including but not limited to auto-repair and maintenance, manufacturing, construction, agriculture, nursing, hospitality and building cleaning.  

Despite these acute labor shortages, the LaMP team and partners have found it challenging to convince individual actors – especially small and medium enterprises (SMEs) or those servicing SMEs – to hire workers from a new sending country such as Kenya and Bangladesh. Employers remain cautious of being the “first mover” by employing workers from new source countries versus workers coming through historically established routes, such as the Philippines and Vietnam. However, Southeast Asian countries are slowly experiencing declining birth rates. On top of that, we learned anecdotally that Southeast Asian migrant workers find it more attractive to work in countries with more competitive wages and better economic prospects, such as the USA or South Korea, rather than Japan.  

However, LaMP’s conversations with members of the Japanese government, particularly the Ministry of Justice responsible for the strategic design of Japan’s migration program, demonstrated commitment to building a strong and reliable system for international workers in Japan, and recognition of labor migration as a win-win for both the sending and receiving countries. Japan’s labor migration system was revised in February 2024 to make it easier for workers to work and live in the country over the long-term by developing a pathway system allowing extensions and conversions of visas for a period of 3-8 years. The changes will go into effect in 2027. Efforts by JICA including the “Japan Platform for Migrant Workers Towards Responsible and Inclusive Society” – or JP-MIRAI – have led to increased transparency and worker protection in the labor migration system.  

Some large corporations in the mobility business in Japan are increasingly recognizing the need to diversify their source countries for labor.  Labor Mobility Partnerships (LaMP) is working with these actors to open up new migration pathways to Kenya and Bangladesh. This comes with its own set of challenges including language, bureaucracy, and cultural nuances – all while building a new migration pathway. LaMP is currently working on developing a pilot mobility program between Kenya and Japan by bringing together relevant actors, such as recruiters, employers, training institutes and government to facilitate movement and subsidize costs of migration such as language learning that would otherwise be unaffordable for a worker in Kenya.  

Japan’s demographic challenges and labor shortages present an opportunity for countries such as Kenya and Bangladesh, who are prioritizing labor migration as a national strategic priority and experiencing young and growing population (Kenya has a median age of 20; Bangladesh has a median age of 27). The governments of both countries are actively signing bilateral labor agreements with labor-scarce countries. However, there are a number of challenges to navigate when opening up a new or expanding an existing labor mobility pathway. These include generating demand for workers from a new source country for labor, jumping through bureaucratic hurdles, and sourcing and adapting workers to the needs of employers including ensuring language proficiency.  

Despite these challenges, the LaMP team were encouraged by the willingness of stakeholders to engage on the topic of labor mobility, across private and public sectors. 

 

KEY LEARNINGS

  • Some sectors in Japan–such as manufacturing, construction, and agriculture–face more acute shortages than others and may be more open to trying new sources of labor.  
  • Japan’s labor migration system is moving away from a circular model – offering workers temporary employment with expectation of return to home country – to recognizing labor migration as a solution to worker shortages in the country and the need to offer a longer-term career trajectory in Japan to foreign-born workers.  
  • There are small but mighty diaspora organizations who are organized, enthusiastic and committed to increasing the number of workers from their countries in Japan. Leveraging the strength of these organizations to support cultural integration and connections is something LaMP is working to include in our mobility pilot.  
  • We need to build systems in Japan and the source country–Kenya or Bangladesh–to build scalable and sustainable migration pathways. Bangladesh has signed a bilateral agreement with Japan to move workers between the two countries and is consequently slightly further along than Kenya. However, recruiters are still finding it challenging to persuade employers to hire workers from Bangladesh (as opposed to more established countries such as Vietnam). For Kenya, it is more challenging as there is no bilateral agreement in place – while this is not necessary currently, it will become a requirement by 2027 for any country seeking to send workers to Japan. Kenya should prioritize signing a bilateral agreement to ensure a long-term and scalable pathway.  
  • Other factors for scalability and sustainability include: 
    • Increasing language training infrastructure and verification of recognition of skills/qualifications 
    • Building a “brand” of workers–activating demand from employers for new sources of labor  
    • Building a network of committed actors across the private, public and non-profit sectors. 

 

The LaMP team met with a recruiter in Nagoya to learn about their recruitment model and system.