Can Microfinance Serve Youth?
As microfinance develops into a viable sector, numerous innovations as well as products and services are offered to clients. A growing focus of microfinance is on youth, variably defined as those aged 12-24. In many developing countries, youth represent a major percentage of the population and a disproportionate number of them are poor living on less than $2 a day. Many microfinance institutions have decided to serve this population while policy makers and the international donor community is exploring microfinance as a strategy for livelihoods and economic opportunities for youth, and youth issues have become a key development target. Included in the category of youth are: former child soldiers, young mothers, and child laborers. It is estimated that billions of youth will join the world economy in the coming decades.
Recognizing the need to support youth, the UN commemorated the Year of Youth. In addition to various initiatives on youth, providing access to microfinance services forms a key component for this target population. While most financial institutions have focused on microcredit to youth, the United Nations Capital Development Fund (UNCDF) hosted a panel discussion on market research for young market. Panelists from UNCDF‘s YouthStart, the YouthSave consortium, and Women’s World Banking shared their findings that addressed financial education, microenterprise, and national policies. Panelists emphasized savings as a means of empowering youth and building assets for the future. While most of the regional focus was on sub-Saharan Africa, initiatives have also been piloted in Mongolia and the Dominican Republic. In sub-Sahara, for example, youth between the ages of 12-24, represent one-quarter of the population, half of whom are illiterate and at risk. The panelists also noted that policies and the regulatory environment adversely impact outreach to youth in some countries. For example in Ethiopia and Malawi youth under age 18 can’t enter into a contract and thus are unable to take out loans or enter into enterprises while in Turkey bank accounts can’t be opened before the age of 18. But innovation and bundling of financial products are expected to prevail. For example, to engage young girls in savings and financial education, Women’s World Banking has created a savings product that includes pink passbooks that appeal to girls.
The goal of the UNCDF program, supported by the Master Card Foundation, is to increase access to financial services and financial education to 200,000 youth in the next four years.