Youth and Microfinance: Initiative Highlights
In their 2012 paper “Youth Financial Inclusion: Promising Examples for Achieving Youth Economic Empowerment” the European Microfinance Platform noted that more than 18% of the world’s population is comprised of youth, and people under the age of 15 make up 40% of the general population and 60% of the population living in LDCs.
Unfortunately, many of these young people are facing particularly significant economic struggles. For every unemployed adult, 2.8 youths are unemployed worldwide, 3.7 are unemployed in North Africa, and as many as 5.0 are unemployed in South East Asia and the Pacific. (Growing Potential: Microfinance-Plus Approaches for Cultivating the New Generation of Young Clients). According to the UNCDF, 78% of the 200 million young people living in Sub-Saharan Africa survive on less than US$2 a day, 48% survive on less than US$1 day, and less than 5% have access to financial services.
With these facts in mind it is no surprise that the microfinance community – and international development in general – have been increasing their focus on the world’s youth population. Accordingly, we have reviewed some initiatives that focus on youth and financial access:
- Initiated in 2010, UNCDF’s YouthStart, (which receives support from the MasterCard Foundation), launched a $12 million project designed to increase low-income youth’s access to financial services in sub-Saharan Africa and spur innovation regarding the delivery of microfinance to young people throughout the continent. The program supports financial service providers’ (FSPs) in developing, piloting, and rolling out youth-focused financial products with an emphasis on savings and financial literacy. The goal is to better equip young people – girls in particular – to make sound financial decisions and build strong economic, social, and human assets in order to support a sustainable future.While the program has made strides, a mid-term evaluation published in 2013 identified several interesting challenges: while YouthStart aims for a 50% female participation rate, as of 2012 it had only reached 40%, whereas YouthStart defines youth as those between the ages of 12 and 24, most African governments define them as those between 18 and 35, and whereas YouthStart emphasizes savings to support personal, business and household asset formation, most African national youth programs feature credit schemes. These facts notwithstanding, according to the latest information available, YouthStart-supported FSPs have granted over 221,545 young people access to financial services, mobilized close to $2.5 million in savings, and delivered financial education to over 236,353 youth to date.
- In 2012, Child and Youth Finance International launched the “Child and Youth Finance Movement” with the goal of reaching 100 million children in 100 countries by 2015. The Movement’s goal is to further financial inclusion and financial education for children and youth around the world and empower them to make wise financial decisions, accumulate savings, and develop employment skills. Collaborating with UNICEF and MasterCard, the organization has created the SchoolBank Program which uses a combination of schools and mobile technology to establish savings accounts for underserved young people. and also has created product standards and certification.
- Making Cents International, founded in 1999, is focused on increasing economic opportunities for youth, women and vulnerable populations. In a 2013 publication regarding youth and economic opportunities they cited the positive response which Senegalese vocational training institutions received from their students (aged 16 – 25) after they added business skills to their training programs. Their research has also shown that youth should be involved in market research and product development and should reflect the diversity of youth.
- Research entitled “Microfinance Services for Youth in the Sub-Saharan African Region” published by the University of Warwick, in cooperation with the Student Microfinance & Development Initiative (SMDI), concluded that microfinance institutions find lending to youth riskier than lending to adults. Accordingly, youths tend to rely on savings and family money for seed funding.
- Plan Canada set up a Youth Savings and Loan Association (YSLA) in Senegal that functions like a village bank by pooling participants’ resources and extending loans to start small businesses, pay school tuitions or support career training.
- MEDA’s YouthInvest is hoping to aid 50,000 youths in Morocco and Egypt by providing them with access to financial services, integrating them into the labor force, and supporting their development of assets and skills which will secure their futures. To date, over 21,000 youths have opened savings accounts with YouthInvest partners, and 96% report that they now save – compared with 19% when the project started.
These developments notwithstanding, there remain hurdles to the bringing of appropriate financial services to young populations. As noted in a paper commissioned by the 2011 Global Microcredit Summit’s Growing Potential: Microfinance-Plus Approaches for Cultivating the New Generation of Young Clients, depending on the country, financial institutions may face regulatory roadblocks that prevent them from serving young people. (For example rules regarding the age of consent.)
Likewise, there are concerns regarding consumer protection. As noted in the report, children and youth are considered a special class of citizens, and therefore regulators need to ensure that banks do not market them inappropriate products or utilize fine print which is difficult for them to understand.
Nevertheless, the prospect of early educational intervention, the establishment of healthy savings patterns, and the allocation of capital to youth-run businesses all stand as potential means to gain an upper hand in both the ongoing battle with poverty, and the current crisis in youth unemployment.
Youth engagement and financial inclusion will be discussed at several upcoming international events. Stay tuned for updates…….
- The International Training Center-International Labor Organization on May 12, 2014 will be holding a training course on “Making Microfinance Work for Youth: Managing Product Diversification” which will include discussions on providing youth with access to financial services and helping them become economically active.
- A global summit on youth and child finance will be held at the United Nations in New York in May 2014 to discuss various aspects of financial and social inclusion.