Some 78 percent of the 200 million young people in sub-Saharan Africa live on less than $2 a day and only 5 percent have access to financial services.

With statistics like these, there is no question that youth have become a core concern in many African economies – yet most financial institutions are not equipped to address them as real potential customers. Lack of access to financial resources is a major constraint for youth transitioning from school to work. It becomes difficult to access the credit needed to start a business, and to find secure places to accumulate assets, insurance and other relevant financial services that could support livelihoods.

In 2010, UNCDF in partnership with The MasterCard Foundation launched YouthStart, ‘Building Youth Inclusive Financial Sectors in sub-Saharan Africa’. After working five years with 10 leading financial services providers (FSPs), in eight countries in sub-Saharan Africa, 2014 marked the final year of the YouthStart Regional Pilot. UNCDF has designed the next phase of the programme, YouthStart Global, to employ a consortium approach in which FSPs will be partnering with youth serving organizations to provide financial and nonfinancial services to youth including entrepreneurship training.

This month #UNCDFExpertsChat spoke to Maria Perdomo, YouthStart Programme Manager, about the promise of accelerating youth’s access to regulated financial services. Maria has almost 15 years of experience working in financial inclusion in Africa, Asia, Latin America and the US. Prior to joining UNCDF, she worked for Reach Global, Freedom from Hunger and Microfinance Opportunities, where she developed Financial Education modules, trainings, capacity building tools and business models to enable different types of Financial Service Providers to offer integrated financial and non-financial services to their clients. She started her career in financial inclusion supporting the integration of financial education into the operations, products and services of Neighbordhood Trsut, a Community Development Credit Union in Washington Heights, and managing their school banking programme. She has a Masters degree in International Affairs and Economic Development from Columbia University; and a Bachelors Degree from Externado de Colombia University and l’Institut de Sciences Politiques de Paris (Sciences-Po).

#UNCDFExpertsChat: What is the development challenge you are trying to solve? How does UNCDF’s YouthStart programme solve that challenge?

Maria Perdomo: I have been living for the past 6 years in Senegal and have worked in projects in 15 different countries in sub-Saharan Africa. There are 2 things that have always caught my attention while living and traveling in Africa: the fast pace at which the continent is changing, and that almost every single person I see in the streets are youth. Unfortunately, even with all the economic growth that Africa has experienced in the past decade or so many young people still lack concrete economic opportunities.

Take, for example, Tanzania, a country I visited last week. Its real GDP growth is forecasted to average 6.8% in the period 2016-2020. There are around 800,000 graduates entering the labour market, but only a small fraction are able to find jobs in the formal sector.

This is precisely the development challenge that UNCDF is addressing through the YouthStart programme. Through the provision of financial and complementary non-financial services, we want to better equip young people, in particular young women and adolescent girls, to successfully navigate school to work transitions and integrate them as drivers of innovative economic growth in their own local communities. The programme does this by:

1. Employing a consortium approach with financial services providers partnering with youth serving organizations - including through local and international NGOs, and technical and vocational education and training support - to provide financial and nonfinancial services to youth including financial literacy training, entrepreneurship and reproductive health education.
2. Employing a market-systems approach focused on convening key market actors, expanding access to information and technical assistance, strategic policy coordination, and direct funding.

#UNCDFExpertsChat: What is the last mile financing model of YouthStart? How does it build public/private partnerships?

Maria Perdomo: YouthStart was launched in 2010 as a regional pilot in eight countries in sub-Saharan Africa. During the regional pilot, we partnered with 10 private sector financial institutions that together mobilized US$20 million from almost 750,000 youth. This money is now invested in local communities. These institutions also provided, as of June 2016, $16 million in loans to 120,000 youth entrepreneurs. The majority of these youth had never accessed a loan from a financial institution before.

With the expansion of YouthStart to other countries in Africa and Asia, we will be also expanding our partnership model to non-governmental organizations that are serving youth, mobile money operators, businesses interested in employing youth to increase their outreach, and the government. We believe that in order to have a long lasting impact in the lives of youth, we need to employ a market-systems approach and for this, a partnership with all relevant actors (FSPs, NGOs, government, private companies etc.) is critical.

#UNCDFExpertsChat: How does YouthStart support the achievement of the SDGs?

Maria Perdomo: In a world where youth and children together account for nearly 40 percent of its population (and in the case of Africa 60 percent), talking about the achievement of the SDGs without involving them as actors of change, in my opinion, is impossible. While economically disengaged youth run the risk of slowing the progress towards development goals, I firmly believe that economically empowered youth can be one of the greatest forces towards the achievements of the SDGs.

#UNCDFExpertsChat: The SDGs have a strong focus on leaving no one behind. How does YouthStart reach poor communities and under-served regions in LDCs? How does it make sure that it reaches women and vulnerable groups?

Maria Perdomo: If there is something that keeps me up at night, is precisely ensuring that the most vulnerable youth (i.e. young women, youth out of school, youth living in rural areas, etc.) are the ones benefiting from what YouthStart and its partners have to offer. How do we do this? First, when selecting our partners, we make sure not only that they share our common goal of serving the most vulnerable, but also that they have a track record in doing so. Second, together with our partners we set up specific targets to ensure they are reaching the hardest to reach. Third, we support our partners to develop innovative ways to reach them. This can involve the use of different delivery channels like technology or savings groups, or the use of specific marketing techniques to attract the hardest to reach. Fourth, we follow through with our promises and those partners that are not reaching their targets can have their financial support from us suspended or even terminated. And this last part, even if it sounds hard, has helped YouthStart and its partners exceed its overall targets by almost 3 times. This has definitely helped me to better sleep at night!

#UNCDFExpertsChat: Can you give an example of how YouthStart has made a difference to the lives of poor people and communities?

Maria Perdomo: I already shared with you the numbers of YouthStart, but behind those numbers, there are young men and women and we constantly ask ourselves this same question. YouthStart went through an independent final evaluation that can be found online. As part of this exercise, the evaluators conducted focus group discussions and surveys with youth that participated in the programme. 80 percent of those youth perceived YouthStart’s savings and credit products, as well as financial literacy training, to have positively influenced their situations/lives, primarily in terms of increased financial capabilities and capacities to generate some income and greater independence and/or stronger self-esteem. In a separate and more in-depth behavioral study commissioned by UNCDF, researchers also found a correlation between participation in the programme, lower levels of stress and greater confidence in the future. They also found that youth saved either to start up or grow their own business, to pay for school fees or to help their families. This is very important because studies suggest that economically empowered youth are more likely to get more anchored in their own communities as agents of positive change. And this is exactly what we want. Young people is probably the most precious resource for Africa’s development and we know that when given the opportunities they can flourish and give back to those communities.

We have also documented the inspiring stories of some of the youth that participated in the behavioral study and I encourage our readers to watch their videos in our YouTube channel. Check out for example the story of Ayalnesh Tamene, a 19 year old young woman living in Amhara-Ethiopia and that has been a client of ACSI since 2014. Or if you prefer a story from a remote rural area in Togo, check out the video of Yawoa Kafui Adika, a 24 year old woman that started saving at FUCEC in 2013. These are just some of the powerful and inspirational stories that I can share with you from empowered young women that have participated in the YouthStart programme.

#UNCDFExpertsChat: What are the lessons learned from YouthStart's implementation so far?

Maria Perdomo: We have learned a lot of things from YouthStart. Six years ago, when I was offered this job, I was asked how confident I felt with the target of reaching 200,000 youth with financial services. At the time, even if the number scared me, I felt it was possible. And this, is I believe one of the biggest learnings from YouthStart. We have not only learned, but also demonstrated that youth, when given the right services and the opportunity, can save. We have also learned that young people are not necessarily as risky as most FSPs think they are, as the overall portfolio at risk of youth loans in the programme is not necessarily higher than FSP’s overall portfolio.

Other learning can be found in the paper written by Ata Cissé, YouthStart Technical Specialist: “Recommended Practices and Lessons Learned from YouthStart”. Let me, however, highlight some of the key findings. Over the past six years, UNCDF has gained a deeper understanding of a) the types of financial services that best meet the needs of youth according to their socio-economic context and developmental stages, b) the business models that FSPs can use to deliver financial education to youth, c) the business case for youth financial services; d) the types of trainings and tools necessary for FSPs to gain a better understanding of the youth market; and, e) the changes needed in the policy and regulatory environment to increase access to financial services for youth.

Finally, I think that the biggest lessons learned has to do with the fact that our programme can have a more lasting impact if we expand our partnership model to all the actors that are part of the youth economic opportunities ecosystem. This means that we need to acknowledge that the work we do with the FSP has to be in line with other services offered to youth by NGOs, YSOs etc. and policies that govern that ecosystem. To do this, in 2015 and 2016, UNCDF conducted assessments of the youth economic ecosystems in Benin, Cambodia, Democratic Republic of Congo (DRC), Madagascar, Malawi, Mozambique, Rwanda, Senegal, Tanzania, Uganda, and Zambia. The results of these assessments are helping us to develop a more comprehensive programme for the next five years.

#UNCDFExpertsChat: What's the plan for scale up? What can we look forward to in the future of YouthStart?

Maria Perdomo: I already gave you the “appetizer” in the previous question, but to make a long story short, we are now, based on the assessments conducted, developing a country by country strategy to bring financial and complementary non-financial services to 800,000 more youth in Sub-Saharan Africa. We are in the midst of discussing with governments those strategies to make sure they respond well to their needs and are in line with their development priorities. We are also looking for partners, technical and financial, that are interested in joining forces with UNCDF, SIDA and the Government of Luxembourg, all of which are already supporting this expansion.

#UNCDFExpertsChat: What's exciting about working in this space?

Maria Perdomo: Seeing concrete institutional changes in the partners we work with and witnessing how those changes are in turn having an impact on young people’s lives and their communities is what excites me the most.

About YouthStart

UN Capital Development Fund (UNCDF) launched YouthStart with the support of The MasterCard Foundation in 2010 in response, not only to the approaching youth demographic wave, but also to the lack of opportunities for young people around the world. In an effort to help youth realize its full potential, YouthStart supports strong financial service providers (FSPs) in developing, piloting and rolling out youth-focused financial products, especially savings, and non- financial services (NFS) such as financial literacy or reproductive health education. Through YouthStart, UNCDF aims to demonstrate that (a) when accessing the right combination of financial and non-financial services, youth -young women and girls in particular- are better equipped to make more informed financial decisions, build financial (e.g. savings), social (e.g. social networks) and human assets (e.g. skills and knowledge) for their futures and create sustainable livelihoods; and (b) youth financial services (YFS) contribute to increasing outreach and sustainability of FSPs over time.

You can learn more about YouthStart at www.uncdf.org/youthstart