Some 78 percent of the 200 million young people in Sub-Saharan Africa live on less than US$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.
In the developing world, 62 percent of youth remain outside the formal financial system, while 700 million remain unbanked. Worldwide, those aged 15-24 are 33 percent less likely to have an account and 40 percent less likely to have saved formally compared to those aged 25 and older.
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.
What Do We Do?
In 2010, UNCDF in partnership with The MasterCard Foundation launched YouthStart, ‘Building Youth Inclusive Financial Sectors in Sub-Saharan Africa’. After working for 4 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.
YouthStart’s original goal of providing access to finance to 200,000 youth between the ages of 12 – 24 was achieved almost three times over, while the scope of products offered to youth also expanded to 17 new youth demand-driven products.
As of December 2014, YouthStart FSP partners granted access to savings accounts to almost 515,000 young people (of which 46 percent are young women), trained over 500,000 youth in financial education (54 percent young women), and provided loans to almost 72,000 young entrepreneurs.
These young clients have accumulated US$14.2 million in savings, while young entrepreneurs accessed US$7.3 million in loans to either start up or expand their own business.
2014 was also an important year for YouthStart’s learning and knowledge sharing agenda. In partnership with the Frankfurt Business School, MicroSave and The MasterCard Foundation, YouthStart has led the production of case studies in Burkina Faso, Malawi, Rwanda, Togo and Ethiopia to analyse and better understand the business case of youth financial services, and how the participation of youth in the programme has led or not to small changes that could become the foundation for greater impact in the future.
YouthStart is planning to build on these results, and is currently mobilizing partners to reach an additional 800,000 youth in the next phase.
Banking on a Brighter Future for the Next Generation
Before Gashaw Belaye learned about Amhara Credit and Saving Institution (ACSI), he was unsure about the services it offered, as he mistrusted banks in general. A good friend convinced him to sit in on an ACSI training session, just to find out what these bankers wanted. “I did not know what to expect. But I am so glad I went because my life has changed since that very first session.”
Gashaw was 21 years old then and worked for a barber. He had no savings at the time yet dreamed of owning his own barbershop. Through the financial-literacy sessions offered by ACSI, Gashaw made his business goals a reality.
“Through the training, I learned how to calculate the amount of money I spend on items such as sweet snacks, extra airtime and other things, and to make and follow a saving plan to achieve my goal of opening my own shop. I saved money every day for a year from not buying these items and instead used these savings to open my own shop.”
Gashaw enjoyed the courses so much that he signed up to become a youth ambassador for ACSI. After three years, not only is he one of the lead youth ambassadors in the Bahir Dar region, but he also has saved enough money to open his own barbershop and to hire four young employees—each of whom has a savings account with ACSI.
YouthStart believes access to finance coupled with financial-literacy training is critical for young people’s overall development. YouthStart’s ten partners have trained over half a million youth across eight countries in sub-Saharan Africa, providing them with training designed to complement their entrepreneurial endeavours while mastering the financial skills needed to create sustainable businesses.
Gashaw’s ability to create his own business and employment opportunities for others is an indication of the importance of access to financial and non-financial services in helping youth, particularly in areas where the formal sector is unable to absorb millions of new job entrants each year.