Bird’s eye view 

52% of the world's population is under 35 years old, with the majority living in Asia and Africa. In Africa, 53% of these youth are under 15 years old, compared to about 40% in the rest of the world. Asia is slightly higher at 43%, while North America has the lowest proportion of youth under 15 at 39%.

Creating perspectives for the youth in terms of education, income and socio-cultural participation is one of the massive challenges of our day. Regrettably, it is at the same time magnified and overshadowed by the other major, self-inflicted challenges of humankind – climate change and destruction of natural resources, the digital-and-AI-revolution, and recently refreshed propensity for war and organized violence. 

Programs of development cooperation

Development cooperation has long recognized that perspectives for the youth are a cross-cutting imperative for all development programs or projects. In an ideal scenario, youth are the proponents and vectors of positive change and transformation towards sustainable livelihoods in poor and emerging economies. 

However, in the day-to-day context of development programs, practical challenges persist. Youth from lower-income-households are affected by the triple whammy of lack of education and skills, lack of finance and means of production (i.e. resources), and lack of voice. In projects with limited period of operation, a focus must be maintained to avoid stretching project budgets thin and missing objectives. Yet, most experiences suggest that success in reaching youth in an impactful manner requires an integrated approach. At least, programs must take on the skills- and resource-gaps at the same time. For instance, the EBRD has conceived a “Youth in Business” program that is being executed in several countries or regions (Central Asia, Egypt, Morocco, Türkiye and the Western Balkans). Whereas it has a credit line for financial institutions (FIs) at its centre, it offers support to these FIs to understand the target market specifically and tailor its products for them; and it also includes entrepreneurship and financial management training for young entrepreneurs. 

GOPA has been delivering projects that: 

• Focus on the skill-gap and also take finance into view; for instance, GOPA AFC provided agricultural and entrepreneurial skill training for youth in Malawi. We then took an additional step of linking the youth trained to FIs, through ”pitch events” organised by our project.  
• Focus on the resource gap and also take skills into view. For example, GOPA Tech led a project that created built structures of incubation centres for four vocational training institutes in Kenya. The project then also revised and piloted entrepreneurship training for the youth that use those incubation centres. For GIZ, GOPA AFC provided capacity building for MSME-finance to different classes of FIs in Ghana. With one of those FIs – a country-wide operating Savings and Loans Company – our experts developed a product concept that targets the youth segment. 

An opportunity for building capacity of FI staff

GOPA AFC has created a comprehensive e-learning course for bankers to acquire the skills to market to, and create products for, women. Several of the techniques covered are equally applicable to youth, examples are client live-cycle perspective, human-centered product design and market segmentation. Moreover, if the results of these financial and non-financial products are well documented, these initiatives also open up attractive funding opportunities for the FIs.

Close-up: Financial services for youth

It is very difficult for youth to start a business because they usually do not have the start-up capital to acquire means of production as well as working capital. Loans from formal financial institutions are mostly out of reach, because the youth do neither have a credit history nor physical collateral. 

Therefore, savings products for minors and early youth are a central pillar. Building savings habits and even savings culture has several advantages: Youth acquire financial literacy, and they build forward looking competencies – planning for the future and patience and perseverance in pursuing those plans. If they safe together, they build collaborative competencies and lay the root for networks with (financially) like-minded people. Last but not least, their savings might be the seed-fund for entrepreneurial activities, and a good starting point for FIs to entrust them with a small loan. 

From the vantage point of a FI, youth and women share several characteristics that make them appear risky and costly target groups: Because they lack credit history and collateral, they are difficult to appraise. Furthermore, both are usually not free to pledge family or household items. Youth are not proprietors of those items. In several parts of the world, women are also culturally and even legally constrained from taking loans on their own. 

However, a strong case exists that serving various segments of women and youth with financial and non-financial services is a good investment, as well as good corporate citizenship. Winning the youth and young entrepreneurs of today as customers means to serve the leaders of tomorrow – both the individuals and their enterprises. This does not mean, that youth and women (and other socially disadvantages groups) should be clubbed together, as donor programs sometimes do. On the contrary, the successful examples underline that strategic choice and resolve are the building bloc: Think of many partner FIs of World Women Banking, a social investor that specializes in building profitable financial services for women. Think of cooperative and savings bank groups in Europe, who have long spearheaded marketing their services to youth and even minors. 

Finance for youth to build their livelihoods is a worthwhile challenge that can be turned into a solid opportunity for financial institutions. At the same time, it is important economically and socially. Thus, the key to success lies in partnerships that interlace access to finance with skill building and making young voices heard. 

For further information, please contact: oliver.schmidt [at] gopa.eu (oliver[dot]schmidt[at]gopa[dot]eu) or stefan.martiniak [at] gopa.eu (stefan[dot]martiniak[at]gopa[dot]eu).