“In five years how many youth will you serve in your countries?” remarked Kate McKee, a senior advisor to the World Bank’s Consultative Group to Assist the Poor and moderator of a recent panel on youth financial services. As the panelists from banks and microfinance institutions in Africa and the Middle East tried to qualify their remarks, McKee interjected, “What is your forecast?” discouraging their attempts at injecting nuance into their responses.
McKee’s message was clear: Scale up, scale up, scale up! There are a growing number of unemployed youth in developing countries and each is an entrepreneur whose potential is idly waiting to be realized through access to credit and savings schemes.
Youth enterprise and livelihood development programs have expanded exponentially in the past decade and include a diverse range of tools and approaches that have done much good for millions of youth all over the world. Yet the intellectual rationale behind giving loans to young aspiring “entrepreneurs” is far too clouded to hail youth microloans as a baguette magique. Before talk of scaling up, there needs to be a more open and inclusive discussion about ways to support youth entrepreneurs.
For starters, those who work in this field need to be clear about the socio-economic groups their programs are targeting. As tempting as it is to support entrepreneurship efforts for the most needy, we need to recognize that in reality, successful entrepreneurs usually come from middle class or privileged backgrounds and tend to be better educated than their peers.
Such entrepreneurs are vocational, or opportunity entrepreneurs, and are usually able to find employment elsewhere but choose to start their own business to achieve financial success. In contrast, necessity entrepreneurs, which represent the majority of the poor and disenfranchised, are those that are self-employed not by choice, but to survive; meanwhile they are poorly educated, and their businesses have limited growth capacity and don’t create as many jobs as opportunity entrepreneurs.
We often make an assumption that if only the poor had access to greater formal credit at a lower interest rate, business activity would flourish, but what poor unemployed youth also need is better education, financial literacy and work skills training. These are steps that would increase the ability of youth to enter formal employment (or launch a sustainable start-up) as opposed to shaky informal self-employment. Youth are much less well positioned than adults to shoulder the risk of becoming indebted to banks and family members.
As one practitioner points out, “It may well be true that many countries do not make full use of their youth’s entrepreneurial potential, but potential must not be confused with capability. Becoming a successful entrepreneur takes time and experience.” The notion that the main obstacle between a poor young adult starting a business is access to credit needs to be discarded.
The good news is that youth enterprise and livelihood development programs have already started to mix in a cocktail of basic education, business incubators, training programs, and mentoring in what has grown to become a very dynamic field. Financial services have also expanded to include savings programs and there are groups that recognize that encouraging organic informal savings groups can be a much more effective first step.
Still, rigorous ethnographic fieldwork and stepped up, independent monitoring and evaluation is necessary to show how youth view credit and other financial services in each social and cultural context. While the dominant development discourse is useful for raising money and uniting people behind a cause, openness to incorporating contradictory findings on the ground is necessary for refining and sharpening approaches in the youth enterprise and development field.
Published Date: October 06, 2010