Unlocking Finance for Youth Entrepreneurs: Evidence from a Global Stocktaking
Four in 10 people, or 42 percent, of the world’s population are under the age of 25. Globally, an estimated 70.9 million youth were unemployed in 2017. Thus, job creation and economic growth through private sector development have become primary areas of focus for policymakers around the world. As more youth enter the workforce, they are known to face increasing difficulties in obtaining employment. The traditional sources of opportunity in many developing countries — governments and large corporations — are generally not hiring at the same levels, if at all. As such, small and medium enterprise (SME) entrepreneurship is seen as an important option for creating sustainable livelihoods for this segment of the population. Youth entrepreneurs are more likely to be constrained by access to finance in starting and growing their businesses. Youth are perceived to be riskier clients by financial institutions because of a lack of business experience, credit histories, savings and other assets to offer as collateral. Such shortcomings often contribute to this perception. Youth entrepreneurs may also be restricted by access to business networks. Consequently, youth are more reliant on family savings, informal lenders or other similarly suboptimal means of financing businesses that yield limited funds and/or are exploitative in nature.
Recognizing the importance of addressing youth unemployment through youth entrepreneurship, the G20 Global Partnership for Financial Inclusion (GPFI) and the SME Finance Forum of the International Finance Corporation (IFC) undertook a global stocktaking of programs that finance youth entrepreneurs in a profitable and sustainable manner. We hope that these case studies will inform future program design and policymaking to improve the access of young entrepreneurs to finance.