MICROFINANCE PAPER WRAP-UP: UNCDF: “Youth Entrepreneurship and Financial Inclusion: Outlook for ASEAN and SAARC;” by Mayank Jain, Dr Robin Gravesteijn, Zamid Aligishiev, Richard Last

This is a summary of a paper by Mayank Jain, Dr Robin Gravesteijn, Zamid Aligishiev and Richard Last; published by the UN Capital Development Fund; August 2018; 23 pages; available at http://www.uncdf.org/article/3890/.

This working paper identifies factors restricting the level of financial inclusion of youth in South and Southeast Asia, with a focus on Cambodia, Lao PDR and Myanmar. The authors assert that these barriers to financial access hinder youth entrepreneurship in the region.

The research indicates that fewer than 20 percent of new businesses in South and Southeast Asia are owned by entrepreneurs younger than age 24. Additionally, the ownership of accounts at financial institutions is lower among young people than among the general population. Nearly half of all youth savings accounts in South Asia are inactive, and the same is true of one quarter of accounts in Southeast Asia. Borrowing by young people is down from 2014 to 2017: by 6 percentage points in South Asia and 3 percentage points in Southeast Asia. Thirty percent of youth use informal sources of credit rather than formal ones due to a range of institutional, infrastructure-related and regulatory barriers. Half of young people in Cambodia and Myanmar have no access to either formal or informal financial services, and the same is true of one third of young people in Lao PDR.

The authors suggest that removing barriers to financial access may unlock growth in entrepreneurship in South and Southeast Asia. Potential solutions include financial technology such as: (1) alternative credit scoring to reduce reliance on collateral; (2) mobile wallets and digital banking solutions; (3) expanded crowdfunding, peer-to-peer lending, venture capital financing, business incubation and accelerator services; (3) digital tools for increasing financial literacy; (4) financing solutions tailored to “social businesses;” (5) facilitating the usage of financial technology by traditional financial institutions to reach rural youth; and (6) adjusting traditional financial products to cater for the needs of this age group.

The researchers conclude the paper with recommendations to policymakers and regulators including: (1) setting ambitious financial inclusion targets; (2) collecting better data for future “evidence-based policy making;” (3) supporting financial literacy via partnerships among financial service providers, telecommunications companies, education institutions and youth organizations; and (4) encouraging youth savings. They also suggest young people learn about the terms and conditions of financial products as well as financial services providers’ complaint processes. Lastly, the authors recommend that young entrepreneurs engage in networking via social media, entrepreneur associations, social enterprises and youth-focused financial services providers.

By Alíz Crowley, Research Associate

Sources and Additional Resources

“Youth Entrepreneurship and Financial Inclusion: Outlook for ASEAN and
SAARC”
http://www.uncdf.org/article/3890/

UN Capital Development Fund homepage
http://www.uncdf.org/who-we-are

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