Countering the perception that youth are riskier borrowers than older clients, Maria Perdomo, the manager of the UN Capital Development Fund’s YouthStart program, recently presented data from seven African microfinance institutions (MFIs) showing that all but one have lower rates of portfolio at risk (PAR) within the segments of their portfolios serving youth than organization-wide. Nonetheless, she noted, youth often make up a disproportionately small share of an MFI’s customer base because loan officers believe they are less likely than others to repay, which would threaten the bonus that many loan officers receive when more of their clients do repay their loans.
Ms Perdomo offered this information at a panel discussion called “Increasing Youth Economic Opportunities Through Access to Finance,” which took place during European Microfinance Week, which was organized by the 130-member, nonprofit European Microfinance Platform (e-MFP) in Luxembourg from November 12 to November 14.
Also during the session, a portion of a video was shown that describes a service offered by FINCA DRC, the arm of US-based microfinance network FINCA International that operates in the Democratic Republic of the Congo, that has attracted 15,000 savers. People up to 24 years of age can use automated teller machines in supermarkets to deposit and withdraw money from savings accounts that offer annual interest rates of 3 percent.
Jules Théoneste Ndahayo, the CEO of Rwanda’s Union des Coopecs Umutanguha (UCU), described how his staff observed that lack of collateral kept youth from borrowing, so they responded by developing leasing products for young people. The idea came from training centers at which youth learned jobs like welding or carpentry and then needed a way to purchase tools upon graduation to begin to generate income.
Regarding financial education, UCU had trouble with attempts to partner with an external NGO, so UCU staff tried other tactics and found success with peer-to-peer learning sessions.
In response to a question about parental control of youth accounts, Jared Penner, the education manager for Dutch NGO Child and Youth Finance International, argued that, “Part of educating young people on financial products is to give them control over own assets to get in the habit of savings and building a relationship with financial institutions as early as possible in a person’s life.”
This article is one of a series covering the proceedings of European Microfinance Week, which was held in Luxembourg from November 12 to November 14 by e-MFP, which sponsored MicroCapital to report on the sessions onsite.
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