Microfinance Services for Youth in the Sub-Saharan African Region
This study tests the validity of the Youth Employment Network's claim that 60% of MFIs do not lend to young people. It explores the mismatch between the youth's demand for financial services and existing supply, as well as the associated challenges and opportunities.
The study evaluates the lending criteria of MFIs in Sub-Saharan Africa, and tests whether these criteria explicitly or implicitly exclude youth. Study findings reveal that:
- Lending criteria are more or less similar with minor changes in group size and interest rates among different programs;
- Interest rates charged for youth and adults is the same, leaving MFIs with low incentives to cater to youth;
- Youth are considered risky investments;
- Discrimination exists in terms of loan availability, but not in cost of lending.
Nonetheless, there are microfinance initiatives across the continent making attempts to develop training and mentorship programs to provide youth with effective knowledge to start their business. Youth need a mix of depository and microfinance services for future development. Finally, MFI perception that investing in the youth is highly risky is changing, but this transformation will take time.