This post was originally published on the Atlantic Council’s New Atlanticist blog. It is reprinted with permission.
Youth unemployment — particularly in the developing world — is one of the most pressing and challenging issues facing the global community. Rates of youth unemployment are the highest across the Middle East and North Africa region, around 30 percent, and close to 17 percent in Latin America and the Caribbean, and the micro and macro consequences loom: stunted economic growth, poverty, migration, crime and poor health, among many others.
Young people in the developing world are some of the most entrepreneurial, a key booster to economic growth through the introduction of innovative technologies, products and services. At the same time, entrepreneurial youth also promise to fill some of the growth gap between wealthy and developing countries; their enthusiasm, spirit and zest are powerful tools for international development. Youth around the world are creating their own businesses — sometimes out of necessity — and are seizing opportunities arising from digital diffusion, new technologies and growing industries. A recent Global Entrepreneurship Monitor study in Asia Pacific found “early-stage Entrepreneurial Activity (TEA) for youth varies from 2.8 percent of working-age adults in Malaysia to 18.9 percent in Indonesia. In most countries, TEA is higher for youth than for older entrepreneurs (age thirty-five to sixty-four), highlighting the dynamism of youth entrepreneurship. On average, the gender gap is less pronounced for youth TEA than it is for the older age group.” However, to succeed these young people need money, mentors and markets.
In advanced economies, young entrepreneurs have access to capital through bank loans, venture funds, investors and personal assets. In low- and middle- income countries, access to capital may be more limited for young people, and they may not be formally banked. Without credit, collateral or assets, they are a credit risk. World Bank FINDEX data shows that approximately 56 percent of people age fifteen to twenty-four have a bank account compared to 72 percent of older adults. Having an account allows youth to access financial services that enable them to pursue their entrepreneurial endeavors. With fewer options to access capital, youth entrepreneurs will turn to friends, family, savings clubs or microfinance. Mobile money, financial technology (fintech), grants and incubators have created new avenues to access capital for youth entrepreneurs. In Sub-Saharan Africa, the fintech landscape has grown 24 percent over the past ten years, and commercial financial institutions such as Equity Bank are creating new products geared to young entrepreneurs.When young people are prepared and empowered to take advantage of emerging platforms, the challenge of youth unemployment dims. Click To Tweet
Money alone, however, does not a successful youth entrepreneur make. Evidence shows that lack of business skills or managerial know-how can also be a barrier, particularly for less educated youth. Young people, especially in the developing world, may not have mentors who can help guide them and shed light on the capacity, skills and resources needed to successfully start and grow a business.
But, a business can only be successful if there is a market to participate in. In the developing world, access to markets, supply or value chains with supportive ecosystems may be limited; markets may be highly localized, vertically integrated or export oriented. To be successful, youth business owners need to understand the demands of their local, regional and global customer base and have entry points and connections to them. Organizations supporting young entrepreneurs increasingly understand that intermediation can be pivotal to their success. In developing economies online market exchange platforms such as Aoun in Jordan, a youth-led enterprise, are helping the self-employed and small-businesses build on their profiles and profits.
When young people are prepared and empowered to take advantage of emerging platforms, the challenge of youth unemployment dims. With access to money, mentors and markets, youth entrepreneurship has the capacity to contribute to economic growth, catalyze new industries and support individuals, families and communities. So, with good reason, youth entrepreneurship will be a core topic at this this week’s Global Youth Economic Opportunities summit in Washington, D.C.