Youth-Inclusive Agriculture Financial Services
Access to finance has been cited as one of the top barriers to youth engagement in the agriculture sector. Finance is a challenge for small participants throughout the agricultural value chain, but this is especially true for youth. Due to the difficulties young people face in obtaining land tenure and overall lack of physical assets, few youth can offer the collateral that banks seek. Loans from financial institutions often have interest rates in the range of 25-30%, making capital prohibitively expensive. Additionally, many qualification requirements are prohibitive for youth and can be driven by a skeptical opinion of youth’s ability to make repayments. This skepticism of youth is also true of lead firms, who might otherwise be a useful source of value chain finance. This situation is compounded by the fact that financial products are not typically structured to meet the needs of youth who have limited exposure to financial services. Young people are often forced to resort to low levels of informal financing to fund their activities in the agricultural sector, which pushes them into primarily low-capital-intensive activities. Given these considerations, youth inability to access agriculture finance does not appear to be specific to the agriculture sector, but rather represents the set of general financial constraints that youth often face.
Measures that can ease access to finance for youth serve an important function in allowing young people to invest in tools, equipment, and technologies that can be employed for business purposes. Such measures can also help fund up-front capital requirements for items like seeds and fertilizer for those youth fortunate enough to have productive land for high-value crops.
Most literature focuses on increasing access to finance for “rural” youth, emphasizing the bankability of youth enterprises, financial literacy and savings among youth, and the capacity of loan officers. Much evidence points to the relationship between savings (particularly group-based savings) and youth resilience. Except for some limited discussion of the need for loans and leasing arrangements for youth to access land, or the creation of venture capital funds for youth agri-startups, there is relatively little information available about agriculture- and-youth-specific issues in finance. Further research is needed in this area.
This policy paper provides a macro-level picture of youth’s inability to access agriculture finance and provides six major recommendations to policy makers: 1) Promote financial literacy for youth 2) Enhance the capability of financial institutions to assess agricultural sector opportunities; 3) African governments should produce and share reliable statistics on youth employment and financial inclusion in agriculture; 4) Policymakers should encourage special finance packages for young agripreneurs that do not require fixed collateral, e.g. by providing guarantee schemes; 5) Governments should remove barriers to crowdfunding platforms, because they can effectively support young African entrepreneurs; and 6) Impact investment funds should continue to be supported to ensure small agricultural business can still get capital support.
This short technical note considers the challenges and opportunities facing banks and other financial institutions wishing to expand their financing of youth entrepreneurs operating in the agricultural space. It offers a range of available opportunities for expanding outreach, and suggestions for how youth can make themselves more "bankable" and serviceable.
This document synthesizes key lessons learned about youth access to financial services and lists the preconditions for IFAD to support youth access to rural finance projects. It also provides guidance for financial service providers on the design of financial services and non-financial services, as well as guidance for project implementation. Although tailored to rural areas, this guidance provides a general set of lessons learned with relatively little information specific to financing across agri-food systems. A summary “teaser” document is available here.
In this document, IFAD elaborates on the opportunities and challenges that face financial service providers when providing rural youth with financial products. The purpose of this document is to share what has been learned in financial inclusion projects focused on youth, highlighting implications for rural areas. Using those lessons learned as a basis, the final section of the document outlines strategic recommendations that IFAD country programme managers, project design teams and implementing partners can carry out to promote access to rural financial services for young people. The recommendations are further elaborated in the “How To Do” note on youth access to rural finance. A summary “teaser” document is available here.
Physical distance, lack of financial products appropriate for rural youth circumstances, limited exposure to financial services, and poor protective measures often put financial services outside the reach of rural youth. Yet the provision of youth-inclusive financial and non-financial services is critical for unlocking economic opportunities that allow rural youth to live and thrive in their communities. This report summarizes key learnings from five youth-inclusive rural finance pilot projects implemented under IFAD’s Rural Youth Economic Empowerment Program (RYEEP) and provides recommendations for future projects.
This publication is a synthesis of the contributions made by more than 300 participants from 40 countries in the 2011 Cracking the Nut conference, an annual learning event for sustainably building the world’s rural and agricultural markets. Among the many findings of the 2011 event, there was a call for special efforts needed to help rural youth engage productively in rural and agricultural businesses, including the application of holistic services.
This paper explores the potential of youth savings accounts (YSAs) as an intervention at the nexus of youth development and financial inclusion by reviewing: 1) current evidence on the potential effects of YSAs on these two development goals; 2) current trends in the state of practice on YSAs in developing countries, drawing out any implications for achieving these goals; and 3) what information is still needed before we can fully understand whether and how YSAs could actually achieve this dual potential. A small handful of examples in the agriculture sector are provided.