Determinants of financial inclusion for youth entrepreneurship: 2018-06-28آ â€¢Financial...
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Determinants of financial inclusion for youth entrepreneurship: Evidences from Addis Ababa
City and Shirka Wereda, Ethiopia.
Presented By: degife ketema (CBMS Ethiopia project leader)
• Financial inclusion is the activity of making access to finance to all members of the community particularly, to the majority of disadvantaged and low income groups, easy, available and usable (Sarma,2012) and Amidzic et al (2014)
• It is measured by the degree to which financial service providers offer unlimited financial services like
Insurance at a reasonable cost to people
• Unemployment becomes as a major challenges which affect the day to day life of youth population of modern era.
• Despite recent year improvement, unemployment and underemployment still is the serious problem in Ethiopia (Nayak, 2014).
• The 2013 Ethiopian national labour force survey result reveals that unemployment rate in Ethiopia is 5 percent.
• Compared two male(2.7 percent) female youth has a higher rate 6.5 percent.
• As a means of tracking the unemployment problem, promoting entrepreneurship, self- employment and small businesses expansion have become central to foster job creation and economic growth.
• Particularly, MSEs are the heart of effort of productive employment system (Garrido, et al, 2012).
• To create job opportunities, ensure integration, and support self-employment for unemployed workforce, supporting MSEs is the driving force.
• The major challenge of MSEs is that 1/3rd of don’t have access to financial services (Garrido, 2012).
• The problem is more pronounced among women micro and small business owners as International financial corporation (IFC) has predicted that greater than 70 percent of women-owned MSEs have insufficient provision of financial services.
• In Africa the emergence and growth of MSEs have also linkage with challenge to access finance.
• Considering inability to repay loans, poor guarantee and absence of information, Africa’s MSEs rarely meet FSPs conditions (Gichuki et al, 2014).
• Girma (2015) stated that the "MSEs Development Strategy" which has been published in November 1997 by the ministry of trade and industry of Ethiopia has declared specific supports to be provided to youth
• These supports include: provision of incentives facilitating access to finance promotion of partnerships access to market access to finance access to appropriate technology access to information and advice infrastructure
• Though efforts have been made to promote SMEs even in rural areas Ethiopia recorded 150th
country with regards to challenges for the population’s access to credit (World Bank 2012)
• Particularly, youth are often excluded from access to formal financial services with FSPs have neglected youth or offered services that were not adapted to their characteristics and needs.
• in 2012, among youth who applied for a loan, 57.3% micro and 87.9% small business owner’s applications were rejected.
• Regulatory frameworks and inclusive policies that are both youth friendly and protective of youth rights are needed to increase youth financial inclusion.
• International, national and local governmental institutions and NGOs need to work on youth entrepreneurship and youth financial inclusion to reduce unemployment and poverty, and achieve inclusive and sustainable development.
• The national financial inclusion strategy has set certain targets to be achieved by 2020.
• Those targets include; 40 percent of adults will save money at regulated financial
institution, 5 percent of adults will report insurance policy, 80 percent of adults will live within the maximum of 5 kilometers
from formal financial service providers and increasing micro and small enterprises lending into 15 percent.
• The strategy has indicated that, Building good roads for the delivery of a range of financial products and services through modern payment infrastructures is one of the preconditions for financial inclusion.
• According to this Findex survey (2014), in Sub-Sahara, the level of youth financial service participation in saving account ownership, having credit and deposited in financial service providers is 20, 3, and 11 percent respectively.
• In the same way, Sykes, et al (2016) has also indicated that 77.4 percent of youth in sub-Saharan Africa don’t use personal financial services from formal financial institutions with 18.9 percent of the youth have a personal service from informal sources (one third for the case of Ethiopia)
• The Enterprise Surveys in 2012 showed that 41% of MSEs felt access to finance was a major constraint.
• This all evidences justify that the country is far from achieving the strategic goal it has established to meet by 2020 and people, particularly, youth’ exclusion from financial services remain a problem.
• Thus, this study aims to provide information (inputs) that can be used by local officials and policy makers for identifying the factors that are hindering micro and small business owners (particularly, male and female youth ) from accessing financial service.
• In particular, this pilot study is designed to determine major determinants of financial inclusions for youth entrepreneurship in Addis Ababa and Shirka Wereda.
2. Research Questions and Hypothesis
Main Research Question • Which factors of inclusive finance have significant and
strong relationship with youth (male and female) entrepreneurs’ financial service reception and preference?
Specific Research Questions • What is the level of youth (male and female)
entrepreneurship in the study area? • What is impact of being financially included on youth (male
and female) entrepreneurs’ welfare? • Does involuntary financial exclusion exceed voluntary
exclusion among youth (male and female) entrepreneurs?
3. Specific objectives of the study
• To explore level of youth (male and female) entrepreneurship in the Addis Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.
• To measure impact of being financially included on youth (male and female) entrepreneurs’ welfare in the Addis Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.
• To compare the prevalence of involuntary and voluntary financial exclusion of youth (male and female) entrepreneurs in the Addis Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.
• To identify which factors are more determinants of inclusive finance among youth micro and small entrepreneurs in the Addis Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.
Hypothesis for the main research question • The involuntary factors (insufficient income, high risk,
discrimination, lack of information, weak contact, price barrier due to market imperfections etc) overweight the voluntary factors in determining the financial inclusion among youth (male and female) entrepreneurs.
Here are hypotheses are set for the other research questions: • H1: The status of youth employment is very low in the
project areas. • H2: Financially included youth (male and female) are more
successful than financially excluded youth entrepreneurs
4. Project site and population
• Project site
• The study is conducted in 2 sites (Addis Ababa City, Addis Ketema subsidy Wereda 10 and Shirka Wereda, Gobossa town and Mitana GAdo Kebele) in Ethiopia with the following general demographic characteristics
Addis Ketema Sub-city (Wereda 10)
No. of households
6307 1813 1813 1,660
1. Gobbesa town
2. Mitana Gado
profile of youth population Item Male Female Total
Total Population 2,996 3,307 6307
Youth population 776 1,026 1,802
Employed youth 388 369 757
Youth covered with rider 723 937 1,660
Youth with Own business 28 32 60
Youth having Own saving account 314 382 696
Youth Made payment/transfer 162 202 364
Youth with credit 5 8 13