Pathways for rural youth to financial inclusion

While most smallholder farmers lack access to adequate financial services, the 2017 World Bank Findex notes that youth, especially rural youth, are even more disadvantaged than their adult peers; with 40 per cent of them less likely to save and 60 per cent less likely to borrow from banks in comparison to adults. This means that they have fewer opportunities to invest in asset development, education and building enterprises. The Global Findex also suggests that four out of 10 agrarian households in Asia-Pacific are prone to poor harvest risks with no means of insurance. These findings can be attributed to youth specific issues: (including young women and men, indigenous and migrating youth):

  • poor financial literacy and capacities
  • lack of products and services catered to youth's needs
  • lack of land and other assets for collateral
  • lack of trustworthiness/credit profile
  • restrictive legal, regulatory requirements for youth etc.

These are further compounded by traditional issues faced by financial service providers (FSPs) in providing services in rural areas, such as:

  • poor outreach
  • poor outlook for agriculture sector lending
  • poor rural infrastructure
  • high transaction costs etc.

With enormous unemployment in Asia-Pacific and a large potential for rural youth to develop farming and farm/off-farm enterprises, efficient and inclusive financial systems can enable today’s young generations to become the drivers and beneficiaries of sustainable rural transformation. Lastly, promoting an ecosystem for digital technologies for rural finance through technical and financial support can also help address the diverse and seasonal needs for finance, reduce operational costs for FSP's and enable greater access and use by youth.  

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IFAD - Michael Hamp, Esha Singh
Tuesday, October 8, 2019
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