Young Entrepreneurs in Sub-Saharan Africa

Youth unemployment is one of the major challenges facing economies in sub-Saharan Africa. A key intervention in this context is youth entrepreneurship, where young people are encouraged to start their own business. Entrepreneurship efforts, however, are unlikely to succeed without easy access to finance. Although commercial banks serve as many entrepreneurs’ main source of finance, young people tend to lack the collateral – assets such as land, automobiles, real estate, or investments – needed to access this source. This constraint to finance exacerbates the youth unemployment problem. In this context, microfinance institutions (MFIs) have emerged as an important innovation in the financial sector, offering financial services to the unbanked and the vulnerable. However, MFIs rarely extend services to young people, whom they associate with a high risk of loan non-repayment.

In spite of the generally low interest in serving youth, some few MFIs have gone on to provide specific services to young people. The purpose of this chapter is to examine the innovative financing approaches that some MFIs in Uganda have adopted in order to serve youth through financial and social intermediation.