Financing Young Agripreneurs

The Food and Agriculture Organization (FAO) has released a report that provides an overview of the current state of agricultural financing for young people in developing and emerging countries. The report highlights trends, challenges, opportunities, innovative solutions, and initiatives related to financing young Agripreneurs.

The Food and Agriculture Organization (FAO) has released a report that provides an overview of the current state of agricultural financing for young people in developing and emerging countries. The report highlights trends, challenges, opportunities, innovative solutions, and initiatives related to financing young Agripreneurs.

According to estimates from the UN Department of Economic and Social Affairs (UNDESA), as of 2019, there were 1.2 billion young people aged 15 to 24, accounting for 16% of the global population.

With such a large youth population, developing countries need to support young people making strides in the agricultural sector by providing financing services.

However, despite significant potential contributions to economic development, the young population faces age-related and other structural challenges to reach their full capacity. Young agripreneurs in developing and emerging countries struggle to access formal financial services. Among the key barriers constraining the financial inclusion of young agripreneurs are:   

  • Weak or discriminatory legal environment;
  • Perception of agriculture as an unprofitable line of business;
  • Weak socioeconomic networks;
  • Lack of collateral to receive financial services;
  • Underdeveloped in-house expertise in developing youth-tailored financial products;
  • Insufficient information on agripreneurs’ client profiles;
  • Institutional bias against lending to young agripreneurs, and
  • Scarcity of adequate facilities dedicated to fostering agricultural financing for youth.

“As youth tend to be early adopters of digital technologies, they have an easier time taking up and assimilating mobile money services and other digital innovations to overcome the inherent constraints that limit them from accessing traditional financial services,” reads the report.  

Innovative digital technologies for agriculture (D4Ag) are increasing in developing and emerging economies. Considering that 70% of D4Ag users in Sub–Saharan Africa are young adults, D4Ag technology can become a powerful driver for youth engagement in agribusiness. The most successful D4Ag platforms bundle financial and non-financial services together on a platform.

Programs that digitalize informal saving patterns will have better acceptance by women and rural youth groups. These groups face greater intersectionality of constraints; therefore need specially designed financial services. It is known that women in rural areas tend to use informal savings and credit groups over a long period to build financial capital.

Reaching underserved segments of society with financial technology creates a competitive dynamic between fintech start-ups, commercial banks, mobile money operators, and other providers as it carries untapped profit. Rural youth are a major target as they are interested in applying technology to their day-to-day life and business.

Based on reviewing barriers faced by young agripreneurs in accessing financial services and analyzing selected experiences, the publication makes the following recommendations:

  • Refining public data collection mechanisms to produce more granular data on rural youth.
  • Promoting agent banking as a tool for youth financial inclusion.
  • Addressing youth financial empowerment in a holistic manner.
  • Building and sharing evidence based on proven, scalable, and replicable business models for serving rural youth.
  • Fostering a youth-specific financial offer among formal finical Institutions by promoting internal restructuring.
  • Developing new lending approaches that rely on alternative collateral.
  • Refining the development of D4Ag platforms under a youth lens.

Click here to read the full publication.

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