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Linking Young Entrepreneurs with Nigerian Micro-Finance Banks
Youth Unemployment in Cross River State was pegged at 46 percent by Senator Liel Imoke, the past governor of Cross River State in 2013 during the commissioning of the Central Bank of Nigeria sponsored Entrepreneurship Development Centres in Calabar.1
With little and near absence of employment opportunities in the Nigerian public sector, youth unemployment has become a great concern for the government of Cross River State Nigeria. While past governments made spirited efforts to find solutions to this through national and international collaborative programs on entrepreneurship and various skills acquisition programs; the population of urban and rural unemployment continues to increase. A conscious probing into the cause of the enigma of unemployment in the state points in the direction of a number of factors such as insufficient skills, access to finance, incompatible/unenforced policies, poor infrastructure, poor educational system, etc.
However, when confronted with the question of unemployment, most youths are quick to identify access to finance as the critical (if not the only) factor limiting their quest to establish some small scale businesses to improve their livelihood. In view of these challenges, the Youth Leadership Entrepreneurship and Access Development (YouLead) Project implemented by Cuso International in partnership with MEDA Canada has included ‘Financial Inclusion’ among its 4 key components in a bid to address this problem. It is also important to note that among the identified constraints in the Youth Financial Needs Survey2 conducted by MEDA are: limited presence of micro finance banks in Cross River State, stringent collateral requirements, high interest rates, guarantorship, limited loan portfolio, wrong perception by banks on youth financing, and limitations place on young women by cultural barriers - all of which MEDA seeks to address through its engagement with 4 selected micro-finance banks (MFBs) on the project geared towards building capacity of bank staff members to develop youth responsive and appropriate financial products and services.
The financial inclusion credit sensitization program aims to link youth with partner and non-partner financial institutions and create a platform for MFBs to share information on available financial products and services for young entrepreneurs who intend to start up/expand their businesses and to create an interactive environment for young entrepreneurs and banks to talk about bank loan application processes.
Interestingly, during a sensitization program with 150 young women and men who had graduated from the project’s entrepreneurship training and representatives of the Bank of Agriculture and CSD Micro-Finance Bank, it became apparent that having youth appropriate financial products may not be enough. Youth participants took turns to ask different questions relating to areas they felt dissatisfied or unclear about, such as the types of loan facilities and conditions attached to each of the products, including: interest rates, collateral requirements, guarantor, loan tenor, moratorium, types of account facilities, and account opening procedures. The bank representatives responded to these questions, noting that there are various products available for youth clients such as agriculture loans, group loans and MSME loans. Other clarifications provided by the banks included: youth hoping to access financing from a bank are expected to open an account with the bank and ensure its active operation for about 3 months; micro- finance banks will only require collateral where the loan amount exceeds 500,000 naira; loans for less than 500,000 naira3 will require a guarantor willing to present a blank cheque; moratorium will be granted to an enterprise based on the type and gestation of its products, etc.
A key lesson drawn from this credit sensitization meeting is the importance of bringing both youth and banks together in a convivial atmosphere where banks can sensitize youth about the availability of products, processes, requirements as well as terms and conditions. This enables youth to take advantage of opportunities that do exist and to overcome their inexperience, fear and lack of confidence in approaching banks (with very formal structures and staff which often deters them). Building on this experience and lesson, the YouLead project can improve its approach towards linking youth to financial service providers and explore strategies that take into consideration tenuous issues such as experience, literacy levels, environment, clarity of information and conditions that can empower youth on their path to successful entrepreneurship.
1 Cross River State, Government of Nigeria. “Imoke Commissions South-South Entrepreneurship Development Centre.” (2015).
2 See previous blog on the Survey of Youth Financial Needs in Cross River State
3 This is approximately $2,500 USD (As of Nov 2015).