Young people in low income countries have realistically very minor options to get a job in the formal sector of the economy. Most will instead find themselves in the informal sector, with all the insecurity and low income that it implies.
The aim of the report is to discuss the potential and limitations of small-scale business development as a tool for poverty reduction. What can improve the chances for young people to be self-employed and how can improved entrepreneurship help people improve their livelihoods?
The report gives an overview of the international research frontier on microfinance, business training, and entrepreneurship, with a particular focus on youth and gender empowerment. It does so by providing both a comprehensive overview of the literature and a more in-depth analysis of findings from the report authors own research.
The report was presented during the seminar Jobb och entreprenörskap i Afrika – hur kan bistånd bidra?
Main findings
- Traditional microfinance does not have a transformative effect on societies. There is, however, suggestive evidence of positive effects of more flexible forms of microfinance, for instance in the form of microsaving.
- Programs that include both financial and human capital interventions are more effective than any intervention alone.
- Stimulating the development of businesses owned by males is easier than those owned by females
- Interventions targeting young women show promising effects on business startups.
Recommendations
The report offers three main recommendations for Swedish development aid.
- Aid should be directed towards innovative forms of microfinance, and be designed so that impact can be evaluated.
- Aid should be directed towards programs that address both financial and human capital constraints.
- Entrepreneurship programs should target girls when they are young: after marriage and childbearing, it may be too late, and even a “big push” policy may not be enough.
Report author
Kjetil Bjorvatn, Professor, department of economics, Norwegian Business School, Bergen