Why financial access campaigns fail to promote sustainable livelihoods: A case study of the youth financial inclusion in Kenya

Victor Apollo,
Head of Solutions Mapping, Accelerator Lab — UNDP Kenya

Access to financial and social assets is a key factor in the quest to empower youth to make their own economic decisions and escape poverty. Unfortunately, majority of this group in the informal sector are un-bankable making access to finance a huge challenge. Photo: Kevin Ouma/UNDP

COVID-19 pandemic has accelerated the loss of livelihoods and led to an increased rate of unemployment among Kenyan Youth. Prior to the COVID-19 pandemic, young people aged 20 to 24 years were more adversely affected in the labor market in comparison to other age cohorts. In December 2019, the youth unemployment rate was 14.2%, a percentage double that of the general populations unemployment at 4.9%[1]. Restrictions related to COVID-19 such as business closures, social distancing, and stay-at-home regulations have affected the population, with youth experiencing the hardest blow. With governments around the world engaging fiscal and monetary safety nets in the quest to minimize the pandemic’s impact on households and businesses, the Kenyan government also put up safety nets that were outlined in the Presidential speech on 25 March 2020[2].

Access to financial and social assets is a key factor in the quest to empower youth to make their own economic decisions and escape poverty. Providing young people with financial services — whether this is a safe place to save or an appropriately structured loan for investment in an enterprise or education — can promote entrepreneurship and asset building and emphasize sustainable livelihoods[3]. Despite these benefits, Financial Sector Deepening (FSD) Kenya estimates that 23% of 18–25-year-olds are excluded from financial services and few financial service providers in developing countries specifically target the youth. Around the world, youth[4] are 33% less likely to own a bank account in comparison to adults.

Strategic focus is on enterprise development is key to increasing sustainable economic opportunities and participation by Kenyan Youth in nation building. Photo Kevin Ouma/UNDP Kenya

Kicking off the “Financial Access and Social Inclusion” Campaign
UNDP’s larger inclusive and multi-sectoral response to COVID-19 seeks to foster ecosystem linkages to enable youth-led MSMEs tap into available resources and capacities. It is against this backdrop that UNDP in Kenya with funding from the Government of Japan, partnered with the Youth Enterprise Development Fund (YEDF) in a campaign to enhance access to financial services coupled with financial education that seeks to enable 1,000 unemployed young people move towards economic independence.

YEDF is a state corporation under the Ministry of ICT, Innovation and Youth Affairs. The Fund is one of the flagship projects of Vision 2030, under the social pillar. Its strategic focus is on enterprise development as a key strategy that will increase economic opportunities and participation by Kenyan Youth in nation building. The Fund seeks to create employment opportunities for young people through entrepreneurship and encouraging them to be job creators and not job seekers. It facilitates for this by “providing easy and affordable financial and business development support services to youth who are keen on starting or expanding businesses.”

The campaign dubbed “Financial Access and Social Inclusion Campaign” targeted 5 counties (Marsabit, Tana River, Turkana, Wajir and Baringo) which had the least number of applications for financial services from YEDF. Coincidentally, these were also ranked as some of the multi-dimensionally poor counties according to the 2020 Comprehensive Poverty Report. Through this campaign, we had an opportunity to explore the low coverage of YEDF services among youth in these 5 counties with the hope that insights derived from this exploration would potentially help design and test sustainable financial services and products for low income youth.

Mapping the issue
To clarify and contextualize the financial inclusion challenge as seen in real life, then develop a shared understanding of its causal factors, we conducted an issue map exercise with young people. This exercise aimed at identifying potential leverage points to tackle this challenge. Below is a graphic showcasing the key drivers that shape the low coverage of YEDF services in Marsabit County as voted by young people:

Other reasons cited as contributing factors to the low uptake of YEDF services include low literacy levels, insecurity, tribalism, lack of guarantors (for example for orphans), low initial loan amounts, fear of loans due to inability to pay back, personnel understaffing making it impossible for the YEDF team to cover the vast county, particularly the economically vulnerable youth who live in rural or remote areas and rare entrepreneurship training opportunities.

In order to enhance financial inclusion for the youth, we must prioritise working with young people, as key stakeholders, to reimagine development that fits with their aspiration and ambition. Photo: Alan Gichigi/UNDP Kenya

Co-creating financial services to enhance financial inclusion for youth
Considering the above barriers to financial inclusion while also taking note of the gendered dimension to this issue, there is no-one-size-fits-all solution. A collaborative effort of youth at the margin, financial institutions including the fintech sector, academia, the private sector and development actors is needed to ensure responsible and sustainable financial services for youth.

The UNDP Accelerator Lab is a new service that seeks to work with people, government and the private sector to reimagine development for the 21st century. To facilitate this, the Lab seeks to move away from pursuing “unicorns” — investing in a single solution for complex problems — towards portfolios of potential solutions which allow the consideration of multiple solutions in parallel. Additionally, the Lab prioritizes learning from existing local solutions that are closer to reality. Case in point would be learning from the good and bad of the vibrant financial technology (fintech) space in Kenya which has seen an increase of digital loan services.

A look at the financial inclusion system’s solutions portfolio
Unlike other accelerators, the UNDP Accelerator Lab is not only focused on taking any single solution to market or to scale, instead, the Lab approach tests portfolios for potential solutions. A portfolio will contain multiple solutions, each using a different strategy to address a challenge. Below is an example of how a portfolio that seeks to learn what combinations provide the right mix of solutions to financial inclusion for low income youth could look like. The portfolio approach takes into consideration the various drivers identified from the issue map exercise and focuses on diversifying the learning generated from a range of experiments.

Overall, the Lab welcomes a range of perspectives from other contributors that might have missed on the portfolio wheel. We believe that several sources of intelligence will help more actors understand the challenge of financial inclusion, develop new solutions for the youth and promote more inclusive decision making. To contribute knowledge to this agenda, kindly reach us via acceleratorlab.ke@undp.org.

[1] UNDP Strategic Policy Advisory Unit (SPAU). (2020). Kenya’s Youth and COVID-19: What are the Possible Policy Options? Kenya. Issue No: 6/2020

[2] https://www.theelephant.info/documents/pres-uhuru-kenyatta-presidential-address-of-25th-march-2020-on-covid-19/

[3] https://www.un.org/esa/socdev/documents/youth/fact-sheets/youth-financial-inclusion.pdf

[4] The United Nations, for statistical purposes, definesyouth’ as those persons between the ages of 15 and 24 years, without prejudice to other definitions by Member States.



In #Kenya, UNDP works with the Government and communities towards inclusive and sustainable socio-economic and human development. https://www.ke.undp

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In #Kenya, UNDP works with the Government and communities towards inclusive and sustainable socio-economic and human development. https://www.ke.undp