Consolidating youth for prosperous development

Helping Young People to Grow

Prospects of Youth Micro Finance in Nepal

Santosh Koirala, Program Associate, Alternatives Nepal

Youth form an important and distinguished social sector because of their strength and vitality, and they are a power that cannot be ignored since they are a pillar of the future. According to the U.N report approximately one billion youth live in the world today. This means that approximately one person in five is between the age of 15 and 24 years, or 18% of the world’s populations are "youth”. The majority (almost 85%) of the world’s youth live in developing countries, with approximately 60 percent in Asia alone.

In context to Nepal, the population of youth between the age of 15 and 29 is 6.131 millions. This accounts for 26.2 percent of the total population. Of the total youth population, 83 percent of the youth live in rural areas and 17 percent in urban areas. Forty percent of the total urban population of Nepal is the youth. According to the census of 2001, the literacy rate among the youth is 70.1 percent, the percentage of unemployed youth among the age group 15 to 29 is 11.4 percent. It is estimated that more than 29 percent of the population in 2011 AD will be youth. On contrary country is unable to create them job in the same ratio. From this fact we can determine that the country is in the pressure of intense increase of unemployment rate. Due to the reason, the nation is facing the problem of youth brain drain and diversion of youth towards vulnerable activities like drug abuse and other criminal activities.

Lack of access to income opportunities or skill-based training opportunities keep many youth in Nepal shackled. Unemployment is high, forcing many youth to seek work in foreign countries. Until and unless youth are not brought into the mainstream for economic change, we will fail to bring economic prosperity in the country. So, youth need to be the main focus of government and any financial institutions and other program as they comprise a major section of the population in Nepal and suffer disproportionately from much vulnerability. Economic and Youth Micro financing issues are closely intertwined, one reinforcing the other.

The research is focused to explore the prospect  of microfinance in Nepal. This research has helped to find out whether the micro finance institutions seek youth as separate market or not, find out the response of institution’s towards performance of the youth micro finance, whether youth microfinance has been supporting the youth entrepreneurship or not and is youth micro financing a sufficient tool for eradicating the youth poverty and unemployment? What services must the micro financing institution should consider for making the financing program effective? How much effective is the government policy towards youth micro finance? The paper focuses on understanding the prospect of youth microfinance services in Nepal, in order to talk to youth unemployment. Thus, the paper analyzes the possibilities on youth as a separate sector for investment and state present status of Microfinance polices to address the youth microfinance. Data were collected from the representatives of financial institution and I/NGOs that had attended the Microfinance summit 2010 through a set of questionnaire. 57 samples were taken for the study.

All most all the financial institutions and NGO/INGOs (89.47%) have agreed that Youth Microfinance can be a separate investment sector and are interested in making investment in the youth and support their venture. Microfinance, Co-Operatives and I/NGOs see higher possibilities of investment in youth sector whereas; Development Bank and Other financial institutions see lower possibility of investment in youth sector. On the Other hand, Youth Microfinance has proven to be the best way to address the problem of unemployment and eliminate the youth poverty through encouraging them to establish their own venture by providing them the capital seed fund and other technical support. Majorities  65% approx has agreed upon it.

Determining the youth skill and developing the program according to youth desire are the important perspective to be considered by the financial institution before investment in Youth Microfinance. Along with credit, it is also imperative to provide technical support- training & workshop and empowerment program to any microfinance clients.

The Microfinance Policies issued by the government on 2005 A.D is satisfactory as the government has addressed the long felt problem on the microfinance activities like lending capacity, un-regulation, through creating a regulatory body. But it it is unable to address the youth micro financing issue. 51.1 % expressed that the government policy is not effective to focus on Y.M.

Hence, youth microfinance is the viable source for the investment to the financial institution and I/NGO's and is the best way to address the youth's issues like unemployment, youth poverty and brain-drain that the nation is hooked up. But, the government policies must supportive to youth microfinance.

So, it is not necessary to invest billions of dollars in various other program for economic development,  it is not billions of dollars youth needed right away.

(The article is based on research paper  "Prospects of Youth Microfinance in Nepal", for the partial fulfilment of BBA in School of Business, Pokhara University, Nepal)

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