AfDB to set up Investment Banks to help young entrepreneurs

As pointed out by AfBD president Akinwumi Adesina, the picture as it stood looked dismal for the continent’s youth and drastic action was needed by governments and the private sector.

The African Development Bank Group headquarters in Le Plateau, the business district of the Ivorian capital Abidjan. Picture: AFP

Author: Amy Musgrave

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The African Development Bank (AfBD) is in the early stages of developing a proposal for Youth Entrepreneurship Investment Banks in its member countries, including South Africa, to help youngsters start businesses and create jobs.

Just like South Africa, the biggest obstacle for SMEs across the continent is access to financing from traditional financial institutions like banks, as well as a lack of continued support and knowledge to help them scale. While Sub-Saharan Africa has been the second fastest-growing region in the world over the last two decades, its weak spots include a staggering 83% of the youth who enter the job market and do not find employment.

Africa has the largest group of youth in the world, with 70% of the population under the age of 35. And by 2063, it is estimated the working population will be two billion people, with half of them being youngsters.

As pointed out by AfBD president Akinwumi Adesina, the picture as it stood looked dismal for the continent’s youth and drastic action was needed by governments and the private sector.

The AfBD held a high-level virtual roundtable with some of its stakeholders last week to get input on the new concept. Adesina said financial institutions in the region did not understand SMEs and were archaic in financing these businesses.

They expected collateral, and decades of tax and company records, which startups did not have. So often, SMEs was started with money from family members or friends, but because of a lack of continued financial support, they were doomed to fail.

“Africa must move beyond youth empowerment to youth investment,” he said.

“It is time to put the capital of Africa at risk on behalf of the youth. It is time to create new financial ecosystems that support the businesses of the youth, grow them and unlock… the demand of financing (needed) by millions… This will help turn Africa’s demographic asset into an economic asset for the continent.”

Adesina said the new banks would be able to support regional members of the AfBD to create their own national financing facilities wholly dedicated to not only financing youth but also give them the necessary support to grow their businesses.

Arancha González Laya, who is Spain’s Minister of Foreign Affairs, European Union and Cooperation, agreed that the banks were critical. She told the roundtable that 20 million jobs needed to be created in Africa each year to absorb the youth into the job market.

“No government can create jobs at that scale. It will have to be private investment and entrepreneurship”. She said other obstacles included changing the criteria for client risk, better economic education and intra-Africa trade, and building capacity.

Yvonne Otieno, who is the CEO of Miyonga Fresh Greens Ent Ltd in Kenya and started her business from money from her sister, told the roundtable that when setting up these banks, three key elements must be considered.

They were mentorship, partnerships with incentives and drastically decreasing the time it took to access money to accelerate building the capacity of SMEs.

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