DETERMINANTS OF FINANCIAL INCLUSION FOR YOUTH ENTREPRENEURSHIP: - - PowerPoint PPT Presentation

CBMS PROJ ECT TITLE: DEGIFE KETEMA,ABEL TEWOLDE, EDEN G/ MIKAEL,HIWOT GIRMA,SENAYIT SEYOUM,KASS AHUN MAMO ARSI UNIVERSITY

This work is being carried out with technical support from the Community-Based M onitoring System (CBM S) Network Office, DLSU-AKI, M anila, Philippines through the PEP-PAGE Program funded by the Department for International Development (DFID) of the United Kingdom (or UK Aid), and the Government of Canada through the International Development Research Centre (IDRC).

DETERMINANTS OF FINANCIAL INCLUSION FOR YOUTH ENTREPRENEURSHIP: EVIDENCE FROM ADDIS ABABA CITY AND SHIRKA W EREDA

OUTLINE OF PRESENTATION

 IN TRO DUCTIO N (Policy Context , Relevance, and O bjectives of the S

tudy)

 RES

EARCH Q UES TIO N S AN D HYPOTHES ES

 METHO DO LO GY (MO DEL / AN AL

YTICAL FRAMEW O RK AN D DATA S O URCES )

 RES

EARCH FIN DIN GS

 CO N CLUS

IO N : KEY FIN DIN GS,

POLICY IM PLICA TION S AN D RECOM M EN DA TION S

CONTEXT AND RELEVANCE OF THE RESEARCH STUDY

• Financial inclusion is defined by Sarma (2012) as the activity of making

access to finance to all members of the community easy, available and usable.

• Sykes et al (2016) has indicated that 77.4 percent of youth in sub-

Saharan Africa don’t use personal financial services from formal financial institutions and only 6 percent of them have personal services from formal financial institutions.

• In Ethiopia, access is a national issue as less than eight percent of

Ethiopians has a formal bank account.

• Gebregziabher (2015) noted access to credit is problematic as only 6

percent

• f microenterprises and 1.9 percent of small enterprises have

credit facilities.

• Enterprise Surveys showed 41% of MSEs felt access to finance was a

major constraint

CONTEXT AND RELEVANCE OF THE RESEARCH STUDY

• Zeru (2010) has stated that more than 2/3 of the Ethiopian

population has access to an informal finance provider

• Among firms who applied for a loan or line of credit in the last

fiscal year, 57.3% and 87.9% of applications submitted by micro and small firms respectively were rejected

• This paper is set to investigate mainly factors associated with

financial inclusion and entrepreunal engagement at grass root administration in Ethiopia.

OBJECTIVES

General Objective:  Identify determinants of financial inclusion and entrepreneurship of youth. Specific objectives:

• To explore level of youth (male and female) financial inclusion in the Addis

Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.

• To explore the level of (male and female) youth entrepreneurship in the Addis

Ababa sub-city Wereda 10 and Shirka Wereda Gobessa town and Mitana Gado Kebele.

• Measure the impact of being financially included on youth’ (male and female)

welfare

• To compare the prevalence involuntary and voluntary financial exclusion of

youth (male and female)

• To identify factors affecting entrepreneurial engagement

OBJECTIVES

• Identify which factors of financial inclusion are more determinants in

financial reception and preference among youth.

RESEARCH QUESTIONS AND HYPOTHESES

RQs:

• Which factors have an effect on youth’ (male and female) financial

service reception and preference?

• What is the level of youth (male and female) financial inclusion in the

study area?

• What is the level of youth (male and female) entrepreneurship in the

study area?

• What is impact of being financially included on welfare of youth

(male and female)?

• Does involuntary financial exclusion exceed voluntary exclusion

among youth (Male and female)?

• What are the factors determining entrepreneural engagement?

RESEARCH QUESTIONS AND HYPOTHESES

Hypotheses:

• The status of financial inclusion is very low in the project areas.
• The level of youth (male and female) entrepreneurship is low in the

study area

• The welfare of financially included youth (male and female) is better

than those who are financially excluded

METHODOLOGY: Analytical Framework/Model

• Age
• Religion
• Interest
• Distance of FSP
• Repayment Period
• Income
• Financial Literacy
• Collateral
• Restrictions in the legal and regulatory environment
• Loan covenants and information requirements
• Availability of other types of loan (friends, equb, family

etc…)

Reception

Preference of Preference of FSPs

Welfare

Modified from Bhuvana and Vasantha ,2016

METHODOLOGY: Analytical Framework/Model

Dependent Variables (DVs) DV1: Youth reception of Financial Services (financially included or excluded) –Using Binary logit DV2: Youth preferences for financial services Providers-Using mlogit List of independent variables: Age, Religion, Cost of capital (Borrowing IR),Distance of FSP, Repayment Period Income Financial Literacy Collateral Regulatory and legal environment restrictions Loan covenants and information requirements Loan Size Availability of other types of loan (friends, equb, family etc…) FSP Technology utilization

METHODOLOGY: Sources of Data

CBMS core household profile questionnaire and rider questionnaire in areas of financial inclusion and entrepreneurship has been used Census data collected from youth living in Addis Ababa and Shirka wereda

RESEARCH FINDINGS

Title

Research Question Findings Based on Analysis of Data

W hich factors of inclusive finance have an effect on youth’ (male and female) financial service reception and preference?

• Financial literacy, technology utilization, age and

informal access to informal FSPs has positive and significant effect on financial inclusion(Specific to saving and remittance).

• Interest,

strain in religion has negative and significance effect on financial inclusion(specific to saving and remittance)

• Particular

to female youth financial literacy, regulatory envt, technology, age and inforaccess has positive effect on FI.

• Whereas religion has negative effect
• Specific to male youth financial literacy,technology

,age has positive effect on FI

• Whereas religion has negative effect

RESEARCH FINDINGS

Title

Research Question Findings Based on Analysis of Data

W hat is the level of youth (male and female) financial inclusion in the study area?

• Among the total 4928 of youth population

in the three project areas, 1709(34.68%) of them have received financial services (financially included) from formal financial institutions in the past 12 months.

• W hereas, 3219(65.32%) of them have not

received any financial services (financially excluded) in the specified period.

• W ith

regards to gender

• f

the youth financial inclusion, 806(37.70%)

• f

male youth are financially included and 903(32.37%) of female youth are financially included.

RESEARCH FINDINGS

Title

Research Question Findings Based on Analysis of Data What is the level of youth (male and female) entrepreneurship in the study area?

• From the total 4,928 youth population in the project

sites, only 195(3.63) of them have their own business while 4,733(96.37%) of the youth have no their own business.

• With regards to the gender, 110(4.22%) of male and

85(3.18%) of female youth have their have their own business while 2028(95.78%)

• f

male and 2,705(96.82%) of female youth have no their own business. What is impact of being financially included on welfare

• f youth (male and female)?
• An individual who is financially included or getting

services earns 16676.51 Birr per annum more than those who are not. The impact is statistically significant at 1 percent.

• Specific to female youth, financial inclusion attributes

additional 17883.47 birr per annum. Hence those female who are financially included earn 17883.47 birr more per annum than those who are not included.

RESEARCH FINDINGS

Title

Research Question Findings Based on Analysis of Data

Does involuntary financial exclusion exceed voluntary exclusion among youth (Male and female)?

• Voluntary

exclusion: Religion

• r

no promising

• investment. (Amidzic et al, 2014)
• All the rest factors stated in the model are involuntary

exclusion factors except religion

• In case of saving, the effect of both voluntary and

involuntary is observable and highly significant.

• In case of remittance, all effects came from involuntary

factors like interest rate, regulatory environment etc…

• In case of loan or credit, only involuntary factor has an

effect on financial inclusion W hat are the factors determining entrepreneurial engagement?

• Education

status, location, famsize,entrepreneurial training has positive effect

• Access to informal FS

Ps and employed has negative effect

CONCLUSION: KEY FINDINGS, POLICY IMPLICATIONS AND RECOMMENDATIONS

Title

Key Findings Policy Implications Recommendations

1.Technology utilization

• f

the youth has an impact on the level of financial service provision. Policy was not effective in

• bliging FS

Ps to incorporate new technology . More technologies should be introduced to the financial services market. 2. Religion and culture affects the participation of youth in financial service provision Policy makers did not enforce FS Ps to compromise their service with existing religion and culture scenario Establishment

• f

religion tailored services will be helpful Ex: Interest free banking and Islamic Bank

CONCLUSION: KEY FINDINGS, POLICY IMPLICATIONS AND RECOMMENDATIONS

Title

Key Findings Policy Implications Recommendations

3.Gender disaggregated regression shows that the effect of financial inclusion is high and significant on female youth than male youth.

S pecial attention is not given to female youth S pecial loan service with less interest rate and free

• f

pledging fixed asset as collateral should be delivered. 4.The entrepreneurial engagement in the study area is very low. S pecial attention is not given for youth particular to financing them. N eed based financial training should be provided to late aged youth

CONCLUSION: KEY FINDINGS, POLICY IMPLICATIONS AND RECOMMENDATIONS

Title

Key Findings Policy Implications Recommendations

5.Access to informal financial sectors has positive effect to be financially included towards formal financial service providers. Informal financial sectors need due emphasis. Collaborative work among informal and formal FS Ps will contribute best. 6.The incapability of pledging collateral attributes negatively for the youth to be in the higher hierarchy of financial service utilization. Pledging collateral is bottle neck for loan provision Pledging movable and less value assets as collateral contributes a lot

PROPOSED STRATEGIES:INSTITUTIONALIZATION OF CBMS IN THE COUNTRY AND IN THE LOCALITY

• Collaborative

work with local statistics and country statistics bureau is fundamental

• Sharing existing data with localities
• Making local statistical personnel to be part of CBMS project
• Conducting

awareness creation conference with representatives

• f

the community.

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THAN K YO U!

PRO J ECT CO N TACT IN FO RMATIO N N AME O F IN STITUTIO N :ARSI UN IVERSITY ADDRESS:ASELLA,ETHIO PIA CO N TACT N UMBER/S:0913769262/0967268448 E-MAIL:DEGUKETEMA@ GMAIL.CO M O R ABELMGT2000@ GMAIL.CO M