REPORT: Exploring the Linkages Between Youth Financial Inclusion and Job Creation, Dec 2016

Justin Sykes, Sara Elder, Yonca Gurbuzer and Marco Principi
The MasterCard Foundation & International Labor Organization
Resource Type: 
Publication Date: 
Oct, 2016

With youth demographic bulges, existing high levels of youth underutilization and limited job creation occurring in many developing countries, governments and development actors are actively exploring new approaches to enabling youth to obtain sustainable livelihoods. There is a growing consensus that increasing the ability of youth to access financial services and strengthening their ability to use these services for their future life needs can play a direct role in supporting the transition to employment and better livelihoods. This report seeks to determine the extent to which this consensus is borne out in practice. Specifically, the report takes stock of existing research and examines new evidence, in an effort to promote a better understanding of the linkages between levels of financial inclusion among youth and their successful integration into the labour market through wage jobs and self-employment. It is anticipated that insights from this study will augment the small but growing body of research on the subject.

This report was commissioned by the ILO’s Work4Youth (W4Y) project, a partnership between the ILO Youth Employment Programme and The MasterCard Foundation. The primary objective of the partnership is to produce more and better labour market information, specific to youth in developing countries, focusing in particular on transition pathways into the labour market. The project is built around the implementation and analysis of the ILO’s school-to-work transition surveys (SWTS) – household surveys targeting the youth population (aged 15 to 29) now available for 34 countries worldwide.

The broadly accepted definition of financial inclusion (see box 1) focuses on a holistic approach to the subject that incorporates not only physical access to financial services, but also regulatory issues and client-related capability issues, such as financial education. For the purposes of this study, however, the focus will be on youth access to financial services.

Moreover, in this report financially included youth are considered to be those who have access to formal financial services (banks, money transfer operators, insurance companies and microfinance institutions, as per the categories used in the SWTS).3 This definition is consistent with the definition of access to finance and financial inclusion used by the World Bank/the Consultative Group to Assist the Poor (CGAP) (see section 2.1) and also accords with the ILO’s approach to youth financial inclusion, which focuses on supporting youth in accessing formal financial channels (see sections 2.1 and 2.2).

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Workforce Development