‘If the young are not initiated in the tribe, they will burn down the village just to feel the warmth.’
This African proverb is one of the most powerful and relevant of our time given the demographics of booming youth populations in the developing world, aging populations in the developed world and all the inter-generational inequality this brings about. Simply put, if the young are not given a stake in society then they will have nothing to lose in burning it down.
Whilst there are different drivers in the developed and developing world, the bottom line remains the same; without the proper financial inclusion of the youth there is a ticking time bomb of frustration, marginalisation and under investment.
A World Bank study in Africa found that 42% of people who joined rebel groups were motivated by a lack of jobs; a serious problem when you consider youth unemployment rates in the major Africa economies (South Africa 50%, Kenya 22%, Nigeria 13%). To look at it in a more positive way, if policy makers and businesses can find innovative ways of improving financial inclusion, education and employment opportunities for young people globally, then society will have less to worry about!
Africa is the only region of the world where the youth population is still growing and the growth rate can only be described as phenomenal. In 2015 there were 226 million people aged 15-24 in Africa, accounting for 19% of the global youth population. By 2030, this group in Africa is projected to have increased by 42% and by 2055 it will have more than doubled.
There is, without doubt, a drive on the continent to improve financial inclusion but it is almost entirely being driven by the private sector, both amongst corporates as well as start-ups. All of the major Retail Banks in Africa now have a strategy on appealing to the ‘un-banked’ (17% of the world’s 2 billion ‘un-banked’ live in Sub-Saharan Africa) and financially underserved segments of society whether they be the youth or women, who play a key economic role in most Sub-Saharan economies.
Much has been made of how mobile money and digital payment innovations have improved financial inclusion and the participation numbers are indeed impressive. The oft cited example of M-Pesa in Africa, which is going into its second decade now, is instructive. There are now 30 million users on the Continent (17 million in its home market of Kenya), last year they processed six billion transactions and some estimates suggest that 25% of Kenya’s GDP flows through the app. But, whilst digital payments systems like M-Pesa have undoubtedly made transfers more secure and accessible, the app is, in one sense, just a move to monetise airtime.
Rationalising payments can only do so much. What will really make a difference is credit and investment. First, credit needs to be more accessible to young people, both as individuals and business founders. As the economy becomes more tech-driven, the younger segment of society will have a greater role to play in everything from big corporates to small family businesses.
There is huge investment in fintech. In a recent study, KPMG stated that in Q1 of 2017 alone global fintech investments hit $3.2 billion. If more of these can focus on genuinely improving access to finance in Africa instead of simply facilitating remittances, then great strides will be made.
There are, of course, many areas we can go beyond simply improving access to credit. For example, pensions can be liberalised and retail investing made more accessible. These are areas undergoing huge change in the UK where efforts have been made to create the so-called ‘share-owning democracy’ and halt the decline in retail investing (in 1964 over 50% of shares were owned by private individuals but by 2010 this fell to less than 10%).
An example of a fintech firm in the UK that is looking to turn this around and specifically in favour of younger investors is Digital MoneyBox, an innovative app which rounds up all payments an individual makes and automatically invests the difference in tracker funds, so as little as £1 can be put to work. By making investing accessible to a generation who have until now perceived it to be beyond their means, Digital MoneyBox is helping to give young people an actual stake in society.
Africa has proven that it can take technical innovations to leapfrog forward, as it did with the widespread uptake in mobiles bypassing the need for fixed line infrastructure, so there is no reason to believe that this can’t happen with fintech.
Elsewhere, governments will need to play their part, both in improving education and employment opportunities as well as doing everything in their power to attract capital from PE and VC firms, Angel investors and Family Offices, and anyone who else who is prepared to take risk in backing start-ups in Africa. Countries such as Côte d’Ivoire and Rwanda, where they have strived to make it easier to do business, are already receiving the dividends of greater inward investment.
At Executives in Africa we have carried out a number of mandates for companies looking to have a positive impact on financial inclusion and youth employment. These include a Nigeria CEO Search for a leading Pan-African microfinance institution to the CEO of a mobile money business in Ethiopia.
We are also working closely with Andela, a visionary business which identifies the very brightest African talent, providing technical and business training for them to become world class software programmers to meet global demand for the significant shortage in this area. With the global economy currently being reshaped and increasingly defined by tech, the backers of Andela believe there is an opportunity for Africa to become the workshop of the emergent world.
Please contact James Adair, Executive Search Consultant at firstname.lastname@example.org to share your views on this article.