Panel at Midi de la microfinance discusses support for young entrepreneurs
On 20 April, representatives of the inclusive finance sector came together at Banque de Luxembourg for ADA’s first Midi de la microfinance et de l’inclusion financière since the pandemic. A high-level panel debated how best to support young entrepreneurs in developing countries in increasing their contribution to the economy.
The panel was moderated by inclusive finance specialist Gerhard Coetzee and consisted of the Luxembourgish Minister for Development Cooperation and Humanitarian Affairs Franz Fayot, ADA Chairman Patrick Losch and Dr. Alfred Hannig from the global policymaking and regulatory network Alliance for Financial Inclusion.
Support for young business owners key to reducing unemployment and poverty
Fostering youth entrepreneurship is key for developing countries to address unemployment and to maximise young people’s contribution to the economy. However, while young start-uppers are well supported in Europe, they face significant challenges in developing countries.
While most Luxembourgish banks have dedicated start-up services, few financial service providers in developing countries understand and adequately serve young business owners. Young entrepreneurs are seen as high-risk clients because of their limited credit histories and lack of assets to offer as collateral. They therefore often depend on savings or money from friends and family to start and grow their businesses.
Another challenge is a general lack of business skills as there is too little business development support and professional training in most countries. Nevertheless, financial and accounting skills are essential for growing a business and for being granted and managing a bank loan. Young people also need appropriate training to take advantage of new opportunities in renewable energy, agroecology, and the circular economy.
ADA offers young entrepreneurs financial and business development support
Providing financial and non-financial support for youth entrepreneurship is therefore a strategic focus area of the Luxembourgish Directorate for Development Cooperation and Humanitarian Affairs and ADA. Over the coming years, ADA aims to develop innovative financing mechanisms adapted to young entrepreneurs’ needs, such as flexible, revenue-based loan repayment schemes, guarantees and longer, medium-term loans. These measures all reduce the risk of non-repayment of loans as the entrepreneurs are granted more flexibility and more time while the lenders are reassured thanks to local, state-backed repayment guarantees.
While ADA traditionally worked with microfinance institutions, we are now extending our collaboration to incubators and other business development hubs to ensure young entrepreneurs not only have the financing but also the managerial expertise and soft skills they need to grow their businesses sustainably and independently. This financial and non-financial support will help young people in developing countries and their families to improve their quality of life and to play an active role in their communities.
The Midis de la microfinance et de l’inclusion financière gather representatives of the Luxembourgish inclusive finance sector for a panel discussion followed by a lunch reception. They take place several times a year in Luxembourg City from 12.00 h to 14.00 h. The debate can also be followed live online. This last edition was organized by ADA with the support of the Luxembourgish Directorate for Development Cooperation and Humanitarian Affairs and the InFiNe.lu network, in collaboration with Banque de Luxembourg.