In 2019, ISF Advisors and RAF Learning Lab launched Pathways to Prosperity, a report about the state of the rural and agricultural finance sector. The report presents new, dynamic frameworks for accelerating progress toward closing the $170 billion smallholder financing gap. Recognizing the critical role they play in rural economies, the research included deep dives on engaging both women and youth in achieving inclusive agricultural transformation. In this blog, we share key learnings from the youth deep dive.
A NOTE ON COVID-19: The emergence of COVID-19 in the past three months has the potential to dramatically affect young people’s transitions due to: (1) a loss of employment, (2) a return to on-farm activities, and (3) shifting household dynamics as a result of illness in the family. While we don’t directly address these dynamics in this piece, the youth deep dive provides a stong baseline from which to consider how COVID-19 will likely affect rural youth. Over the coming months, the Lab in collaboration with ISF Advisors will be launching an Emergency Briefing Series on COVID-19 which will consider rural youth livelihoods.
The global youth challenge
Of the 1.2 billion young people (aged 15-24 years) in the world, 1 billion live in developing countries. About half of this youth population resides in rural areas. Despite shrinking population growth rates across the globe, in low-income countries the youth population is growing rapidly. This is the largest demographic challenge and opportunity of our time. While more young people are seeking to enter the workforce, youth unemployment is three times higher than it is for older adults. For youth in rural areas, agriculture is still the primary source of employment—though mainly informal. In sub-Saharan Africa alone, over the next five years it is expected that most youth will work on family farms and in household businesses; only one in four will find waged employment, and a fraction of those jobs will be in the formal economy. That’s why it’s vital to support rural youth in undertaking viable livelihoods strategies.
The rural transition pathways model and how it relates to youth
In the Pathways to Prosperity report, we introduced a new framework (seen above) for understanding and segmenting rural households. This rural transition pathways model describes a series of predictable development trajectories for smallholder households as they pursue resilience and agency through various livelihood strategies. The model moves us from a static understanding of smallholder households based on their characteristics at a particular moment in time, toward a dynamic view of how households might evolve as they move along the different pathways.
The pathways model can help financial service providers determine the right engagement for their rural customers at the right time. But given the unique position of youth in the rural economy, providers must layer on an understanding of their specific needs and challenges. At a foundational level, young people have the same set of rural transition pathway options as older populations. But, based on their unique life stage, skills, networks, and assets, youth have different needs, opportunities, and challenges that may lead them to transition differently through the rural pathways model.
Unique challenges for rural youth
Young people face many of the same challenges that are experienced by the broader rural population: the challenging economics of smallholder farming and agricultural value chains; relatively underdeveloped rural markets and services economies; limited financial resources available for entrepreneurship and investment; limited market access opportunities; and an often weak enabling environment. However, they also face a number of additional challenges and service requirements that providers must address.
Mobility: Youth tend to be more mobile than older adults, moving between urban and rural areas, between various kinds of formal and informal employment, and inside or outside of agriculture.
Urban migration: That higher level of mobility is associated with higher levels of urban migration, driven at least in part by perceived and actual limited opportunities for employment in rural areas. A study in 29 countries found that rural youth are 40% more likely than older adults to migrate to urban areas.
Assets: Relative to older adults, youth are significantly less likely to own or manage agricultural holdings and medium or large rural enterprises. This is often due to a variety of interlinked factors, including lack of access to financial resources (often due to lack of collateral), as well as legal and communal land ownership restrictions.
Family of origin: The familial starting point of youth has a very strong impact on their livelihood trajectory. Recent research found that youth born into farming households are most likely to end up being employed in farming, while the opposite holds true for youth born into non-farming households.
Gender: Opportunities to accumulate human capital, build social networks and access assets are highly gendered, which means that young men and women often accumulate vastly different amount of these resources. The result is that rural young women often lag behind men in educational attainment, asset ownership, economic participation, and productivity. Social norms can also influence youth’s transitions between pathways. As young men transition into adulthood they may find that income-generating opportunities increase along with expectations of their role as main breadwinners, whereas doors begin to close for young women as they transition into adulthood and are increasingly expected to take on the role of child-bearer and caretaker. For more information about how to understand women’s rural transitions and service needs, see our previous blog post.
With this broader context in mind, it is possible to consider how these youth-specific dynamics play out in different rural transition pathways.
Serving youth through a pathways lens
In order to create opportunities for youth, services need to match the demographic changes and challenges faced by youth based on the pathway transitions they are pursuing. The pathways model is an effective framework to better analyze and map out service provision opportunities for any rural customer, including rural youth in different life stages. Using this approach, providers can optimize service delivery for young people moving through each pathway:
- Service providers targeting youth in subsistence farming households (pathway 1), should provide products that meet the broader needs of these households (e.g., non-agricultural finance products, agronomic training, and input financing and subsidies). Recognizing that youth are some of the first adopters of innovative practices and technologies, providers can also engage youth in driving farm professionalization. For example, SNV in Uganda trains ‘young model farmers’ to demonstrate the potential of farming as a business and provide lessons to their peers.
- For emerging youth farmers that are actively seeking out growth opportunities to improve their family farms (pathways 2 and 3), a number of service adaptation approaches exist. Youth need tailored financial products to allow them to purchase or lease land, as well as access to more complex farming inputs and assets, such as farming technologies and equipment (e.g., harvesters, tractors, irrigation). This may take the form of microfinance institutions or fintech players, such as FarmDrive, targeting youth with adapted financial products.
- Many youth seek entrepreneurial opportunities in the rural services provision space (pathway 5), either formally or informally. Entrepreneurial opportunities for youth can be a valuable channel to build experience, capabilities, and capital. Numerous service providers exist in this space, meeting service needs around start-up capital, capacity building (especially around business skills), and identification of the right opportunities. One example is the Social Investment Accelerator, which provides mentorship, financing, and networks for youth entrepreneurs across Africa.
- For youth working in rural areas (pathway 6), securing consistent employment can be challenging due to a general lack of rural non-farm employment opportunities. Youth typically face challenges in accessing information on the labour needs of rural service providers and understanding and finding off-farm employment opportunities. Service providers like Harambee, a nonprofit social enterprise in Rwanda and South Africa, partner with the private sector to train youth in response to demand.
It should be noted that Pathways 4 and 7 are excluded from the analysis in this deep dive. Youth are highly unlikely to have access to the resources needed to own larger farms or rural enterprises (pathway 4). However, efforts to support other farmers and business owners in pathway 4 can have significant implications for youth by spurring broader economic development in rural areas. While pathway 7 (urban migration) provides opportunities to youth that might not be available in rural areas, these service needs and delivery examples are outside the scope of this deep dive.
What comes next?
The issue of youth livelihoods in rural areas will become an increasingly important one in the years to come. Building on the broader impact investment theses and concepts in the Pathways to Prosperity report, we believe there is an opportunity:
- For practitioners and thought leaders to deepen research into the unique needs and challenges of youth as they pursue different livelihood pathways;
- For existing service providers to put a youth lens on their service provision that takes into account these challenges and dynamics;
- For governments, donors, and NGOs to further innovate multi-stakeholder or multi-dimensional programs that deal with youth-specific challenges in a way that is closely linked to more structured employment and livelihood opportunities.
To learn more, explore the full youth deep dive here.