CBMS PROJ ECT TITLE: DETERMINANTS OF FINANCIAL INCLUSION FOR YOUTH ENTREPRENEURSHIP: EVIDENCE FROM ADDIS ABABA CITY AND SHIRKA W EREDA 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).
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 of 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 Reception Distance of FSP Repayment Period Welfare Income Preference of Preference of Financial Literacy FSPs Collateral Restrictions in the legal and regulatory environment Loan covenants and information requirements Availability of other types of loan (friends, equb, family etc…) 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 Research Question Findings Based on Analysis of Data • Financial literacy, technology utilization, age and W hich factors of inclusive finance have an effect on informal access to informal FSPs has positive and youth’ (male and female) financial service reception and Title significant effect on financial inclusion(Specific to preference? 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 Research Question Findings Based on Analysis of Data • W hat is the level of youth (male and female) Among the total 4928 of youth population financial inclusion in the study area? in the three project areas, 1709(34.68%) of Title 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 of the youth financial inclusion, 806(37.70%) of male youth are financially included and 903(32.37%) of female youth are financially included.
RESEARCH FINDINGS Research Question Findings Based on Analysis of Data What is the level of youth (male and female) • From the total 4,928 youth population in the project entrepreneurship in the study area? sites, only 195(3.63) of them have their own business while 4,733(96.37%) of the youth have no their own Title 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%) of male and 2,705(96.82%) of female youth have no their own business. • What is impact of being financially included on welfare An individual who is financially included or getting of youth (male and female)? 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 Research Question Findings Based on Analysis of Data • Voluntary Does involuntary financial exclusion exceed voluntary exclusion: Religion or no promising exclusion among youth (Male and female)? investment. (Amidzic et al, 2014) Title • 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 • Education W hat are the factors determining entrepreneurial status, location, famsize,entrepreneurial engagement? training has positive effect • Access to informal FS Ps and employed has negative effect
CONCLUSION: KEY FINDINGS, POLICY IMPLICATIONS AND RECOMMENDATIONS Key Findings Policy Implications Recommendations Title 1.Technology utilization of Policy was not effective in More technologies should be the youth has an impact on obliging FS Ps to incorporate introduced to the financial the level of financial service new technology . services market. provision. 2. Religion and culture Policy makers did not Establishment of religion affects the participation of enforce FS Ps to compromise tailored services will be youth in financial service their service with existing helpful Ex: Interest free provision religion and culture scenario banking and Islamic Bank
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