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. If you'd like to support that research effort, please reach out.
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.
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.
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.
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:
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.
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:
To learn more, explore the full youth deep dive here.
The Learning Lab works to identify and share knowledge relevant to our learning agenda and our users, but also to create new knowledge through research and facilitated learning. Original content from the Learning Lab includes news about the Lab, analyses we've conducted, knowledge products we've created, and posts we've written about other relevant initiatives.
ISF is an advisory group committed to transforming rural economies by delivering partnerships and investment structures that promote financial inclusion for rural enterprises and smallholder farmers. Combining industry-leading research with hands-on technical expertise, ISF develops practical, profitable, and sustainable financial solutions.
This research was made possible through support from the U.S. Government's Feed the Future initiative.
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