Ethiopia’s financial institutions are coming under scrutiny for failing to provide adequate support to the country’s youth, particularly in the face of soaring interest rates and stringent loan requirements. The challenges have made it increasingly difficult for unemployed youth to access the financing they need to organize and improve their socio-economic situation.
Experts have pointed out that the current financial landscape is not conducive to youth-friendly financial services. Existing institutions often impose restrictive terms on loan products, including high-interest rates, large collateral requirements, and limited loan amounts, which exclude many young people from the financial support they desperately need.
In response to this, alternative solutions are being sought. One such initiative is the establishment of Youth Savings and Credit Cooperatives (Youth SACCOs), which aim to provide more accessible financial services tailored to the needs of young people. These cooperatives are youth-led, youth-owned, and youth-managed, offering a promising model for empowering the younger generation to take control of their financial futures.
The success of these cooperatives has been notable. For instance, the Youth SACCO branch in Adama, established only a few years ago, has made significant strides. The cooperative has provided 5.8 million Birr in loans to its 60 members and has already collected over 4.8 million Birr in the current fiscal year. This success story is inspiring many other unemployed citizens to join the movement and transform their lives through collective financial empowerment.
Youth unemployment in Ethiopia, particularly among those aged 15 to 24, remains a pressing issue, with the rate estimated to be around 5.58% in 2023. This demographic is particularly vulnerable to economic instability, and the lack of access to financing exacerbates their challenges.
To address this, significant initiatives have been launched. In March 2022, Amref Health Africa, in partnership with other organizations, introduced a five-year, $60 million integrated youth action program called ‘Kefta’. Funded by the United States Agency for International Development (USAID), the program is designed to benefit at least 2 million young people from various backgrounds across 18 metropolitan areas in Ethiopia.
A key component of the Kefta initiative is the provision of funding and low-interest loans to youth groups and coalitions. The project has allocated $10 million specifically for the establishment of Youth Savings and Loan Cooperatives (SACCOs). These cooperatives offer low-interest loans to young people who are looking to start or expand their businesses, providing a critical financial lifeline that traditional institutions have failed to offer.
Kefta Integrated Youth Action is a comprehensive project aimed at promoting the economic, civic, and social development of Ethiopia’s youth. Through partnerships with local civil society organizations and international agencies, the project seeks to empower young people to overcome the financial barriers that have long stifled their potential.
Despite these positive developments, the broader challenge remains: Ethiopia’s financial institutions must do more to support the nation’s youth. As the success of initiatives like Youth SACCOs and Kefta shows, there is a pressing need for more inclusive and accessible financial services that cater to the unique needs of young people. Without these changes, a significant portion of Ethiopia’s population may continue to struggle to achieve economic stability and personal growth.
