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Challenges and opportunities for Kenyan women from the gig economy in the digital age

Posted on by M1croSave!2025

Introduction

Jane, a freelance transcriber from Nairobi, Kenya, said, “I have a small kid and a husband, and I have to take care of them. My husband is also a freelance transcriber.

Jane is among the many gig workers who work in the informal gig economy across Africa. The gig economy and the “platformization” of labor have transformed Africa’s employment landscape. A Mastercard Foundation study revealed that Africa’s gig economy has been growing at an average annual rate of 20% and is expected to reach 80 million gig workers by 2030.

However, evidence from a recent study of 314 online gig workers revealed that the participation of female workers in Kenya’s gig economy remains low at 28%. Other studies on gig workers in Kenya and elsewhere concluded that about 60% of gig workers in these countries were men. The studies also revealed that women were more likely to exit the gig economy. This is mainly attributed to societal norms, working conditions, and occupational barriers, which limit their participation in gig work.

This blog explores the gig economy’s significance for Kenyan women. It explains how the gig economy offers them flexibility and economic empowerment. It also provides concrete interventions and approaches to address the digital skills gap that hinders many women’s participation in this evolving job market.

Can we rewrite this as “So, if both of us transcribe, he has more time to work and concentrate than me.” addressed.

Kenya’s gig economy landscape

Kenya’s gig economy has rapidly expanded due to the emergence of digital work platforms. These platforms have transformed how people work and created alternative economic opportunities. A study by Mercy Corps anticipated the online gig economy to grow at an annual rate of 33% and be valued at USD 345 million in 2023. By the end of 2022, about 1.9 million people were already engaged in online gig work and digitally-enabled jobs, up from 638,000 in 2019, per the MCF-KEPSA report, 2022. The World Bank projects that Kenya’s digital economy is expected to grow to USD 23 billion by 2025 and create thousands of new jobs.

Kenya hosts various gig platforms, which range from Upwork and Fiverr to local players, such as the Ajira Digital program. As per the Kenya Private Sector Alliance (KEPSA) 2020 study, 1.2 million Kenyan adults now engage in gig work, particularly in the tech industry. Platforms, such as Uber, Lyft, Grubhub, DoorDash, and Fiverr, have become essential for gig workers. Hence, the present and future of work in Kenya will involve workers who participate in various gig-work activities with different levels of formality and high flexibility.

Challenges for Kenyan women in the gig economy

As Kenya continues to embrace the gig economy through a flexible and dynamic platform for different job opportunities, women face unique challenges that significantly impact how well they participate in this evolving landscape. We have identified the different challenges Kenyan women face in the gig economy below:

    • Limited access to technology: The GSMA report highlights a 38% gender gap in mobile Internet use. 54% of women who lack mobile devices cite affordability as the primary barrier. Many gig opportunities rely on digital platforms, but a gender-based digital divide persists due to women’s limited access to smartphones, unreliable Internet, and affordability issues. This limits how well they can integrate into online gig platforms and hinders their participation in the digital workforce.
    • Societal norms and cultural barriers: Deep-rooted societal norms and cultural expectations often restrict Kenyan women’s choices of gigs. Traditional gender roles may discourage women’s participation in certain types of work deemed more suitable for men. This limits the diversity of opportunities available to them. MSC’s research in Kenya highlights that women were more involved in traditionally female-oriented jobs, such as hairdressing, beauty services, and housekeeping. Women take up these roles because of their familiarity with the line of work, their risk-averse nature, and societal norms. Men in the gig economy were more involved in jobs, such as delivery, construction, driving, and home repairs.
    • Safety concerns: Women in the gig economy are more concerned about their physical and online safety. Some gig jobs require female workers to meet clients or work in unfamiliar locations, which exposes them to potential risks. Moreover, online platforms may lack adequate mechanisms to address harassment and discrimination, which further compromises female gig workers’ safety. The threat of sexual harassment is high in situations where the gig requires face-to-face interaction.
    • Lack of social protection: Gig workers often lack the traditional employment benefits and social protection enjoyed by formal sector workers. This absence of a safety net is particularly challenging for women who may face additional vulnerabilities. Per the World Bank, women’s labor force participation in Kenya in 2022 was 74%, but women were paid 32% less than men on average. The lack of maternity benefits, healthcare coverage, and pension plans puts women at a disadvantage and impacts their long-term financial security.

The gender gap in digital skills: The lack of digital skills is a major obstacle to Kenya’s economic progress. It hinders businesses’ competitiveness and productivity because businesses lack workers with the necessary tech skills to meet the digital economy’s demands. This gap is particularly pronounced, as only 35% of women use advanced digital services compared to 54% of men.

The government and digital platforms must address the challenges Kenyan women face in the gig economy to ensure an inclusive and equitable future of work. With the gig economy’s growth, policies and initiatives that promote digital inclusion, dismantle gender stereotypes, and establish fair labor practices must be implemented. Kenya can harness the full potential of its 49.7% female workforce if it shapes a technologically advanced, socially just, and inclusive future of work. The challenges women face in the gig economy need to be resolved to unlock the nation’s full economic potential.

Sustainable support for Kenyan women in the gig economy

Sustainable interventions for women in Kenya’s gig economy can focus on several key areas that enhance their digital literacy and access to technology and enable them to navigate online platforms effectively. Targeted skill development programs that cater to the gig industry’s demands can empower women to diversify their opportunities and increase their income. Moreover, the promotion of inclusive policies and fair labor practices can create a more equitable and secure environment for Kenyan women in the gig economy. The following figure details MSC’s recommendations that provide such sustainable interventions.


Figure 1: High-level recommendations that provide sustainable interventions for Kenyan women in the gig economy

Conclusion

Many Kenyan women and girls are not fully engaged in gig work despite the opportunities in the gig economy. As work transitions online, gender-based factors are likely to exclude women and girls from the job market. The government and other stakeholders must promote gender inclusivity through relevant affirmative policies. They must strengthen current labor laws and regulations around social protection, equal employment opportunities, and labor standards for gig workers.

Awareness of women’s experiences on digital labor platforms in multiple sectors of the economy can build evidence of the emerging opportunities to ensure decent working conditions. Policymakers and platform companies should play a central role to provide high-quality work. They must also improve economic security, support unpaid work, increase worker’s control over schedules, ensure their safety, and base policy and practice on worker preferences, which requires collective action.

Please also see MSC’s previous work on women in the gig economy, which offers insights, solutions, and recommendations to promote gender inclusivity in the gig economy.

Digital platform cooperatives: A step closer to equality and inclusion?

Posted on by M1croSave!2025

Authored by Jenifer Shapiro and Mohit Dave, Head of Partnerships and Resource Mobilization for the International Cooperative Alliance, in affiliation with the regional office in Asia and Pacific. Mohit is also a fellow at the Platform Cooperative Consortium housed at The New School in New York City. Mohit has shared his personal views and comments, which may not necessarily represent the views of the organizations with which he is affiliated.

The Emergence of Gig Platforms

When ride-hailing giants Uber and Lyft emerged in the United States in the 2010s, they were viewed as a panacea for transportation. Around the same time, other gig platforms, which include those that specialized in food and grocery delivery, caregiving, accommodations, and freelance work, came to market. This disrupted traditional business models and put power in the hands of consumers as they offered competitive prices and on-demand services. Workers also benefitted from flexible schedules and the ability to make a side income. These digital platforms were not unique to just the US and Europe, as the same platforms or others with similar business models, rolled out services in the Global South.

Yet, the initial hopes that platform work would improve the overall livelihoods of unskilled workers in the Global South, and worldwide for that matter, remain unfulfilled. Researchers have witnessed increased worker exploitation, a lack of social protection mechanisms and governing regulations, an increased gender divide, and inconsistent and uncertain wages for those who engage in platform work. What was once deemed an avenue for unskilled workers to climb out of poverty is increasingly viewed as work that exacerbates inequality and exclusion. Many of these outcomes are attributable to the for-profit business models adopted by digital platforms. This model has a winner-takes-all attitude, driven by deep-pocket investors, shareholder growth, and profit optimization, often at the workers’ expense.

A focus on the Worker – Digital Cooperative Platforms

Several efforts have emerged to rectify the negative consequences of platform work on workers’ lives. These include the creation of worker-centric platforms, the emergence of spaces to rate gig platforms against principles of decent work, such as Fairwork, advocacy for better working conditions, and knowledge dissemination on best practices in the area led by organizations, such as the JobTech Alliance.

Such efforts have been helpful. Yet, a burgeoning movement has emerged that addresses the lack of democratic and transparent values inherent in venture-backed commercial digital platforms.

The Platform Cooperative Consortium (PCC) is a leader of this movement. The PCC strongly advocates for the adoption of cooperative principles that include shared ownership and democratic governance, human-centric platform design, transparent and open-source development, and open data. It believes that platforms that adhere to these cooperative principles will give rise to higher quality jobs, lower worker turnover, privacy and transparency, and fair pay, among other positive benefits for those who work for the platforms.

The PCC and its associated digital cooperative movement have gained momentum, partly through its annual conventions. However, the transition from private digital platforms to cooperatives or the launch of cooperative digital platforms has had its challenges. Some pressing challenges are outlined in detail below.

Scalability: The hyperlocal nature of cooperatives often runs counter to the concept of scaling. Many cooperatives are borne out of identities closely tied to local values and their environments. This makes growth, expansion, the accommodation of a wider range of member identities, and applicability in other markets more challenging.

MSC, through its work in India’s Bihar state with the Bihar Rural Livelihoods Promotion Society (BRLPS), also known as JEEViKA, supports farmer producer companies (FPCs)—a form of a cooperative. MSC’s support enhances the FPCs’ governance models, helps them realize better prices, and digitizes their value chains. Through this work, we have recognized the inherent difficulties FPCs face when they attempt to grow, scale, and digitize. Federated platforms have emerged as an alternative to overcome such scaling hurdles. They allow the cooperative to remain small, local, and sustainable. At the same time, it benefits from the strength of joined forces with several platforms.

SEWA Cooperative Federation in India adopted the federated model, which proved useful. Another example of such adoptions is AMUL, the marketing apex organization of the Dairy Cooperatives of Gujarat. Some cooperatives have not adopted a federated model yet scaled successfully, at least on a pan-India level. Such cooperatives include ULCCS, India’s oldest worker cooperative, with roots in Kerala.

Digital platform cooperatives, however, allow a relaxation of the hyper-localness to which their non-digital brethren are tied. Their digital nature naturally lends them to larger markets. This holds if the cooperative members are not limited in terms of access to digital platforms and the skills to use them. Limited access to platforms and a lack of digital literacy have challenged rural women’s cooperative members in Indonesia, who lack information, resources, and digital tools. Typically, they are small-scale and semiformal and often fall behind amid the charge toward digitalization. Therefore, such cooperatives require mentors or ambassadors from the cooperative community to shepherd other members through digitization.

Regulations: The lack of policies and regulations that govern digital platforms in the Global South often leads to the types of worker exploitation highlighted above. However, there appears to be a lot of promise at the municipality or city government level to create an enabling ecosystem for cooperatives in the digital economy. Currently, the International Cooperative Alliance conducts research in Chennai to determine the levers policymakers can use to facilitate environments that help digital platform cooperatives sustain and grow.

Beyond the municipal level, states, such as Kerala in India, have a fertile backdrop for digital cooperatives to thrive. The state’s policies promoting technology adoption, its higher-than-average national literacy rates, and its worker-centric government make it conducive to digital cooperatives. The Auto Savari app, registered under the Ernakulam Jilla Auto Drivers Cooperative Society in Kerala, is a digital cooperative platform that has recently emerged as an alternative to ride-hailing apps, such as Uber. State or national-level laws that allow transnational digital cooperatives to expand beyond their borders are beneficial. Examples of such cooperatives that have benefitted from cross-border expansion include Smart, based in Belgium, which addresses the administrative nuances that freelance workers face, and MyCoolClass, an online teachers’ cooperative domiciled in the UK.

Capital raising: Investors chase returns, so in the case of platform cooperatives whose business models are the antithesis of pure play capitalism, the scope for significant returns over a short time frame does not exist. Additionally, other modes of capital raising, which include business loans and crowdfunding, are difficult for digital platform cooperatives as they struggle to compete with private tech companies that offer big payouts. The shortage of capital hinders digital cooperative platforms from attracting the best talent and technical expertise. This limits further investment into the platform for growth, which makes it hard for cooperative platforms to compete with their privately owned counterpart.

That being said, fundraising is not impossible, as was recently proven in New York City, where a driver-owned Uber alternative crowdfunded approximately USD 1 million. The cooperatives’ member-owners must recognize that attracting capital will take longer. They may have to rely on various capital sources while they target investors who do not fit the mold of traditional venture capitalists such as a combimation of impact investors and crowdfunding.

Digital platform cooperatives present an opportunity for workers to control the direction their businesses take alongside a host of other advantages, many of which spill over to actors in the platform cooperative ecosystem. However, the transition to a digital platform cooperative model has not yet been extensively tested and thus far has presented the hurdles outlined above. With ingenuity, patience, and innovation, such challenges are worth tackling, as they can provide fair working conditions to the millions of workers who rely on digital platforms for their livelihoods.

Locked out of homeownership: Exploring the challenges of accessing affordable housing finance in Kenya

Posted on by MSC

Jane is a single mother who works as a casual laborer and receives a weekly wage of KES 4,000 (USD 27). She dreams of a better home for her family. She has tried to secure a housing finance loan from different financial institutions, but her efforts have been in vain. Her unstable income, lack of bank account, lack of a title deed, and absence from any formal group have created insurmountable hurdles to obtain housing finance. Jane represents the 60% of the Kenyan urban population compelled to live in informal settlements. Her story is one of many that highlight Kenya’s pressing issue of affordable housing.

Jane’s story reflects the challenges faced by many low- and moderate-income (LMI) Kenyans who cannot access housing finance. This underscores the national housing crisis and how affordable housing remains a distant dream for the majority. Stories of countless people like Jane highlight the need for systemic change in the housing finance sector.

Access to affordable housing could transform Jane’s and many others’ lives. Homeownership is more than a dream for LMI individuals—it represents economic empowerment, stability, and improved living conditions. For many, it means breaking free from poverty and offers far-reaching benefits, such as access to better education and healthcare and a secure future for their families. It is the cornerstone of a better life and a brighter future.

Affordable housing situation in Kenya

The LMI segment comprises a significant portion of the country’s population and desperately needs housing solutions. Kenya has been grappling with a housing deficit, with only 50,000 units supplied against an annual demand for 250,000 units. The demand for housing is particularly high in urban and peri-urban areas, where most low-and middle-income earners live. The rapid urbanization rate (3.7%) and the increasing number of people in the workforce are expected to increase the demand for housing finance within this segment.

In Kenya, a mere 11% of the population can afford a mortgage. Informal settlements are widespread in the nation. This often forces LMI individuals into substandard housing conditions. These settlements lack proper sanitation, access to clean water, and security. This makes life challenging for those who live there. Government-led programs and financial institutions have been working to make homeownership more accessible to the LMI segment.

Barriers to affordable housing finance

LMI households, such as Jane’s, are often confused about whether they should save for a home or meet their immediate needs. Most Kenyans spend almost 15% of their income on housing. The pursuit of dignified shelter in the absence of affordable housing finance risks the continuation of the poverty cycle. These households face systemic barriers in their access to affordable housing finance besides the effects of low- and unstable income. High interest rates, lack of collateral, and complex loan application and approval processes are just a few systemic challenges that LMI people face.

MSC helped Habitat for Humanity Kenya conduct a study to identify barriers to access and use of housing finance in Kenya. High interest rates and clearing costs were respondents’ most frequently cited challenges (50%). High construction costs and the rising cost of building materials were other significant challenges. Only 2% of newly built houses target LMI families, which drives up the mortgage costs beyond the reach of 89% of Kenyans. The prohibitively high costs to build or renovate a home and high financing costs keep current financial solutions unaffordable for most. The box below shows the barriers LMI people face.

The study underscores the importance of designing housing finance products that specifically cater to the LMI segment’s needs and financial capabilities.

Designing the right housing finance products

Product features play an overwhelming role in consumers’ borrowing decisions. MSC’s survey results indicate that convenience is a significant factor as individuals opt for solutions that are easily accessible and user-friendly. Affordability is another key driver of consumer preference, as borrowers prioritize solutions that offer low repayment amounts tailored to their financial capacity. Moreover, financial service providers who target and prioritize specific geographies, such as rural areas, significantly improve the level of access to housing finance LMI earners in those regions enjoy.

Delivery channels significantly impact the access and usage of housing finance. Delivery channels need to be hybridized to ensure greater reach and accessibility to housing finance as implemented in other sectors. This process combines traditional physical branches with digital platforms. Similarly, a well-designed and targeted marketing strategy significantly impacts the awareness, perception, and usage of housing finance products. For example, Habitat for Humanity’s Terwilliger Center for Innovation in shelter has worked with financial service providers to help them design their branding and marketing strategies. This approach positions housing microfinance products as opportunities for LMI households to achieve their dream home in stages, through a series of successive loans tailored to their affordability.

Financial service providers can benefit immensely if they understand the LMI population’s unique needs and constraints. Although incremental construction for the LMI segment is mostly tied to housing microfinance, such as home improvements, the model can potentially extend to housing construction. Some SACCOs and MFIs offer micro-mortgages that adopt the incremental lending model. This approach tailors housing development to the borrower’s financial capabilities and generates a demand for previously non-existent loans.

These findings should drive the financial service providers to develop solutions that are easy to use, convenient, affordable, and tailored to their target customers’ needs. By doing so, they can increase the uptake and usage of their housing finance products and services and better serve their customers’ housing needs.

The untapped potential for home ownership within the LMI segment

Serving the LMI segment is a public policy imperative and offers a sound business case. The demand for affordable housing is undeniable. If we unlock the segment’s potential, it would bring several economic opportunities waiting to be tapped.

The untapped potential primarily stems from financial barriers that have traditionally hindered the LMI segment’s homeownership. Financial inclusion plays a pivotal role to make homeownership a reality for the LMI segment. Tailored financial products can provide necessary support, such as affordable mortgage options and down payment assistance programs. The Kenya Mortgage Refinance Company (KMRC) has enabled lending through savings and credit cooperative societies. It, thus, made homeownership more accessible for LMI households in Kenya.

Another common barrier to homeownership in the LMI segment is the perceived challenge to obtain credit. Mechanisms for fair credit evaluation and recognition of alternative forms of creditworthiness can empower individuals with limited credit histories. This inclusivity is not just a social imperative but also a key driver for economic growth within communities.

Our next blog explores the opportunities for donor investment in housing finance to promote financial inclusion.

Why are women entrepreneurs seeking mentors?

Posted on by MSC

Improving the ecosystem of innovation and entrepreneurship for women and men alike is one of the central goals of public policy. India improved its ranking from 16th in 2021 to 4th in 2023, among 51 countries surveyed by the Global Entrepreneurship Monitor (GEM). This ascent reflects a steady improvement in the country’s overall entrepreneurial environment. However, a gender gap in entrepreneurship persists, as entrepreneurship is tough and it’s tougher for women. Their constraints are amplified due to entrenched gender bias in social and economic systems, which has material consequences on their entrepreneurial journey.

Entrepreneurs need much more than money, they need customers, networks, peers, contacts, and knowledge. Our recent research suggests that experienced mentors are often the best way to get almost all of these.

However, the question is how many women entrepreneurs have access to such mentors? What has been their experience of seeking entrepreneurial mentorship and how does it accelerate their entrepreneurial journey?

In a recent study done by WEP and MSC, we find that only 25% of women entrepreneurs surveyed have access to entrepreneurial mentorship, and the majority (64%) are not aware of any mentorship programs for entrepreneurs. The concept of seeking formal mentorship support for business growth still remains an alien concept, especially for women entrepreneurs in smaller towns and cities. In some Tier II cities, active local women’s industry associations are key to regular troubleshooting for women’s businesses and come closest to being institutional mentors.

Family-based mentorship for women entrepreneurs plays a key role, especially among those who run an inherited family business. 24% of women entrepreneurs mention friends and family or relatives with business experience as their mentors. Women who lead their family businesses mostly receive mentorship from male family members.

Family-owned businesses remain the dominant form of business organization in India. More than 90% of all listed firms in India are family-owned businesses, but only 12% of them have second or third-generation owners who are women. Discussions with female family business owners who are mentored by family revealed a variety of experiences, which are primarily determined by how supportive male members of the family are.

Others state that the majority of them discover mentors through their peer networks and social media.

Women’s top expectation from mentors is to connect them with industry networks.

It pays to have networks is no secret. Women traditionally have less social connections and networks outside their family circles. Access to networks also varies based on your PIN code, income, and education level. An interesting research by Harvard economist Raj Chetty and his team finds that cross-class friendships are a significant key to upward mobility in America. It is no different in India, where access to networks outside your social circles can be instrumental in providing exposure, access, and opportunities.

Our experience from the Women’s Entrepreneurship Platform (WEP) also indicates that access to industry networks is a lifeline for an entrepreneurial journey, mentors bring access to diverse networks and opportunities apart from providing valuable psychosocial support and feedback.

Women with access to high-quality mentors shared their transformational impact on both business metrics and entrepreneurial ability.  72% of women entrepreneurs report an improved ability to understand risks and opportunities in their business. 67% report enhanced confidence.

It is not surprising that mentorship is considered one of the oldest and most influential tools of human development. History is packed with stories of famous mentor-mentee relationships that have shaped human civilization. However, in the context of entrepreneurship, it’s only with the explosive growth of the Indian startup ecosystem that recognition has increased for mentorship as an effective entrepreneurship development tool. Despite this, access to quality, structured, and formal mentorship for women entrepreneurs still remains a challenge. Incubators and accelerators dominate India’s mentorship landscape however only 3% of all incubators and accelerators specifically target women entrepreneurs and remain concentrated in few regions.

As per McKinsey, an additional 55 million women could enter the workforce by 2030 if their long-standing underrepresentation is at least partially corrected. Not all will be job seekers, many will be job creators. Speeding up India’s journey to a $5 trillion economy will depend on how best we can support women’s entrepreneurial ambitions.

Along with money, markets, and skills, enabling access to high-quality mentorship will have practical implications on improving the texture of the entrepreneurial journeys of millions of budding women entrepreneurs.

The article was first published in The Hindu Business Line on 28th November 2023.

Access to finance alone will not save youths from unemployment. What will? Part 2

Posted on by MSC

As our previous blog shows, youth unemployment in Africa is a multifaceted challenge—exacerbated by several factors, which include macroeconomic instability, educational mismatches, and social biases. These problems hinder young individuals’ potential and impede the continent’s economic and social development. They call for comprehensive solutions as diverse and complex as the problems themselves.

These solutions offer a roadmap to empower Africa’s youth, from policy reforms and educational alignment to breaking social barriers. We can turn the tide on youth unemployment and unlock Africa’s young population’s immense potential through environments conducive to job creation, skill development, and inclusive practices. This blog discusses how we can manage youth unemployment challenges in Africa, what has worked, and what lessons these experiences offer.

How can we address the youth unemployment challenge in Africa?

We must acknowledge that no one-size-fits-all solution can address Africa’s youth unemployment challenge. Different contexts require different approaches. Employment comes in two forms: Wage and self-employment. As per the World Bank announcement in October 2023, Africa has 12 million new young job seekers and only 3 million jobs. This gap of 9 million unemployed, which represents 75% of new young job seekers, will likely worsen if we do not take action, as the number of applicants could reach 100 million by 2030. This blog focuses on self-employment and entrepreneurship. It recognizes their significance to address the escalating youth unemployment crisis in Africa, given the widening gap between job seekers and available positions.

Youth employment in Africa cannot rely solely on scarce salaried jobs. This presents a significant challenge as relying solely on such jobs is not a viable solution for youth unemployment. Entrepreneurship is a credible alternative to tackle employment difficulties. However, this journey is filled with pitfalls, especially for young people who face numerous challenges to set up and develop their businesses. A frequently faced challenge is access to finance—the ability to obtain sufficient and accessible funds to launch, manage, and grow a business.

Several initiatives were developed to address this challenge. The Kenyan government’s Youth Enterprise Development Fund sought to support youth enterprises. The Nasira program was born of a public-private partnership to set up a youth loan guarantee fund. The Africa Growth and Innovations Initiative project is another similar initiative. These programs provide young people various forms of financial support, such as grants, loans, equity, guarantees, and subsidies.

The Youth Enterprise Development Fund program enabled many young people to access finance and create or develop their businesses. Despite this, youth unemployment in Kenya has continued to rise from 6.9% in 2006, when the program started, to 13.4% in 2022. Only 10% of the youth employment programs in Africa have positively and significantly impacted employment outcomes. These statistics suggest that access to finance alone is not enough to solve the youth unemployment problem in Africa. What is missing, then?

The Challenge Fund for Youth Employment (CFYE) is an initiative that takes a different approach to create, match, and improve jobs for young people in Africa. It emphasizes private-sector participation and youth engagement. It encourages innovative job creation strategies beyond the promotion of financial access to create jobs, as reported by the Palladium group as part of the CFYE initiative’s success story.

These findings suggest that we must adopt holistic approaches that consider the several dimensions that affect African youth entrepreneurship. These dimensions include individual, company or value chain, and ecosystem. This is further explained below.

Some regional development organizations, such as AGRA, have recognized the benefits of a holistic approach to youth employment programs. AGRA has developed the Youth Ecosystem Development Framework (YEDF) with MSC’s support. YEDF is a framework to analyze the youth employment ecosystem to foster collaboration and accelerate youths’ access to economic opportunities in food systems. This framework has helped redefine AGRA’s strategy to create sustainable jobs for young people in Africa’s food system. AGRA has been working to create 1.5 million jobs in food systems for young people across Africa over the next five years.

A holistic approach, such as that undertaken by AGRA and CFYE, recognizes that young entrepreneurs need non-financial support along with access to finance. This non-financial support includes business development assistance, a business-friendly environment, and capacity-building opportunities. It recognizes that stakeholders must design financial services to meet young people’s diverse and dynamic needs and preferences. Moreover, it advocates a systemic approach to youth employment that promotes collaboration and coordination between actors from the public and private sectors, civil society, and academia.

A holistic approach acknowledges that financial services should cater to diverse youth needs. Young people are not a uniform group but are varied and dynamic. Our field research shows that youth preferences vary. Some favor savings over loans, require different loan amounts, repayment terms, or collateral conditions, and have varied risk appetites and aspirations. Development partners have recognized the need to understand youths and have taken steps to make this information available. For instance, MSC helped FMO and Making Cents International develop a compendium of global good practices as practical guidance to financial service providers (FSPs) to understand the youth market, improve their products, and broaden and deepen their institutional strengths, priorities, and resources to serve the youth better. MSC also helped Opportunity Bank Uganda Limited (OBUL) develop financial products for the youth. OBUL can now better address the unique financial needs of young entrepreneurs in Uganda through dedicated products.

 

The approach would promote coordination, complementarities, and partnerships among different actors, which include:

  • Policymakers and regulators, such as governments, ministries, and agencies, to formulate and implement policies and regulations that affect young entrepreneurs;
  • Research and education institutions, such as universities, think tanks, and media, to generate and disseminate knowledge and information on youth entrepreneurship;
  • Financial institutions, such as banks, microfinance institutions, and FinTechs, to provide financial products and services to young entrepreneurs;
  • Business development service providers, such as NGOs, foundations, and incubators, to provide non-financial assistance to young entrepreneurs;
  • Youth organizations and networks, such as associations, clubs, and forums, to represent and advocate for young entrepreneurs’ interests and needs.

However, a holistic approach also has several risks, such as:

  • Divergences in interests and priorities of different stakeholders can hinder effective coordination and collaboration;
  • Information and power asymmetries between young entrepreneurs and other stakeholders can limit people’s access to opportunities and resources;
  • Institutional and regulatory constraints, such as bureaucracy, corruption, and entry and exit barriers, can discourage or hinder youth entrepreneurship;
  • Challenges in the measurement of youth employment and entrepreneurship programs’ impact and performance can affect interventions’ quality, relevance, and effectiveness.

A holistic approach would emphasize the need for youth involvement through a participatory approach. A participatory approach recognizes young people as critical actors in development and not passive beneficiaries in program design, implementation, and evaluation. It ensures the programs are relevant, responsive, and effective for the target beneficiaries. Youth involvement would also empower and inspire young people to take ownership of their entrepreneurial journey and contribute to develop their communities and countries.

The path ahead

The challenge of youth unemployment in Africa is an immediate and pressing issue that demands urgent action. Although access to financing is crucial, it is only a part of the solution. A comprehensive and holistic approach is essential to truly make a difference—one that addresses the problem’s multifaceted nature.

We recommend that stakeholders recognize the youth population’s diverse and dynamic nature, and design financial services tailored to their specific needs and preferences. This design will consider different financing options, repayment schedules, and risk appetites. Additionally, stakeholders should prioritize nonfinancial support. Collaboration and coordination among various actors, such as financial institutions, business development service providers, policymakers, research and educational institutions, and youth organizations, are also essential. We must also consider risks and challenges in the implementation of strategies and include a participatory approach of youth in interventions.

In summary, we propose a holistic approach that considers the individual, business, and environmental dimensions of youth entrepreneurship, practical recommendations, and a critical review of risks and challenges to address the problem of youth unemployment in Africa. We can solve this pressing problem and contribute to the continent’s transformation through a conducive and supportive environment, youth’s involvement at every stage, and usage of their potential and the strengths of the financial sector and the broader ecosystem.

This blog was written with inputs from Willis Ogutu. 

Access to finance alone will not save youth from unemployment; what will? Part 1

Posted on by MSC

Youth unemployment is an urgent challenge in Africa. The International Labor Organization (ILO) reports the youth unemployment rate in Africa was 12.7% in 2022. More than 20 million working-age youth are unemployed, which hinders the continent’s economic development.

Addressing youth unemployment is a crucial step to harness the potential of Africa’s youth to foster sustainable economic growth, social stability, and innovation. Employed youth contribute to a virtuous cycle of poverty reduction, increased consumer spending, and the cultivation of a skilled workforce that can adapt to the evolving demands of the global economy. The realization of this potential is not just an economic imperative but a moral one. The continent must ensure that its most valuable resource—young people—does not become a narrative of lost opportunities but a beacon of progress and prosperity.

Why are African youth unemployed, and what are the consequences?

The factors behind youth unemployment in Africa and their consequences may vary across countries and regions. Still, we identified a few common factors, which we have classified into three categories:

 Macro factors

Africa struggles to provide sufficient employment for its youth, with a low economic growth rate of only 2.5% in 2023. Youth comprise 23.5% of the 38.1% estimated working poor in Sub-Saharan Africa (SSA). 60% of Africa’s population is younger than 25, which exerts immense pressure on the need for job creation. While 10 to 12 million youth enter the workforce yearly, only 3.1 million jobs are available. This leaves many youth unemployed.

As per the International Labor Organization (ILO), micro, small, and medium enterprises (MSMEs) are Africa’s largest source of employment, yet they face significant entry barriers. MSMEs comprise 90% of African businesses and generate more than two-thirds of the continent’s employment opportunities. Youth-led MSMEs often face significant barriers despite their immense potential to create employment opportunities. They struggle to access essential resources, such as land, capital, and technology. The FinAccess report in Kenya states that youth aged 18 to 25 are the most excluded from access to financial services, with an exclusion rate of 22.5%. Only 45% of youth-led MSMEs are likely to approach financial institutions for financing compared to 50% of non-youth-led MSMES because youth-led MSMEs cannot present an adequately structured business plan.

Weak governance and institutional deficiencies further discourage job creation. With an average score of 51.8 in the ease of doing business, SSA ranks below the global average of 63. This makes it one of the poorest performing regions. This low score indicates that the business environment in SSA is challenging and less conducive to economic activities. This score may discourage potential investors and business activity, which leads to high unemployment rates.

Meso factors

Insufficient education and a lack of skills that align with market demands exacerbate youth unemployment. For example, in South Africa, the unemployment rate for those aged between 15 and 24 is a staggering 63.9 %. Stats SA highlights that the lack of suitable jobs that match their skills leads to a significant loss of hope for these youth.

Poor coordination between employers and job seekers creates significant barriers. This lack of communication makes it difficult for youth to find suitable jobs and align their skills with job market needs, which continues the unemployment cycle. A good example is South Africa. As per the ILO, labor market institutions—intermediaries between job seekers and employers—raise wage levels above what would be needed to reduce unemployment.

Additionally, the limited integration of youth into local, regional, and global value chains exacerbates the unemployment challenge. The Organization for Economic Co-operation and Development (OECD) reports that Africa’s participation in regional value chains constitutes only 2.7% of its global value chain engagement. This rate starkly contrasts other regions, such as Latin America and the Caribbean, with a participation rate of 26.4%, and Asia, with 42.9%. Insufficient integration into these economic networks restricts young individuals’ opportunities to apply their skills and talents. This limits their access to suitable employment opportunities.

Micro factors

Social and cultural biases, especially against groups such as women, rural dwellers, and ethnic minorities, contribute to youth unemployment. ILO states that women in some SSA countries face high underemployment rates, around 40% or 50%. Additionally, youth unemployment is more pronounced in rural areas, with a 10% difference compared to urban areas. These biases limit job opportunities for specific groups, make it harder for youth to find work, and perpetuate the issue of youth unemployment.

Summary of the macro, meso, and micro levels constraints

Complex challenges at the macro, meso, and micro levels cause unemployment among African youths. These challenges limit economic opportunities for young Africans and lead to social issues, such as inequality and underused human capital. MSC identified the following factors and consequences of rising youth unemployment when it developed AGRA’s youth employment, empowerment, and entrepreneurship strategy:

Macro

Factors

• Low level and quality of countries’ economic growth
• Limited access to productive resources, such as land, capital, and technology
• High barriers to entry and growth for small- and medium-sized enterprises (SMEs)
• Weak governance and institutions 

Consequences

• Insufficient job creation opportunities due to a stagnant or slow-growing economy result in limited positions for youth.
• Youths face barriers to start or expand businesses due to the lack of essential resources, such as funding and technology. These barriers limit entrepreneurship and the potential for economic empowerment.
• Significant barriers hinder the establishment and growth of small businesses. This reduces entrepreneurial activities among youths, and this reduction of activities leads to missed opportunities for self-employment and innovation.
• Lack of effective policies, enforcement, and regulatory frameworks may result in an unstable business environment. This uncertainty discourages domestic and foreign investments, which leads to a diminished job market for the youth.

Meso

Factors

• Lack of quality education and skills adapted to the demands of the labor market
• Lack of intermediation and coordination between employers and job seekers
• Poor integration into local, regional, and global value chains

Consequences

• Youth may have qualifications that do not align with the skills employers need. This results in a mismatch between the education system and the job market’s needs. This mismatch can lead to higher rates of unemployment and underemployment.
• The mismatch of skilled youth with suitable employment opportunities leads to inefficiencies in the labor market. This mismatch can result in prolonged job searches for young individuals and higher unemployment rates.
• Limited economic opportunities restrict innovation, growth, and the creation of new jobs.
• Youth may face restricted employment prospects due to a lack of integration into broader economic networks.

Micro

Factors

• Social and cultural norms that discriminate against certain groups of young people, such as women, rural dwellers, and ethnic minorities
• Employment involves various risks, such as instability, vulnerability, exploitation, and violence, which often lead to migration.

Consequences

• Exclusion and limited access to employment opportunities for specific groups contribute to higher unemployment rates among marginalized segments of youth. This exclusion perpetuates social and economic inequalities.
• Fear and uncertainty in the job market may deter youth from seeking or maintaining employment. Precarious work conditions, along with exploitation and violence, undermine job security and adversely affect the well-being of young workers.
• Additionally, migration may respond to limited opportunities, but it leads to brain drain and further exacerbates unemployment issues in certain regions.

What do we lose when youths are out of productive economic engagement?

We lose the potential of a large and dynamic population segment that could drive innovation, entrepreneurship, and social change in Africa. We lose the opportunity to harness the demographic dividend, the economic benefit that arises when a country has a large share of working-age people relative to dependents. Around 60% of Africa’s population is predominantly young and could contribute to job creation, increased productivity, and higher living standards if put to good use. We lose the chance to achieve the sustainable development goals (SDGs), a set of global targets to end poverty, protect the planet, and ensure peace and prosperity for all by 2030.

The exploration of the multifaceted challenges of youth unemployment in Africa proves that tackling this issue requires innovative and multidimensional solutions. Our next blog delves into these solutions and offers practical approaches to address the identified barriers and capitalize on African youth’s untapped potential.

This blog was written with inputs from Willis Ogutu.