President of the AfDB, Dr Akinwumi Adesina, said this at a virtual High-Level Roundtable on Scaling up Financing for Youth Entrepreneurship and Innovation in Africa from Abidjan, Côte d’Ivoire on Monday.
The webinar was tagged the “Rationale for the Creation of Youth Entrepreneurship Investment Banks”.
The AfDB had approved its Job for Youth in Africa Strategy to help create 25 million direct and indirect jobs and empower 50 million youth over a 10-year period.
The strategy is aimed at reducing barriers to youth innovation and entrepreneurship and addresses the issues of social and economic insecurity.
This is with the aim of preventing illegal migration, terrorism and political instability among African youths.
The bank also established a multi-donor Youth Entrepreneurship and Innovation Trust Fund, funded with 40 million dollars by Denmark, Sweden, Norway, Netherlands, Italy and the UK.
Adesina said that the capacities and entrepreneurial drive of the youth in Africa needed to be unleashed to create jobs, noting that the youth must be supported to go beyond job seeking.
“We must grow, finance and support large scale successes of youth-led businesses in Africa.
“Existing financial institutions have failed to meet the needs of this rapidly growing population of the continent.
“This is due to lack of appropriate financing instruments; archaic credit risk assessments; focus on collaterals which the youth do not have; and lack of long-term financing horizon.
“That can deploy different types of financing instruments, from debt, equity, quasi-equity and guarantees over the life cycle of the businesses of the youth.”
Adesina said the continent had several programmes directed at improving the skills of the youth by countries, supported by bilateral and multilateral finance institutions.
He noted that though such programmes might have helped to impart some skills to support entrepreneurship, the youth still faced financing challenges to turn their ideas into viable businesses.
“It is time to put the capital of Africa at risk on behalf of the youth.
“It is time to create new financial ecosystems that are able to support the businesses of the youth, grow them, and unlock the latent demand for financing by millions of the youth.
“This will help to turn Africa’s demographic asset into an economic asset for Africa and for that, we must nurture the businesses of young people.
“We must tackle market failures and missing institutions that prevent the youth entrepreneurs from reaching their potential,” he said.
He noted that by developing a new financial ecosystem around the youth, that was systemic, scalable and sustainable, Africa would create youth-based wealth and jobs across the continent.
Also in her address, Ms Arancha Laya, Minister of Foreign Affairs, European Union and Cooperation, Spain, said Africa’s demographic dividends would only come about when the youth were gainfully employed.
Laya noted that entrepreneurship was recognised as a driver for economic growth but pointed out that there were too many hurdles to intra-African trade.
“Spain, therefore, welcomes the AfDB Youth Entrepreneurship Investment Initiative geared towards unlocking entrepreneurship and promoting the growth of businesses of the youth.
“This will be a key instrument to spur youth-led innovations and business ventures and at the same time create quality and decent jobs and turn Africa’s youth demographic advantage into a clear and strong asset for the continent.
“In this endeavour, I believe it will be crucial to give youth access to appropriate financing mechanisms, capacity building and implementing legal and institutional reforms to address the barriers that young people face in accessing financial corporate markets,” she said.
The minister further suggested a focus on reviewing the criteria for client risk; facilitating easier access to savings and credits; insistence on financial education, access to information and the creation of support networks for young entrepreneurship.
She further suggested the advancement of the African Continental Free Trade Area, “and we proceed with removing red tape to doing business in Africa”.
“We need to act now, we need to do it right. This is what Spain has proposed to do with its Focus Africa 2023 strategy; focus on youth entrepreneurship and unlock all its potentials.”