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Encouraging successful youth entrepreneurship through training

Youth entrepreneurship is a crucial source of employment among youth and can support efforts to solve youth unemployment, a joint European Commission (EC) and OECD reportsuggests.We might expect youth to be more inclined to engage in self-employment because of their pronounced entrepreneurial spirit and risk tolerance, but these traits may not be sufficient to ensure their success. A number of PEP research projects offer evidence on the factors that encourage and discourage profitable youth entrepreneurship in developing countries.

 

Entrepreneurship as a subsistence strategy

A lack of economic activities may force youth in developing countries to establish their own business for subsistence, rather than as a profit-seeking activity. PEP research in Ethiopia found that nine out of 10 young people who established their own business did so to secure subsistence income. Evidence from Bangladesh and Chad corroborates this finding. Meanwhile, in Ethiopia and the Democratic Republic of the Congo, the lower a person’s education, thehigher their probability of being self-employed. Outside of Africa, however, the evidence is more varied. Findings from PEP research projects in Argentina and Pakistan indicate that entrepreneurship is popular among higher-educated youth and a richer socioeconomic background encourages youth entrepreneurship.

 

Entrepreneurial skills essential to success

Three critical stumbling blocks for youth entrepreneurship are a lack of skills, inexistent or inadequate (at best) entrepreneurial education, and lack of work experience1Entrepreneurship and related skills should, therefore, form an integral part of the educational system. The PEP study from Ethiopia mentioned above suggests that the country’s entire educational curriculum should be oriented towards more practical teaching. The Bangladeshi study also highlights the need for a better match between training opportunities for youth entrepreneurs and labor market needs. While not focused on youth, findings from another PEP study in Ethiopia indicate that training is more important than credit for increasing revenues, but combining credit with training is even more effective.

 

The importance of soft skills and risk awareness

Even when youth intend to become entrepreneurs, and are equipped with adequate technical skills, the paucity of their soft skills may betray their intentions. Indeed, a PEP study on non-farm entrepreneurship (not specifically focused on youth) in Indonesia shows that innate problem-solving skills and the ability to quickly adapt to changes are associated with higher business profitability than technical skills. Similarly, a PEP study in Liberia indicates that soft skills combined with business management skills increase SME revenuefor entrepreneurs in general. These findings abundantly corroborate the evidence produced by the World Bankin Eastern Europe and Central Asia2. Finally, raising risk awareness, through education, counselling and other learning instruments, may prevent bad business and financial decisions among youth, as PEP’s work in Uganda has documented.

 

Ambiguous impacts of remittances on youth entrepreneurship

It is a common finding in the global literature that higher initial capital endowments increase the chances of success of an entrepreneurial venture. However, youth have limited access to finance, mainly because of their lack of credit access, collateral, and social networks. The lack of venture financing in the developing world further aggravates these financial conditions. PEP studies have produced evidence that remittances could be important for the entrepreneurial decisions of youth. In North Macedonia, young people’s entrepreneurial intentions strengthen when remittances flow into the household, as youth use these funds to finance micro- or small businesses. However, in Kyrgyzstan, youth in households receiving remittances had to engage in unpaid family work to replace the emigrated labor. 

 
Find out more about the projects featured
Country Project Documents
Argentina CBMS-12566 Policy Brief 156 Developing Entrepreneurship Evidence from Argentina
Bangladesh CBMS-12531 Policy Brief 180 Youth Employment Scenario in Rural Areas of Bangladesh: A Case of Mohammedpur West Union
Chad PMMA-12366 Policy Brief 117 Choice of education language and entrepreneurship in Chad
Democratic Republic of the Congo PMMA-12488

Policy Brief 126 Migration interne et entreprenariat des jeunes en République démocratique du Congo

Ethiopia CBMS-12658

Policy Brief 177 Challenges and Prospects of Entrepreneurship Development and Job Creation for Unemployed Youth: Evidence from Addis Ababa and Dire Dawa City Administrations, Ethiopia

Ethiopia PMMA-19978 Policy Brief 191 Financial Inclusion and Gender Disparity in Risk Appetite for Micro, Small and Medium Enterprises Performance: Evidence from Ethiopia
Indonesia PMMA-20026 Policy Brief 188 Improving cognitive skills for non-farm entrepreneurial productivity and growth in Indonesia
Kenya CBMS-12896 CBMS Working Paper 2017-01 Entrepreneurship as a Mechanism to Address Youth Unemployment and Poverty in Kenya: Case Study of Murang'a County
Kyrgyzstan PMMA-12594 Policy Brief 130 Impact of remittances on youth labor supply: evidence from Kyrgyzstan
Liberia PIERI-12937 Policy Brief 200 Improving entrepreneurs’ interpersonal skills to increase SME revenues in Liberia 
North Macedonia PMMA-12415

Policy Brief 115 Youth self-employment in households receiving remittances in Macedonia

Pakistan CBMS-12548 CBMS Working Paper 2017-11, CBMS Working Paper 2017-12 CBMS development initiative to reap the demographic dividend in the helm of 18th amendment in Pakistan
Uganda PIERI-12451 Policy Brief 151 Impact of credit counseling on the entrepreneurial behavior of Ugandan youth
External Sources

European Commission and OECD. 2012. Policy Brief on Youth Entrepreneurship: Entrepreneurial Activities in Europe. Luxembourg: Publications Office of the European Union.

Sondergaard, L., Murthi, M., Ghaida, D.A., Bodewig, C. and Rutkowski, R. 2011. Skills, Not Just Diplomas: Managing Education for Results in Eastern Europe and Central Asia. Washington DC: International Bank for Reconstruction and Development / The World Bank.

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