youth loan products · fsp financial service providers iga income generating activities mfi...

Assessing the Impact of Product Features and Financial Education in Morocco

Youth Loan Products

Understanding the framework of the study.

Assessing Youth Satisfaction with Financial Education and Tailored Loans in Morocco

The Impact of Youth Loans on Incomes and Living Conditions in Morocco

Savings Behaviour and Trends

among YouthInvest

Loan Recipients in Morocco

Understanding MFI Staff Perceptions of and

Recommendations for Youth

Lending

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Click on the throughout the document to access the footnotes.#

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About MEDA

Since 1953, MEDA has been designing and implementing market-driven economic development programs that improve the welfare of millions of people around the world. As a leading-edge risk taker in financial services and market development, we collaboratively create business solutions to poverty by working in partnership with the poor and the institutions that serve them.

Abstract

This study is the second in MEDA’s ‘YouthInvest Praxis Series’ - a group of reflective publications developed over the course of the YouthInvest (YI) project in Morocco and Egypt to assess the impact of MEDA’s interventions in order to learn from and strengthen them. This particular study focuses on the impacts of the project’s financial education and loan programme, documenting the kinds of loans that youth accessed, youth satisfaction with financial education training and loan features, the effect of the loans on youth livelihoods and savings behaviour, and MFI staff insights on the efficacy of the program and how the loans could be improved. In addition to facilitating reflection and innovation within the project, the YI team hopes this publication will be useful to financial service providers such as microfinance institutions, as well as youth, practitioners, and researchers.

Acknowledgments

Researchers/Writers/Translator: Khadija Saoudi, Daniel Harley, Adil Sadoq, and the MEDA Maroc Team

Editors: Jennifer Denomy, Jennifer Harley, Sara Mohammed, Nicki Post, Rachel Yordy

Graphic Design: Dalilah Jesus

Special thanks: Mark Wensley, Alexandra Pattee

Copyright© 2013, Mennonite Economic Development Associates

155 Frobisher Drive Suite I-106, Waterloo, Ontario, N2V 2E1, Canada 7315 Wisconsin Ave., Suite 300, West Lobby, Bethesda, MD, 20814, USA

This study has been produced in partnership with The MasterCard Foundation. The contents are the responsibility of MEDA and do not necessarily reflect the views of The MasterCard Foundation.

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Acronyms

AAA Al Amana – Moroccan MFI

AMOS Association pour le microcrédit de Oued Srou – Moroccan MFI

ARDI ARDI foundation – Moroccan MFI

CIN Carte d’identité nationale (National Identity Card)

FSP Financial Service Providers

IGA Income Generating Activities

MFI Microfinance Institution

MAD Moroccan Dirham

MEDA Mennonite Economic Development Associates

MENA Middle East and North Africa

NGO Non-Governmental Organization

USD United States Dollar

YI YouthInvest

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Quick Links IntroductionYouth in Morocco dominate the ranks of the unemployed. Demographic challenges, gender barriers, an education/skill mismatch, and unsafe or poorly remunerated work are among the many difficulties that youth face in the search for economic opportunities. Among other challenges, Moroccan youth have limited access to financial services that address their unique needs. According to the World Bank, only 12.3% of youth aged 15-24 in the MENA region have a formal bank account, which is the lowest rate in the world. In this context, access to appropriate financial services has the potential to lead to many positive outcomes for youth, including a heightened capacity to manage money and build assets, as well as increased opportunities for entrepreneurship, employment and education.

YouthInvest is a five-year, five million dollar initiative in which Mennonite Economic Development Associates (MEDA) is partnering with leading microfinance institutions (MFIs) and Non-governmental Organizations (NGOs) in collaboration with The MasterCard Foundation, to develop innovative financial products and services tailored to the needs of economically active youth in Morocco and Egypt. The YouthInvest project began in 2008 and has three main objectives:

• To increase youth access to appropriate financial services, such as loans and savings;

• To support education and training opportunities for youth to ensure improved long-term prospects and improved use of financial services;

• To support financial service providers – including MFIs and banks – to develop financial products appropriate to economically active youth.

As one component of the project, MEDA partnered with three MFIs to develop loan programmes designed for youth aged 18-35 in Morocco:

• Al Amana (AAA): a microfinance association founded in 1997, the mission of Al Amana is to promote micro-enterprises by offering loans to businesses and entrepreneurs who are otherwise excluded from the traditional financial system. As of early 2012, Al Amana had 339,408 customers in 400 branches and more than $295.3 million (USD) in outstanding loans.

• Association de Micro-finance Oued Srou (AMOS): AMOS was established on 25 February, 2000, and operates in the region of Khenifra, particularly targeting women in rural and suburban areas. As of early 2012, AMOS had 2,780 clients, and outstanding loans exceeding $709,000 (USD).

Introduction page 1 of 2

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Quick Links • ARDI Foundation (ARDI): Established in March of 2001 as a non-profit organization by the “Groupe Crédit Agricole du Maroc”, is an microfinance provider and market leader in agricultural business. ARDI’s mission is to promote micro-finance and financial inclusivity, especially in rural areas. As of 2012 ARDI had more than 100,700 clients with outstanding loans exceeding $24.8 million (USD).

In late 2011, a study was undertaken to assess the initial impacts of the loan program. Primary research was conducted with youth loan recipients, training participants, and a control group of non-participants as well as MFI staff. The study focused on the impact of loans designed for youth clients in Morocco as well as mandatory financial education training youth acquired before accessing these loans. This report documents the satisfaction and recommendations of youth and MFI staff in four main chapters or vignettes:

Youth Loan Features and Impressions

Assessing youth satisfaction with financial education and loan characteristics

ÈYouth Loans and LIvelihoods

Understanding the impact of youth loans on income, spending habits and living conditions

ÈYouth Loans and Savings

Exploring the relationship between loans and savings behaviour

ÈMFI Insights into Youth Loans

Understanding MFI staff perceptions of and recommendations for youth lending

It is hoped that these vignettes will be useful to financial service providers, particularly MFIs, in their efforts to reach out to the youth segment with appropriate credit products.

Introduction page 2 of 2

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Quick Links MethodologyObjectives

The primary objective of this study was to understand the impact of youth access to loans adapted to their needs in Morocco, and identify how and where the loan programme could be strengthened. The study evaluated two elements: the loan products themselves, as well as youth participation in mandatory financial education training sessions prior to accessing their first loan. These elements were evaluated from two perspectives – that of the youth (comparing those who had accessed loans, to those who had only accessed financial education training to those who had not accessed either), and that of MFI staff.

The specific goals for each target group were as follows:

Participant Objectives• Determine the effectiveness of youth loans

• Analyse youth satisfaction with regards to loans and training

• Understand the effect of the youth loan on the living conditions of the youth

• Outline the recommendations proposed by youth loan recipients to improve their access to loans

MFI Employee Objectives:• Identify the difficulties encountered by the employees when attempting to facilitate youth access

to loans.

• Document the advantages and disadvantages when targeting youth with loan prospects

• Detail the recommendations proposed by the MFI employees to improve youth access to loans.

• Explore possible impediments that prevent success with youth loans

The study was conducted in June of 2011 and an initial report was written in November of 2011.

Methodology page 1 of 5

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Quick Links Methods

This study was based on qualitative and quantitative research, using questionnaires and focus groups. These are outlined individually below.

Quantitative ResearchTools: Questionnaires were administered face to face with youth participants between the ages of 18 and 35 and MFI employees. The questionnaires were written by MEDA in French and were translated and administered in an Moroccan Arabic.

Participants: Among youth participants there were three groups of youth involved:

• A: Loan Recipients — Participants of the training and loan programmes. These were youth from AMOS and Al Amana who had already accessed a loan (the majority, after completing a six-hour training).

• B: Training Participants — Participants of the training who had not yet received a loan. These were the youth participants from ARDI that had only participated in the MEDA savings and training programme at the time of the research . They were included in the study in order to measure their satisfaction with the services hitherto received and to note their recommendations proposed toward the improvement of youth loans.

• C: Non-participants — youth with the same socio-economic characteristics as YouthInvest participants, who had never received a loan from a financial institution. The non-participant youth were included to help determine the effect of the loan programme on the living conditions of the youth by contrasting their conditions with those of the full participants.

Sampling: The quantitative research was conducted with a sample of 76 youth from the three regions where the youth loan programme is offered: Agadir, Khenifra, and Fez. The composition of the sample is as follows:

• Loan Recipients: 47 youth participants from the training and loan programme, who represent more than 15% of all youth participants of the programme (Agadir + Khenifra regions).

• Training Participants: 8 youth participants of the training who had not yet received a loan (Fez).

• Non-participants: 21 non-participant youth (all three regions)


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Quick Links The male-female ratio was taken into account in order to reflect the gender composition in each region. Below is the distribution of youth participants by region and gender:

Interviews with a Questionnaire (Youth)

Region

Number of interviewees

(participants)

% female

Number of interviewees

(non-participants)

% female

KHENIFRA 20 55% 6 50%

AGADIR 27 44% 9 22%

FEZ 8 50% 6 83%

Total 55 49% 21 51%

MFI employees who serve youth were only interviewed in Khenifra and Agadir because those in Fez had not begun their loan programming with youth yet, and, as such, were not in a position to comment. Below is the distribution of employees interviewed by region and gender:

Interviews with a questionnaire (MFI employees)

RegionNumber of interviewees

(MFI employees)% female

KHENIFRA 6 100%

AGADIR 7 71%

Total 13 85%


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Quick Links Qualitative ResearchOn the qualitative side, five focus groups were conducted with youth by moderators from MEDA using a discussion guide. Focus group participants were chosen by the proximity of their MFIs to their place of residence (both urban and rural), and were held at the respective MFI branches.

Sampling:

Finally, youth participated in focus groups in all three communities according to gender and urban/rural divide as outlined in the table below:

Focus groups (Youth)

Region Rural youth Urban youth Total % female

KHENIFRA 7 6 13 77%

AGADIR 7 8 15 40%

FEZ 8 8 21%

Total 14 22 36 58%


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Quick Links Presentation of Results

The data from the questionnaires and focus groups was analyzed jointly, given that the same youth that participated in focus groups also answered questionnaires. Youth that filled out the questionnaire are referred to in this study as “interviewees” and the youth that participated in the focus group will be labelled as such. The analysis of the data and the presentation of the results will focus on the three groups of participants of this study: youth participants of both the training and loan programmes (“loan recipients”), youth participants of the training only (“training participants”), and youth that did not take part in the training or loan programmes (“non-participants”).

These three groups will be used to explain the results relative to the youth participants and to show trends of behaviour. We plan to present the data simply and clearly so that the results can be applied to broad field of use and understanding. When appropriate, or when the data shows significant results, we will separate results by age, gender, or level of education.


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Quick Links

�Youth Loan Features and Impressions

Youth Loan Features & ImpressionsThis chapter documents the kinds of loans youth have accessed, youth satisfaction with financial education training and loan features, and their recommendations on how the loans could be improved. It suggests that youth respondents were largely satisfied with their loan types, amounts, durations, interest rates and the loan granting process but, unsurprisingly, recommended larger loans and lower interest rates.

Getting loan features right with youth is a delicate but critical balance: it helps build client loyalty with a generation that is just beginning their relationships with financial service providers (FSPs), minimizes risks to both the institution and borrowers, and ensures effective usage of financial products. Thus, the YouthInvest team hopes that the results and recommendations herein will be

useful to FSPs, particularly in the MENA region.

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Quick Links Financial Education: An Essential Beginning to Youth Loans

In the youth financial services industry, it is common for potential clients to participate in financial education training prior to accessing services for the first time. YouthInvest partner MFIs have adopted this model for their youth lending products. Each MFI provides their own short financial education module before youth receive loans. For the first two partner MFIs, AMOS and Al Amana, these are typically six hours in length, conducted as three two-hour sessions within one week.

In the case of youth surveyed for this study, 81% of clients from Al Amana and AMOS participated in financial education training with their MFI before being awarded a loan. The following table shows the ranges in time spent in training before accessing this loan. On average youth spent approximately 2.5 hours in training.

Youth Training Average Mode Minimum Maximum

Training Duration (in minutes) 147 120 60 360

Youth interacting with a third MFI, ARDI, participated in a more extensive financial education and entrepreneurship programme. This program was 20 hours and ran for three full days of training. At the time of the survey, participants who underwent training with ARDI had not yet received a loan. As a result, a distinction between the two groups of respondents will be made throughout: “loan recipients” denoting youth from Al Amana and AMOS, versus “training participants” from ARDI. With ARDI, 100% of the youth interviewees participated in the 20 hours of training.

Youth Loan Features &

Impressions page 2 of 15

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Quick Links Youth Satisfaction with TrainingAmong the training participants and loan recipients, 93% stated that it was beneficial, and only seven percent stated that it was insufficient (eight percent of only loan recipients). According to the youth the training was beneficial as they learned how to:

• Manage spending (75% of training participants and 79% of loan recipients)

• Increase savings (63% of training participants and 50% of loan recipients)

• Attract more clients (13% of training participants and 32% of loan recipients)

• Manage debt (24% of the loan recipients)

Other aspects were also cited by the participants, such as improving their business management skills, developing self-confidence and motivation, improving their planning skills, and managing their life for success. These are highlighted in the table below:

In what way has the training helped you?



79

32

50

8

16

24

3

8

5

75

13

63

25

13

0 20 40 60 80 100 120 140 160 180

Be.er able to manage spending

A.ract more clients

Save

Have a goal and plan how to a.ain it

Understand the steps toward starDng a project

Be.er able to manage debt

MoDvaDon and drive

Training did not help

Self-‐confidence

Managing life goals

Loan Recipients

ARDI ParDcipants

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Quick Links Features of Youth Loans

This section highlights the kinds of loans youth accessed to contextualize youth satisfaction and recommendations to come. It discusses five main features: loan type, amount, duration, interest rates and the loan granting process; and analyzes who is accessing what kind of loan by youth characteristics such as age, sex, marital status, geography, and type of economic activity as appropriate. As it will show, youth were diverse in background as well as in needs. Understanding the interrelationships between youth characteristics and loan features enables FSPs to design tailored products to effectively serve the youth segment in its diversity.

Loan TypeOf those who had received a loan, 91% of the youth surveyed were awarded an individual loan. Specifically, all youth recipients at AMOS were given an individual loan, while 85% were given individual loans at Al Amana. The reason for this difference was that the youth loan, as developed and offered by AMOS, was exclusively designed for individual lending, with flexibility in the amounts awarded. Al Amana offered youth both individual and group loans of varying amounts.

The following tables show the types of loans accessed by marital status and sector of economic activity.

0%

20%

40%

60%

80%

100%

Agriculture Trade Handicra7s Services

100% 77%

96% 100%

23% 4%

Type of Loan by Sector of Ac1vity

Group

Individual

0%

20%

40%

60%

80%

100%

Single Married Divorced

13%

87% 100% 100%

Type of Loan by Marital Status

Individual

Group

The distribution of loan by employment sectors shows that individual loans were awarded exclusively in the agriculture and service sectors. The distribution by marital status shows that married and divorced participants were only awarded individual loans, whereas 13% of the single participants took group loans.



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Quick Links Loan AmountAs the graph on the right indicates, 86% of the youth were awarded loans between 3,000 and 10,000 MAD (380 and 1,266 USD).

As the table below indicates, the average amount awarded was 8,234 MAD (1,042 USD) with a minimum of 1,500 MAD (190 USD) and a maximum of 30,000 MAD (3,797 USD). Half of the youth participants were awarded more than 7,000 MAD (886 USD).

Loan Statistics Average Median Mode Minimum Maximum

Loan Amount (MAD) 8,234 7,000 10,000 1,500 30,000

Loan Amount (USD) 1,042 886 1,265 190 3,797

The data also shows a significant relationship between the loan size and the MFI providing the credit. As the graph on the right indicates, a quarter of the loans awarded by AMOS were less than 3,000 MAD (380 USD), whereas 3,000 MAD was the minimum loan size awarded by Al Amana. Nearly 50% of Al Amana’s loans were between 6,000 and 10,000 MAD (759 and 1,266 USD). Thus, although both MFIs awarded a similar percentage of loans of over 10,000 MAD, Al Amana had a larger average loan size of 8,675 MAD (1,098 USD), in contrast with AMOS’ 7,910 MAD (1,001 USD).

0%

10%

20%

30%

40%

50%

<3000 MAD 3000-‐6000 MAD

6000-‐10000 MAD

>10000 MAD

0%

37%

48%

15%

25% 20%

40%

15%

Loan Size per MFI

Al Amana

AMOS



0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

<3000 MAD 3000-‐6000 MAD 6000-‐10000 MAD >10000 MAD

6.49%

51.15%

34.35%

8.02%

Loan Amount

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Quick Links The distributions of the loan amount by monthly employment income and by gender are shown in the following graphs. There is a near-linear relationship between the loan amount and the monthly employment income: the higher the monthly employment income, the larger the loan.

This relationship is anticipated as the MFIs calculate the repayment capacity of youth before they can receive a loan. As youth have limited assets, their projected income is a major determinant of their repayment capacity and therefore loan size.

2020 2314

3117 3457

0

500

1000

1500

2000

2500

3000

3500

4000

<3000 MAD 3000-‐6000 MAD 6000-‐10000 MAD >10000 MAD

Loan Size by Average Monthly Income

0%

10%

20%

30%

40%

50%

<3000 MAD 3000-‐6000 MAD

6000-‐10000 MAD

>10000 MAD

9%

22%

43%

26%

13%

38%

46%

4%

Loan Size by Gender Male

Female

In terms of gender, nearly half of the female recipients were awarded a loan between 6,000 and 10,000 MAD (759 and 1,266 USD). Additionally, female recipients were more represented in the lower loan brackets, whereas the male recipients were more represented in the highest loan bracket (26% male, 4% female). According to YouthInvest staff, this may be attributable to a few factors: women can often start a business with a smaller amount of money, particularly as many are home-based enterprises, while men often do not ask for a loan unless they have an existing business that needs funds, and often require larger amounts.

Finally, it is important to note that there was a strong correlation between the loan amount and one’s type of living environment: rural youth received larger amounts – on average 9,500 MAD (1,202 USD) compared with urban borrowers’ average of 7,250 MAD (918 USD).



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Quick Links Loan DurationOverall, loan duration ranged from eight months up to four years depending on the type of loan. The eight month loan was primarily for solidarity group loans (financing small businesses), while the four-year loans were for housing (with larger sizes and longer lengths than business development loans). The range of loan lengths appears in the table below.

Length of Loan Average Median Mode Minimum Maximum

Loan Duration in Months 15 12 12 8 48

While the average length of a loan term was 15 months, it is important to note that 50% of the loans awarded to participants were for a period of one year or less.

Interest RatesThe interest rates on youth loans varied from institution to institution and remain confidential due to industry sensitivities. They are also hard to explain definitively as with at least one of the MFIs youth were offered a declining annual interest rate, but then also had other fees associated with the loan. So an interest rate of 17% could have effectively been closer to 30% when membership fees, processing fees and mandatory disaster insurance fees were all factored into costs. Furthermore youth clients were often unaware of the actual interest calculations, as they focused on the repayment schedule and were told how much they needed to pay with each installment.



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Quick Links Loan Granting Process The loan granting process was an average of 13 days, as shown in the table below.

Loan Grant Process Average Mode Minimum Maximum

Loan Granting Period (in days) 13 7 2 30

The length per financial institution is further indicated in the following graph:

0%

20%

40%

60%

80%

100%

Al Amana AMOS

21%

76% 43%

24% 36%

Length of Loan Gran-ng Process by MFI

15-‐30 days

8-‐15 days

<= 7 days

With Al Amana clients, there was a strong correlation between the length of the loan granting period and whether the youth had completed the training before accessing the loan. Those who had participated in financial education training took longer to get approval as they completed the training course over a week or two weeks.

Comparison with other Lending Products

Overall, the youth loan was different from other loans in Al Amana’s portfolio in two ways: the mandatory financial education training and the establishment of more flexibility in collateral requirements. For AMOS, new features of the youth loans were the provision of individual loans (AMOS had only offered group loans to all clients before partnership with MEDA), flexible amounts (from 1000 to 30000MAD) and flexible collaterals. The type of loan offered is particularly significant as most MFIs in Morocco require new clients – particularly youth clients who do not have strong collateral – to take group loans. It was also such a successful product for AMOS that they decided to begin offering individual loans to other clients as well as youth.



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Quick Links Youth Satisfaction and Recommendations

Youth SatisfactionEighty-one percent of the youth stated that their experience with the loan programme was positive. When asked, “Did the loan programme help you?” 66% of the youth stated that it helped very much, 30% suggested that it was of moderate help and only 4% stated that it was of no help at all.

As the graphs below demonstrate, this satisfaction was closely tied to the type of loan they received as well as their type of living environment.

0%

20%

40%

60%

80%

100%

Individual Group

70%

21%

50%

9%

50%

Level of Sa*sfac*on by Loan Type

Not sa;sfied

Somewhat sa;sfied

Sa;sfied

0%

20%

40%

60%

80%

100%

Rural Urban

71% 58%

24%

23%

5% 19%

Sa#sfac#on with Loan by Type of Living Environment

Not sa9sfied

Somewhat sa9sfied

Sa9sfied

While only 9% of loan recipients took group loans, none of these reported high levels of satisfaction with their loan, with only 50% somewhat satisfied. Those in rural communities also tended to have higher satisfaction levels with their loans than their urban counterparts. Nineteen percent of youth borrowers in urban areas were “not satisfied” in contrast with only 5% of rural borrowers.



Helped very much 66%

Helped moderately

30%

Did not help at all 4%

Overall Loan Sa,sfac,on Did not help at all 4%

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Quick Links Turning to specific loan features, the graph and analysis below suggest that some loan characteristics were more satisfying than others. Each feature is discussed in turn.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Amount Length Loan type Interest rate

Grant process

64% 81%

96%

49% 70%

23%

17% 2%

30%

11%

13% 2% 2%

21% 19%

Level of Sa*sfac*on with Loan Characteris*cs

Not sa@sfied

Somewhat sa@sfied

Sa@sfied

Loan TypeThe youth were overall (96%) satisfied with the type of loan. Nearly all of the youth (91%) were satisfied with regards to the individual loans, whereas 50% of the participants with a group loan were unsatisfied. The data shows a significant relationship between the type of loan and youth satisfaction. Those who received group loans were not generally satisfied and the reason had to do with group dynamics: “I had a lot of problems with the group and that affected my business. Instead of an increase in revenue there was a decline. I’m just waiting until the end of the terms of the loan so that I leave the group.”

Loan amountSixty four percent of the youth participants were satisfied. Thirteen percent were not satisfied and stated that the amount was generally insufficient to finance their IGA and the MFI awarded a lesser amount than the one asked for, especially when it was a first time loan. The data also shows a significant relationship between the satisfaction of the participants when considering the loan amount, the place of residence, and the type of loan.



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Quick Links Loan Duration Eighty one percent of the youth participants were satisfied with the duration of the loan, noting that it was they who chose the loan duration. The duration varied between 12 and 18 months.

Interest ratesNearly 50% of the youth were satisfied with the interest rates, or at least with the repayment rates (some were unable to calculate their interest rates). Twenty percent stated that they were not satisfied with the interest rates and that the rates were too high.

Loan Granting ProcessSeventy percent of the youth were satisfied with the amount of time it takes to grant a loan. The data shows a significant relationship between the MFI, the granting period of the loan, and the satisfaction of the participants. The 36% who stated that the granting period exceeded 15 days were from Al Amana, and were thus less likely to be satisfied, as show in the graph below.

0%

20%

40%

60%

80%

100%

Al Amana AMOS

52%

95%

33%

15% 5%

Sa#sfac#on with Loan Gran#ng Process by MFI

Not sa8sfied

Somewhat sa8sfied

Sa8sfied

Ninety percent of the participants from AMOS were satisfied with the loan granting period, while only 52% at Al Amana were satisfied, and 33% were moderately satisfied. Fifteen percent of the participants at Al Amana were not satisfied.



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Quick Links Youth Recommendations for Financial and Non-Financial ServicesFinancial Services To improve the terms of the loan, the youth recommended the following:

Loan Type

Offer individual loans rather than group loans (94%). The individual loan provides more freedom and avoids the problems related to group loans. “Every month I have to assure myself that every member of the group will pay, no matter the circumstances: sickness, vacation... It’s stressful.”

Loan Amount

Increase the loan amount (83%) “The MFI should at least give us the amount that we requested rather than give us less.”

Duration

Maintain the loan duration (70%), which is a duration chosen by the youth. According to loan recipients, their MFIs increase the interest rates of the long term loans, which discourages them from taking these. Instead, they take shorter loans, with smaller amounts. If the youth could have longer loans and larger loan amounts, at a lower interest rate, the youth would be interested in these longer loans. But things being what they are, they prefer a shorter duration, to enable them to renew their loan faster and access a bigger loan amount as they build credibility with the institution.

Interest Rates

Lower the interest fees (66%).

Length of Granting Period

Retain the same loan granting period (57%). Again, the relationship was significant between the MFI and the youth participant recommendations about the loan granting period. At AMOS, 75% of the youth interviewees stated that the granting period is convenient. Fifty five percent at Al Amana wanted a shorter loan granting period.



0%

20%

40%

60%

80%

100%

Amount Length Interest Rate

Process Length

83%

15%

17%

70%

34% 57%

15%

66% 43%

Youth Recommenda.ons for Loan Characteris.cs

Decrease

Do not change

Increase

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Quick Links Additionally, youth proposed the following recommendations for the MFI:

• Counsel the youth on what makes a profitable business or IGA (27%). The youth stated that the MFI personnel have experience that the youth lack and the MFI could advise them or direct them toward a profitable IGA.

• Eliminate the collateral requirements (14%). Certain requirements by the MFIs, such as having a business for at least six months or one year before accessing a loan, or obtaining the endorsement of a parent, were not appreciated by the youth. “It’s been almost two years that I have had my own business and that I’m in charge. I don’t see why my father has to sign an endorsement so that I can take out a loan and expand my business!”

• The youth also noted that the MFIs should treat every client equally. The MFIs had a tendency to grant larger amounts to formal business proposals, with fewer requirements, while less formal proposals were treated strictly. “The association should help youth who work in less formal areas, those with formal business proposals have more funding from banks and financial groups like Wafasalf.”

Non-Financial Services:Apart from the training currently given by MFI partners, the youth interviewees requested other non-financial services to assist in the success of their business. As shown in the graph below, half of the youth stated that experience in the form of advice (26%), or an internship at a business (24%), is what is necessary for them to succeed with their business. The youth stated that they were interested in having someone counsel and guide them when starting a business as well as when managing one.

0 10 20 30 40 50 60 70 80 90 100

Planning for the future

Assurances for suppliers from the MFI

Legal training for the business

New trends

Training for a specific job

Training for starIng and managing a

The loan was sufficient

MarkeIng/selling

2 2 2 2 2 4 4 7 9 17 20 17

26 26

17

6 28

28 28

13

25 50

13

Youth Requested Financial Service by Par8cipant Type (%)

Loan recipients

Non-‐parIcipants

ARDI parIcipants



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Quick Links The youth often rely on the experience of their parents when they begin business similar to those of their parents. The youth who work (loan recipients and non-participants) look for more advice and counsel than those who do not yet work (the participants at ARDI). Fifty percent of the participants who do not work are more interested in an internship at a business before starting their own business. This was also the opinion of 28% of the non-participants.

Twenty four percent of the youth stated that the loan was sufficient enough for them to successfully start their business and that they have no need for non-financial services. “I have a lot of experience, I’ve been working six years with my father, I just need money to start my own business.”

Note that the loan recipients and non-participants stated that the loan was sufficient in nearly equal proportions.

Among the loan recipients, much of the other requested non-financial services were for further training pertaining to business management (20%), business feasibility (17%), a specific job (9%), as well as general financial education (7%). “I think that it is important to know how to manage money, especially debts. It isn’t just important for me but also for those who loaned me the money.”



Youth Loan Features & Impressions page 15 of 15

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Quick Links Synopsis

The results of this study show that the combination of training and loan programmes targeting youth clients provides consistently high levels of satisfaction among a large demographic that is often overlooked. Youth were highly satisfied with almost every feature of the loan, while preferring individual loans to group loans. The results show especially high levels of satisfaction with the type and duration of the loan, as well as the granting process of the loan. The lower levels of satisfaction with the loan amount and interest rates correlated with youth requests for larger loan amounts and lower interest rates. Of the non-financial services, the youth predominantly requested support from adults with expertise in the form of counseling or further training and education.

When designing a loan that targets youth clients, FSPs will do well to consider the perceptions of youth clients, and balance these wishes with what is feasible for the financial institution. Some recommendations that seem characteristic of youth naïveté, such as a request for larger loans and less interest, should not be disregarded wholesale. The future of loan programmes with youth also rests on the continued development of appropriate financial education training. For MFIs and other financial service providers, the study highlights the efficacy of a training and loan programme for youth clients, and suggests that with changes to the interest rates and the amount of the loan, MFIs can provide a product that will yield high satisfaction for a large demographic of new clients.

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Quick Links Youth Loans and LivelihoodsThis chapter focuses on elucidating the relationship between youth loans and livelihoods. It suggests that loans with YouthInvest partners have increased incomes, led to more focused spending habits, and improved their living conditions (including housing and household assets) among youth clients. It also shows that upon the receipt of a loan, youth continue to invest in the development of their business, and plan for their future. For financial service providers this is good news, as youth develop assets and grow their businesses, they become more experienced and attractive clients. Youth loans – with the right balance of financial education support, and the right products – can be a smart choice for both young entrepreneurs and micro-finance institutions alike.

Youth Loans and Livelihoods

page 2 of 12

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Quick Links Youth Incomes

When loan characteristics were suitable for the market segment, the relationship between youth loans and incomes was often positive. As the graphs below demonstrate, this was certainly the case for loan recipients participating in this study. Specifically, the distribution of monthly income among youth participants before and after the loan shows that their monthly income increased nearly 20% after the loan. This improvement was more direct among male participants (28%) than female participants (14%) and was also more dramatic in rural communities than urban centres where the income increased by 24%.

0

500

1000

1500

2000

2500

3000

3500

Female Male

1856

2714

2124

3471

Monthly Income Before and A3er Loan by Gender (MAD)

Before loan

A7er loan

0

500

1000

1500

2000

2500

3000

Rural Urban

2254

2705 2802 2819

Monthly Income Before and A3er Loan by Residen9al Area (MAD)

Before loan

A8er loan

Before the loan was awarded, the average monthly income of the male participants was 47% higher than that of the female participants. After the loan this difference grew to more than 60%. In other words, while the overall incomes of women also improved, they improved by less than men’s thereby increasing the disparity in incomes.

By residential area, the trend was quite the opposite. The average monthly income of the participants before the loan was larger in urban areas than rural areas by more than 20%. After the loan there was no longer a substantive difference. Thus the loans can have a geographically equalizing effect on one hand and reinforce gender trends on the other. Overall, female participants living in rural areas had the lowest average income, and male participants in urban areas had the highest.


page 3 of 12

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Quick Links Youth Perceptions and Aspirations Youth were asked, “How has your income changed during the last six months?” The response from the majority of loan recipients (73%) was, “my income has increased”. In contrast, only 54% of the non-participant youth gave the same response. While many participants suggested their income remained the same, only 9% of the participants stated a decrease in income over the past six months. Among those 9%, respondents suggested the decrease in their income was connected to a few factors, such as:

• “Investing in the business and in savings and you have to wait months until the business is profitable.”

• “My income decreased because I used some of it to pay back the loan.”

• “I didn’t have many clients in these last months, I’ll get more customers in the summer.”

Seventy-six percent of the youth expect their income to increase six months from the date of the survey. Among both youth participants and non-participants, expectations for increase in the six subsequent months matched the report of the six preceding months. In the six preceding months 76% of the participants and 56% of the non-participants experienced a growth in income, and 73% of the participants and 54% of the non-participants expected a growth in the subsequent six months.

The amount of youth who stated a decrease in income was similar to the amount of youth who expected a decrease in income (10% and 9%, respectively).

The majority of loan recipients (73%) suggested

“ My income has increased”

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

Augmented Stayed the same

Diminished

72.70%

18.20% 9.10%

53.80% 46.20%

0

Youth Income Trends (past six months)

Par?cipants

Non-‐par?cipants

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Augment Stay the same Diminish

76.20%

14.30% 9.50%

56.30%

43.80%

0

Youth Income Trends (next six months)

Par>cipants

Non-‐par>cipants


page 4 of 12

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Quick Links Youth Spending

In order to assess how they managed their spending, the youth were asked how much of their funds were allocated to their businesses, household, savings, and leisure. The youth invested a large amount of their income from the business back into the business itself, with the intention of growing their business to develop enough revenue so that another loan would not be necessary.

The graph below details the difference between the loan recipients and the ARDI participants. Because they had not yet received a loan, the ARDI participants were not in the position to allocate funds towards a business, and instead used the majority of their income on their savings and leisure. The loan recipients used their income more evenly, spending the least on leisure. The higher amount spent on savings at ARDI may be explained by the fact that ARDI participants were encouraged to save and open savings accounts.

0

10

20

30

40

50

Business Household Leisure Savings

0

8

48 45

34

22 19

32

Loan Recipient and ARDI Par2cipant Spending (%)

Loan recipients

ARDI parBcipants


page 5 of 12

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Quick Links When pairing spending based on residential area and marital status, the data shows interesting results. Divorced participants spent the highest amount of their income on their business and their household, followed by married participants. Recreation and entertainment was not a priority for divorced participants at 5% of their income. Single participants spent a large amount of their income (one third) on savings and on their business. By residential area the data shows that rural participants spent large amounts of their income on savings and their business (35% and 28% respectively). Rural participants spent more on their business and saved less than the urban participants, at 40% and 28% respectively. Urban participants also spent more on entertainment than the rural participants (22% versus 13%) but this may be explained by the fact that recreation and entertainment is more readily available in urban centres.

0%

20%

40%

60%

80%

100%


32 20 20 34

50 33 5 30

34 24 17 27

Par$cipant Distribu$on by Marital Status and Spending (%)

Married

Divorced

Single

0%

20%

40%

60%

80%

100%


40 27 13 28

28 18 22 35

Distribu(on of Par(cipants by Living Area and Spending (%)

Urban

Rural


page 6 of 12

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Quick Links Youth Households and Living Conditions

This section will discuss the impact of the loan on several indicators of youth households and living conditions, including housing, access to basic services, assets, and income.

HouseholdsThe youth were asked how the loan helped their household both directly (by using all or a part of the loan for a purchase), and indirectly (though improved income from their business).

The youth most commonly improved their household by addressing the immediate needs of the present, spending their income on better housing, furniture and appliances, clothing, and a better diet. While 21% used their income for leisure, 19% used it either for better education, or medical care. Establishing independence from parents or a husband continued to be an important way to use a loan in a household at 13%. The 15% that stated that the loan did not help said that it was because of the high interest rates, because of the relentless competition of other businesses, or because they had not yet used at least the majority of the loan.

15 36

19 43

19 6

40 43

21 13

4

0 10 20 30 40 50

The loan did not help Be6er diet Educa;on

Be6er housing Medical care

Be6er access to basic services Clothing

Furniture or appliances Leisure

Independence from parents or husband Emergencies or other unforseen events

Youth Household Improvements (%)


page 7 of 12

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Quick Links Living ConditionsIn order to further measure the impact of the loan on their living conditions, non-participant youth were asked, “In the last six months, have there been improvements in your living conditions and household?” The following were their responses:

• Housing came first in describing how their living conditions improved at 48%;

• At 29% each, were clothing and furniture;

• Nineteen percent stated they had better access to medical care, the same percentage as the youth participants;

• Nineteen percent of the non-participants stated that they were no improvements, while this was stated by only 4% of the participants;

• Ten percent stated that they had better access to education, 9% less than the youth participants.

19 10

48 19

5 29 29

24 19

0 10 20 30 40 50

Be,er diet Educa5on

Be,er housing Medical care

Be,er access to basic services Clothing

Furniture and appliances Leisure

The loan did not help

Non-‐Par(cipant Household Improvements [past six months] (%)


page 8 of 12

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Quick Links While 97% of youth had a permanent address before the loan, this rose to 100% after the loan. All of the non-participants had permanent addresses.

Before taking a loan 64% of the participants lived in a residence belonging to their household, while after the program, this rose to 94%. At the same time, the proportion of renters dropped by 67% after participation in the programme and there were no longer co-proprietors among the participants. In contrast, the majority of the households of non-participants owned their residence. This group reflected a higher rate than participants before the loan, and lower rate than participants after the loan.

0%

20%

40%

60%

80%

100%

Par,cipants before the programme

Par,cipants a:er the programme

Non-‐par,cipants

64

94 86

18

6 14 18

Property Ownership Before and A4er the Loan (%)

Co-‐Ownership

Rental

Ownership

95%

96%

97%

98%

99%

100%

Before loan A3er loan

97%

100% 2%

1%

Housing Before and A0er Loan

Shanty town

Adobe

Permanent


page 9 of 12

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Quick Links Access to ServicesBefore the programme 82% of participants and 86% of non-participants had access to potable water and electricity. After the programme, 92% of the youth participants had access to these services. In a similar manner, the proportion of youth who only had access to network electricity (no network access to potable water) dropped from 14% before to 2% after their participation in the program, and those who only had access to potable water (no network electricity) rose slightly from 3% to 6%. In contrast, nearly 5% of the non-participants did not have access to potable water or electricity.

The distribution of youth interviewees by residence and by MFI provides the following results.

• Ten percent of the participants at AMOS who live in rural areas did not have electricity.

• Ten percent of the participants at AMOS and 9% at Al Amana who live in rural areas did not have access to potable water.

• In urban centres, all participants at AMOS had access to both electricity and water. Ninety-four percent at Al Amana had both electricity and water, and 6% did not have potable water.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Par0cipants before the programme

Par0cipants a>er the programme

Non-‐par0cipants

82 92 86

14 2 3 6

10

1 5

Access to Basic Services (%)

Neither

Potable water

Network electricity

Both

0%

20%

40%

60%

80%

100%

AMOS AAA AMOS AAA

Rural Urban

80% 91% 100% 94%

10% 9% 6% 10%

Paricipant Access to Services by Living Environment and MFI

Network electricity

Potable water

Both

Youth Loans and Livelihoods page 10 of 12

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Quick Links Household AssetsThe household assets of the youth participants increased considerably after taking a loan. This is depicted in the graph below.

0% 50% 100% 150% 200%

Radio/CD player

DVD player

Stove

Truck/Tractor

Motorcycle

Telephone

94% 86% 84% 77% 83%

17% 3%

32% 21% 17%

97% 12%

96% 94%

79% 94% 100%

23% 2%

45% 26%

51% 100%

28%

Par$cipant Household Assets Before and A6er the Programme

Before the programme

AJer the programme

The following assets were the most common:

• Computers: The proportion of youth owning a computer tripled from 17% to 51%

• Stoves and household appliances: After the programme all of the youth owned a stove and the majority of them owned other household appliances. Seventeen per cent of the youth acquired these during their loan.

• Air conditioning and/or heating: The proportion of youth who owned air conditioning and/or heating more than doubled after the programme, even though it is less represented than other assets.

• Bicycles: 45% of the participants owned a bicycle after the program, an increase from 32% before the programme. By buying a bicycle, the youth stated that they could save money on transportation costs and save time.

• Cars: The purchase of a car was important for the household. Six percent of the youth, (who did not own a car before the programme) bought a car, demonstrating an improvement in their living conditions.


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Quick Links In contrast, as shown in the graph below, the household of the non-participants acquired primarily portable telephones, household appliances, and CD and DVD players. Thirty eight percent and 43% of the youth purchased a stove and refrigerator, respectively.

0% 10% 20% 30% 40% 50% 60% 70%

Radio/CD player

DVD player

Stove

Truck/Tractor

Motorcycle

Telephone

48% 43%

38% 52%

38% 0% 0%

29% 19% 19%

67% 5%

Non-‐Par(cipant Assets (past six months)


37 of 65


This chapter suggests that youth loans can lead to higher incomes, more focused spending habits (including further investments in the business and household), and improved living conditions in terms of housing, assets, access to services and other household costs. Indeed this was true for the majority of youth surveyed in Morocco as part of YouthInvest programming within six months of receiving a loan. While these findings are significant unto themselves, it is also important to note that there was a noticeable difference between those who accessed youth loans and those of similar backgrounds who had not.

However, it is also important to recognize that loan recipients did not all benefit equally. While loans had an equalizing effect on youth incomes between urban and rural populations, increases in income were much more modest for young women than men in both settings. While most youth predict that their incomes will continue to grow, the amounts will continue to be shaped by gender norms. This does not imply that young women are not credit-worthy. The trends suggest that providing support to youth clients is advantageous not only to a range of youth, but also to MFIs as they capture a new market segment that is developing assets, experience and financial management skills required for ongoing savings and credit products. With these kinds of results, it is hoped that FSPs will continue to expand their outreach to responsible young entrepreneurs.

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Quick Links Youth Loans and SavingsThis chapter focuses on the relationship between loans and savings. It suggests that youth who undergo training and access a loan are more likely to save. It begins by examining youth savings behaviour, explores the likelihood of having a savings account among the participants and non-participants, and assesses where youth spend their savings before and after the programme to determine how the youth develop financial management skills.

Youth Loans and Savings

page 2 of 11

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Quick Links Savings Behaviour

In Morocco, the YouthInvest training and loan programme encouraged youth to save by increasing access to new opportunities for saving. The training programme sought to help youth recognize the importance of saving, to learn how and where to save, as well as how to structure a savings plan. After the programme 96% of the youth loan recipients saved, a 9% increase, and 25% more than the non-participants (17% more in the case of ARDI participants).

80%

85%

90%

95%

100%

Before the Programme A4er the Programme

87%

96%

13%

4%

Par$cipant Tendency to Save Before and A5er the Programme

No

Yes

0%

20%

40%

60%

80%

100%

Loan Recipients ARDI Par9cipants Non-‐par9cipants

96% 88% 71%

4% 12% 29%

Tendency to Save by Par0cipant Type

No

Yes

The data shows a significant relationship between undergoing the training programme before the loan, and saving. All the youth participants who underwent training saved, while among those who did not, only 78% saved.

0%

20%

40%

60%

80%

100%

I did not undergo training

I did undergo training

22%

78% 100%

Savings and Training Among Par0cipants

I save

I don't save


page 3 of 11

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Quick Links The data also shows a significant relationship between the youth participants who saved and their gender or their place of residence. All of the rural participants saved and all of the male participants saved no matter their place of residence. Therefore only female participants in urban areas did not save.

0%

20%

40%

60%

80%

100%

Female Male

9%

91% 100%

Savings by Gender

I save

I don't save

88%

90%

92%

94%

96%

98%

100%

Rural Urban

100%

92%

8%

Savings by Par-cipant Residen-al Area

I don't save

I save

Savings AccountsForty percent of the youth loan recipients had their own savings account. Before the loan programme, only 28% of the participants had savings account. After the programme there was a 12% increase, with 40% having savings accounts. The ARDI participants were encouraged to open savings accounts and the process was often facilitated for them. Thus a higher percentage of them (63%) had a savings account compared to the other participants. Only 24% of the non-participants had savings accounts, while 40% of the loan recipients had savings accounts.

0%

20%

40%

60%

80%

100%

Before the Programme A5er the Programme

71% 60%

28% 40%

Tendency to have a Savings Account

Yes

No

0%

20%

40%

60%

80%

100%

Loan Recipients ARDI Par9cipants Non-‐par9cipants

58% 38%

76%

42% 63%

24%

Tendency to Have a Savings Account by Par6cipant Type

Yes

No


page 4 of 11

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Quick Links Among youth participants who opened savings accounts after participation in the programme, 58% stated that the programme helped them open the account and 40% of the participants at ARDI stated the same.

0%

20%

40%

60%

80%

100%

Loan Recipients ARDI Par9cipants

42% 60%

58% 40%

"Did our programme help you open your savings account?"

Yes

No

The distribution of participants by MFI and level of education shows that:

• More than half of the participants at AMOS had a savings account, closer to a third at AAA.

0%

20%

40%

60%

80%

100%

Loan Recipients

ARDI Par9cipants

Non-‐par9cipants

60% 43%

67%

40% 57%

33%

Savings Accounts Among Youth who Save

I have a savings account

I don't have a savings account

0%

20%

40%

60%

80%

100%

None

Primary School

Middle School

Secondary School

University

14

63 31 43

100 86

38 69 57

Savings Accounts by Educa2on Level


I do have a savings account


page 5 of 11

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Quick Links • Both the university graduates and those who finished primary education had the highest percentage of savings accounts, at 100% and 63%, respectively. The least amount of savings accounts (14%) was among the participants with no formal education. They were not convinced that saving with a bank was better than saving at home; at home there are no interest rates to contend with.

As shown in the graph below, not all the youth who save also have a savings account. Forty percent the loan recipients had a savings account. Fifty-seven percent of the participants at ARDI had a savings account. A third of the non-participants had a savings account.

0%

20%

40%

60%

80%

100%

Al Amana AMOS

30

55

70

45

Savings Accounts by Lending MFI (%)


I do have a savings account

Note that neither gender, place of residence, nor income had any bearing on whether the youth did or did not save or have a savings account.


page 6 of 11

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Quick Links Participant Reasons for Not Having Opened a Savings Account

They prefer to save at home (50%) “I rather leave my savings at home where I can access it when I want. If an opportunity presents itself, I know I have my savings handy.”

They have a current account (21%) which they use for their business.

“I opened a current account but I’m considering closing the account because the fees are too high.”

Their income is spent in full (14%). “I just started my business and it was necessary to invest a lot. In addition to the loan repayments, I don’t have anything left to save.” (Note that the youth still do state that they save small amounts at home, for both personal and business-related needs).

They use their parent’s account (7%).

“Because I work with my father, I’ve been using his account for years for business expenditures.” “My mother helped me start my business, she provided me with a free space, and I use her account if I want to save.” “I don’t want to open my own account because I don’t want to pay the fees, I’d rather use my father’s account.”

4%

21%

50%

4%

7%

14%

0% 10% 20% 30% 40% 50% 60%

I spend my income too quickly

I already have a current account

I rather save at home

I will open an account soon

I use my parents' current account

The benefits hardly cover the costs

Par$cipant Reasons for not Opening a Savings Account


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Quick Links The ARDI participants stated different reasons. A third of the participants stated that they could not open a savings account because they don’t have a CIN (Carte d’Identité Nationale) number; another third stated that they had not opened an account for personal reasons but suggested that they would soon; and the final third stated that they already have a current account.

Non-Participant Reasons for Not Having Opening a Savings Account

They save at home for ease of access (29%).

They do not have CIN numbers (29%).

“I’m not 18 yet, I’m waiting to get my CIN so that I can open my own account.” “My CIN was stolen and I have to get another one before I can open an account.”

They do not have enough income to save (21%).

“I don’t make enough money. I spend all of my income on transportation and food.” “I’m still a student, the money that my parents give me is just enough to cover my educational expenses.”

They use a parent’s account (14%)

They do not like banks because they do not trust them or because of interest fees which are prohibited by Islam (7%).

“I don’t like banks because they aren’t clear with their clients: we never know how they calculate interest fees, or when they’ll charge fees...” “Banks impose interest fees on savings accounts and it is against our religion.”

They already have a current account (7%).

0 0.2 0.4 0.6

Personal reasons

I already have a current account

I don't have enough income

I don't have a CIN

I don't like banks

I rather save at home

I use my parents' account

7%

21%

21%

7%

29%

14%

33%

33%

33%

ARDI and Non-‐Par.cipant Reasons for not Opening a Savings Account

Non-‐ParFcipants

ARDI Paricipants

The majority of the youth participants stated that saving helped them in many ways. Only 4% stated that they had not yet used their savings account and could not say how they were benefited.


page 8 of 11

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Quick Links The following were the ways in which savings helped the youth:

• In the creation or development of their business (70%): “The loan was not enough and I needed more to start my business, so I used my savings.”; “Starting a business necessitates a large investment and it isn’t profitable in the first months of operation. For the first few months I had to pay the interest with the loan itself, or pay with my savings.” Having savings made taking a loan possible.

• In the case of emergency (65%). “My father became sick and I was able to help him thanks to my savings.” “If I didn’t have savings I would have to pay for unforeseen circumstances with some of my loan, and you know there are always unforeseen circumstances! Luckily I set aside some money.”

• Finally, 7% of the youth stated that the loan did not help them save because of the high interest rates.

The participants at ARDI as well as the non-participants saved in case of potential unforeseen circumstances more than to help with the creation or development of their businesses.

The ARDI participants and the non-participants (both at 13%) use their savings for clothing and for recreational purposes, while only 2% of the other participants stated that they did so. Savings were also used, especially by non-participants, to move to another home or to gain access to basic services like potable water or electricity.

0 50 100 150 200

In case of emergency Create/develop my business

Finance personal events Financial security

I haven't used it yet Purchase of a business

Housing Clothing/Leisure

Access to basic services Independence

65 70

4 4 4 4 2 2

53 47

7 14

13 13

7 7

50 38

13

13

Benefits of Saving (%)

Loan Recipients

ARDI ParJcipants

Non-‐parJcipants


page 9 of 11

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Quick Links Managing Expenditures

The youth spent a third of their income on their business and saved almost the same amount. The remaining third was spent on their household and on recreation, at 22% and 19% of their income respectively. Among non-participants, the portion of income spent on the household (39%) was much higher than that devoted to their businesses (15%), unlike the loan recipients who spent a third of their income on their business. The higher spending on household materials by the non-participants can be explained by the fact that the non-participants did not own their own business

or because their goal was not to develop a business but simply to generate enough income to cover the household expenses. Spending for recreation and entertainment was not significantly different.

Some of the income designated for the business, saving, and recreation increased slightly after participation in the programme (2-3% more of the income), while there was a 6% decrease in household spending after the participation in the programme. The youth invested a large amount of their income from the business back into the business itself, with the intention of growing their business to develop enough revenue so that another loan would not be necessary. By investing in the business rather than in the household, the youth participants demonstrated long term planning.

0

5

10

15

20

25

30

35

40


34

22 19

32

15

39

18

30

Paricipant and Non-‐Par.cipant Spending (%)

Par<cipants

Non-‐par<cipants

0

5

10

15

20

25

30

35


32 28

17

29 34

22 19

32

Loan Recipient Spending Before and A3er the Programme

Before the programme

AAer the programme


page 10 of 11

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Quick Links The spending of loan recipients and the participants at ARDI (who work occasionally or not at all) was allocated differently. The ARDI participants spent their income primarily on savings and leisure, whereas the loan recipients used their income more evenly, spending the least on leisure. The high amount spent on savings at ARDI may be explained by the fact that ARDI participants were encouraged to save and open savings accounts.

The 13% difference in savings might be explained by the fact that the programme at ARDI focused on financial education training that stressed the importance of savings when planning for the future. Savings help youth participants with their payments despite whatever constraints there may be (both personal and business-related).

When pairing spending based on residential area and marital status, the data shows interesting results. The divorced participants spend the highest amount of their income on their business and their household, followed by married participants. Recreation and entertainment is not a priority for divorced participants at 5% of their income. Single participants spend a large amount of their income (one third) on savings and on their business. By residential area the data shows that rural participants spend large amounts of their income on savings and their business (35% and 28% respectively). Rural participants spent more on their business and saved less than the urban participants, at 40% and 28% respectively. Urban participants also spent more on entertainment than the rural participants (22% versus 13%) but this may be explained by the fact that recreation and entertainment is more readily available in urban centres.

0

20

40

60

80

100

120


32 20 20

34

50

33 5

30

34

24

17

27

Par$cipant Spending by Marital Status (%)

Married

Divorced

Single

0

10

20

30

40

50

60

70


40 27

13 28

28

18

22

35

Par$cipant Spending by Living Area (%)

Urban

Rural

0

10

20

30

40

50


0

8

48 45

34

22 19

32

Loan Recipients VS ARDI Par4cipants Spending (%)

Loan Recipients

ARDI ParCcipants


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This chapter suggests that there was considerable difference between the youth who participated in the training and loan programme and those who did not. With the help of financial education training and loan programmes, youth are better able to save and recognize the importance of saving. Better savings leads to better management of expenditures as youth prepare for unforeseen circumstances with their savings, and plan for the future of their business.

As financial service providers and MFIs develop new training and loan programmes, the differences between the loan recipients and the ARDI participants will be especially informative. The ARDI participants and the loan recipients both showed improvement with their spending and savings, which attests to the value of financial education among youth. However, the ARDI participants saved more than any of the other participants because they were not paying off a loan, and growing their business. All training programmes encourage the youth to save, but at ARDI it was especially important, and opening a savings account was facilitated as part of the training process. The difference between the two sets of participants proves that youth will rely on their training, and will take advantage of subsequent opportunities.

There is still room for finding the ideal balance between the content and duration of the training. As training programmes continue to develop the messages that they wish to instil, while honing the structure and format of their teaching, MFIs will benefit from more knowledgeable and informed clients.

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Quick Links MFI Insights on Youth LoansThis chapter shares findings from the assessment with MFI employees on the efficacy of financial education training and the lending product. It suggests that even in its initial stages, MFI staff believe the youth loan programme (including the financial education training) is effective, and that youth clients are as responsible as their adult clients. At the same time, employees were honest about the difficulties they experienced in offering a youth loan, as well as the advantages of working with youth clients. In this way, their reflections offer significant insights for other MFIs considering expanding their outreach to the youth segment, particularly in the MENA region.

MFI Insights on Youth Loans page 2 of 13

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Quick Links Financial Education Training— An Essential Beginning to the Loan Programme

In the youth financial services industry, it is common for potential clients to participate in financial education training prior to accessing services for the first time. YouthInvest partner MFIs have adopted this model for their youth lending products. Each MFI provides their own short financial education module before youth receive loans. For the first two partner MFIs, AMOS and Al Amana, these are typically six hours in length, conducted as three two-hour sessions within one week.

In the case of youth surveyed for this study, 81% of clients from Al Amana and AMOS participated in financial education training with their MFI before being awarded a loan. The following table shows the ranges in time spent in training before accessing this loan. On average youth spent approximately 2.5 hours in training.

Youth Training Average Mode Minimum Maximum

Training Duration in minutes 147 120 60 360

Youth interacting with a third MFI, ARDI, participated in a more extensive financial education and entrepreneurship programme. This program was 20 hours and ran for three full days of training. At the time of the survey, participants who underwent training with ARDI had not yet received a loan. As a result, a distinction between the two groups of respondents will be made throughout: “loan recipients” denoting youth from Al Amana and AMOS, versus “training participants” from ARDI. With ARDI, 100% of the youth interviewees participated in the 20 hours of training. Because ARDI staff had not yet interacted with youth in the context of a loan, they were not interviewed for their perspectives and recommendations (even on the training component). Therefore this section will focus on the feedback of staff from only Al Amana and AMOS.

It is important to note that although the training by Al Amana and AMOS was similar in length, it was still different in approach. At AMOS, loan officers trained the youth and later awarded the loans. At Al Amana, counsellors trained the youth and loan officers later issued the loans. These different relationships with youth also led to differing perspectives about the training and loans.


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Quick Links Staff Satisfaction and Recommendations on Training

According to AMOS employees, the training by loan officers helped the youth at a personal and professional level. The employees stated that the youth appreciated the content of the training and it encouraged them to do better and to improve their business. However, the needs of the youth can differ, as stated by this loan officer: “As soon as we introduce them to the training process and clarify the content and duration of the training, there are some that are interested, some that say they already know the subject matter, some that want only work-related training, and some who want only loan-related training.”

The MFI employees recommended the following:

• Training should be done by a trainer or a loan officer with detailed knowledge of the youth product.

• The trainer or loan officer should be convinced of the need for the training and its use and impact on youth.

• If the trainer is a loan officer, they may need a smaller portfolio of active loans than other loan officers given the time they need to spend training youth.

• The MFI may benefit from creating a bonus for trainers/loan officers as incentive to reach a higher number of youth with loans

In addition to the traditional follow-up done by a loan officer, the field staff propose that there be a follow up immediately after the training and after the loan in order to help the youth practice what they learned and to help them or counsel them on ways to improve. “The youth have more of a need for a follow-up than adults because they often lack experience. The follow-up would allow us to counsel the youth on the use of the loan and the management of their business and would also help us gain their trust and thus develop a long-term relationship with the client.” -Branch Manager in Agadir.

The youth product is a set of services: “We don’t give just a loan, we offer training, follow-up services and counselling. These are the needs of the youth.” -Loan officer.


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Quick Links Youth Loan— MFI Staff Satisfaction and Recommendations

Regarding the terms of the youth loan, the MFI employees stated:

Loan Features Staff Comments

The loan amounts were generally sufficient, and were awarded based on their needs and ability to repay the loan. Therefore some youth clients received larger loans.

“The amounts requested by the youth clients are not very high, especially for those who are just starting their business.”

“Generally, we award the youth the requested amount. If we see that they might be unable to repay the loan, we advise them.”

The duration of the loan was adequate because it is chosen by the youth themselves. However, the youth tended to choose loan durations not exceeding 15 months because interest rates increased, and hoped to renew after the 15 months at a larger amount.

“The youth clients preferred shorter periods because they are impatient and don’t plan for the long term.”

“The youth clients, especially the newer clients, take shorter loans their first time, and plan to ask for a larger loan when they renew.”

The interest rates were too high. “In my opinion the loan is adapted to youth with the exception of the interest rates which are too high” (Loan Officer in Khenifra).

“If the interest rates were lower, it would be a big advantage for the youth compared to the conventional credit lines offered to adults.” (Loan Officer in Agadir)

“We should lower the interest rates for the youth especially because they are starting businesses and they aren’t asking for large amounts.” (Branch Manager in Agadir)

The granting period of the loan was good but there could be delays because of either the training process or the validation procedure from the management.

“For loans exceeding 20,000 MAD (2,532 USD), the Branch Manager has to ask permission from the management who then comes to the branch to make a decision. It’s true that this way the loan officer is more prudent but it slows the granting period, and for the youth client there can be dissatisfaction and confusion.”


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Chapter title hereQuick Links Loan Features Staff Comments

The collateral requirements should be more flexible. The youth generally started their businesses with little to show for collateral. The endorsement of a parent as a more flexible requirement was not always appreciated by youth who considered themselves adults.

“We don’t follow all the requirements, we try to be more flexible with youth clients.”

“When we ask a youth for the endorsement of a parent, they are often offended and don’t appreciate the lack of confidence in their abilities. This is their business and they are the only person who manages it.”

“To award a loan we often ask for an existing business or at minimum experience in a business, but some youth, especially those who are starting businesses, can’t fulfill these requirements. They too should have a chance!”

There should be no grace period as it does not promote the discipline of regular payments.

“It’s true that the grace period is asked for by the youth clients who work in livestock and farming but the payments are not as regular after the grace period as they are with other clients. We went through this once and don’t want it to happen again.”

A guarantee fund should be set in place for youth loans and in the case of non-payment, the MFI would be protected and would be more inclined to offer this product.

“If we had a guarantee fund, we could take more risks with the youth clients and be more flexible with the collateral requirements or offer larger loans.”

The loans should be marketed to youth in the same way that loans are marketed to adults.

The employees suggested reaching youth clients in the same way that reach their adult clients: soliciting face-to-face at their homes or at the souk (market).

Note that according to the employees the behaviour of the loan officer is as important at the beginning as it is during the granting process of the loan. “The professionalism of the loan officer is important to promote loans and to help the youth clients find a loan that is best suited to their situation.” “You know, we adapt our language to their age.” -Loan Officer, Agadir


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Quick Links Opportunities And Challenges in Offering Youth Loans and Financial Education

This section highlights the opportunities and challenges in offering youth loans with their accompanying financial education training. It begins by outlining difficulties with each component of the program, followed by challenges in offering youth financial services overall, and then concludes with the opportunities or advantages of offering youth financial products and services.

DifficultiesAs shown in the table below, since offering the youth loan, the MFI employees encountered several difficulties, some of which were related to the youth, some to the conditions of the training or the loan itself.

Difficulties MFI Employee comments

Difficulties with the training

Challenging to assemble the youth for the training sessions.

• The youth worked and they thought that if they came to the training they would miss work opportunities and payment.

• Work schedules were not the same for everyone. “Market day is sacred for some of them.”

• There were sometimes very few youth who want a loan at a particular branch.

Slow loan granting process because of the training, or lack thereof.

“Before granting a loan the youth are required to participate in the training and it sometimes slows the granting process of the loan. The youth want the loan immediately and do not want to wait.”

“Some consider the training a burden and they don’t want to devote the time.”

The youth were not aware of the importance of the training.

“There is some reticence among some of the youth who say, ‘What’s the point of the training? We know how to manage our business, we just need a loan.’”

-Business counsellor in Agadir.

“They don’t know why the training is useful. It takes time away from their work.” -Project coordinator


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Chapter title hereQuick Links Difficulties MFI Employee comments

The loan officer did not have enough time to do the training.

Some loan officers have many responsibilities (teller, administrative duties, awarding loans, on-site visits, follow-up visits). “With the administrative duties related to the loans and on-site visits, I don’t have time to lead training sessions, and certainly not to prepare the content or to plan the logistics.”

“Sometimes it’s a trainer from management who helps the loan officer with the training of the youth or sometimes the trainer will do the training himself: he is more able and has more time to do so.”

Some loan officers were not convinced that the training was necessary.

“Some loan officers are not convinced of the necessity of the training sessions, so how can you convince the youth? In addition, some of the loan officers don’t have the right qualifications to deliver the training material.” -Branch manager in Khenifra

Youth needs vary. “Youth needs vary, some are curious, others want a loan, and some already know the content of the training.”

Difficulties with the loan features

Lack of guarantees. “The youth want to start businesses but don’t have savings, and don’t have any guarantees.” -Branch manager.

“They don’t have a stable income, and we have to take that into consideration for the repayment of the loan.”

Lack of experience. “The client has to have a minimum of six months experience in a business, which the youth generally don’t have.” -Loan officer, Agadir.

Lack of counselling. “We’ve started counselling the youth who received a loan during our on-site visits, but without support from management in the form of supervision, or reimbursing fees, we had to reduce the counselling for some and stop altogether for others.”

The work of a business counsellor is valued but can be time consuming and not well remunerated.

The work of a business counselor ensures better insight on the financial, professional, and familial situation of the youth, thus ensuring a better relationship with the MFI. However, coaching and supporting the youth should be more defined within their job requirements and better remunerated.


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Difficulties related to youth

The majority of the youth participants did not have a job but wanted to start a business.

“When starting a business, there are several risks, but we try to mitigate the risks by having the support of a parent.” -Loan officer, Khenifra.

“When a youth starts a business, we take a lot of risks, both with the institution’s money and with the youth’s business itself.” -Branch manager, Khenifra.

“When a loan is requested, the youth must be carefully selected. Some say that they want the loan before they know what they’ll do with the money, others come with ideas that they don’t know how to implement.”

Reliance or dependence on parents (or, for some female participants, their husband).

“The business of a youth is generally that of the father, and therefore it is the father who is really responsible.”

“If the business is that of the father, even if the youth takes in business revenue, the youth still doesn’t feel in charge of the business and will do only do the absolute minimum, and won’t look to improve the business.” -Loan officer, Agadir.

Some youth do not know how to manage the loan.

“Some youth don’t know that the money they have is a debt.”

“Some youth don’t know how to use the loan and can miss several good opportunities.”

Short term outlook. “The youth only look to the short term. After requesting a loan they don’t think about renewing it later, or about their future with the MFI, unlike adults.” -Branch Manager, Agadir

Problems with stability. “Not married, they are likely to move.” -Branch Manager in Agadir.

“Some of the youth dream of immigrating and moving abroad, even those who have a business here or who work with their parents. They are fascinated by wealth of the émigré youth who come back to Morocco. -Loan officer, Khenifra

Some youth do not know how much they will be able to repay.

“Loan officers are wary of awarding higher loans to youth, especially when it requires validation and a visit from management.” -Loan officer, Khenifra.


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Competition. “The youth struggle with competition, especially when they start a business without experience or other businesses in the area already provide the same service with a loyal clientele.” -Loan officer in Agadir.

Difficulties with the MFIs

Concern regarding unpaid debts.

“The majority of the field staff were concerned with the recovery of unpaid debts and weren’t interested in offering a new product to a riskier population.”

Lack of support from the management.

“We didn’t have the chance to improve the project because we didn’t have the support from management.”

“We had meeting sessions to increase awareness of the programme in the beginning, but we stopped offering the sessions. We could have done better with the number of youth participants if we had continued.”

Overall Challenges in Youth Financial Services As detailed above, accessing higher loans was not easy for youth. Even when they received a loan there were many other difficulties or impediments that prevented them from succeeding with their business. Below are principal difficulties according to the MFI employees:

• Lack of parental support: Parental support can be in the form of encouragement or advice as well as financial support. A parent can sign an endorsement of the youth to facilitate the loan. Note that the MFI employees agree that those who have parental support have “better success”.

• Lack of market knowledge: “One youth used the loan to open a bakery and bought equipment and rented a relatively expensive space. He then priced his products without taking into account the weak purchasing power of the neighbourhood who preferred to bake bread and pastries at home rather than buy them at a bakery.” “The competition is very strong and some youth don’t take that into consideration when starting their business, which will adversely affect their profitability and increase their risk of failure.”

• Lack of savings/capital, sole reliance on the loan and lack of profitability/feasibility research results in high-risk lending: “One youth used the loan to open a big store on the main road of the town, the rent was expensive but he thought that he would quickly make a profit which would cover the costs. But after three months he could no longer pay the rent and he had to close the store.” “Seasonal work like farming depends heavily on rain. One youth didn’t take into account that his business was seasonal and he was unable to keep up with his loan repayments.”

MFI Insights on Youth Loans

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Quick Links • Lack of marketing and product awareness: With seasonal businesses marketing is difficult because the businesses have a limited time of operation. “Everywhere in the region there are three weekly ‘souk’ markets. Most of the people here, especially those who work in seasonal businesses sell their products at the souks.”

• Outside circumstances: “Sometimes it isn’t even the youth or their business that have a problem, it is just bad luck, like the youth who lost all his money at a souk.” “Mohammad took a loan to move and open a butcher shop and the day that he bought the meat and stocked his refrigerator, his neighbour who shared the electricity cut the power and everything Mohammad had bought was ruined.”

• Debt: “Some youth don’t know how much they will be able to repay and it is possible to take out loans from several institutions at once.”

• A lack of experience and poor money management skills can increase the risk of failure: “One youth invested everything and there was nothing left to pay us back or his suppliers. It was only through the support of his family that he was able to overcome this obstacle.”

• Lack of self-confidence: “Most of the youth have the right knowledge and ideas but some lack the self-confidence and limit themselves to the businesses of others, like those of their parents.” “Sometimes the youth is so afraid of failure that he or she cannot act, the more so when they know that if they fail their parents or those close to them won’t give them a second chance.”

• Parental dependence: “Even when they have their own business, some youth still depend on their parents in the creation or management of their businesses, and certainly in the cases of emergency.” “As well as with the management of their business, even if the youth continues to pay the fees, we don’t know if it is the youth or their father paying the fees.”

• Recreation and entertainment: Free time for youth is often spent by recreation and entertainment which can potentially encroach upon the business and negatively affect its development. Some youth turn to bad habits like drugs and alcohol. “Sometimes the youth mix work and play and give more time, money, and energy to travel or outings with friends than they do to the business.”

• Other risks: “Some youth don’t understand the necessary paperwork to open a business and others say that the process is costly and would rather risk their business be shut down or penalized by the state.” “The youth who are street vendors face many risks, such as the fact that police might confiscate their wares, which happens often.”

• Using loan funds on other expenditures: Even when taking out a loan for a current business, the youth often use the funds to start a different business or pay off other expenses.

• The interest rates are too high: “If the interest rates are too high, the MFIs themselves can impede the development of a business.”

Note that for the most part the difficulties and challenges presented above are representative of only a minority of the youth clients, as the vast majority of the youth experienced success and satisfaction with their loans. Interestingly, the final point stating that the interest rates are too high was the most frequently stated difficulty by the youth clients, as was seen in the section outlining “The Youth Loan Features and Impressions”.


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Quick Links Advantages of Offering Youth LoansFinally, MFI staff felt that there were many advantages in offering loan products to youth. The table below shows how they ranked these advantages:

Advantages Ranking

Prompt repayment of loans 1

The youth were ambitious 2

They used the loan to finance their businesses 3

The youth were responsible 4

The youth were active 4

The youth had good ideas 5

The youth communicated well 5

Personal satisfaction in helping youth 5

Nurturing future client relationships 6

The youth were competitive and innovative 6

The youth were healthy 6

The youth were serious 6

The youth were punctual 6

The youth were capable of managing a business 6

All of the field staff stated that the youth paid back their loans as well as their adult clients and that their assumption that youth clients would be more of a risk was false. Some MFI personnel also stated that the youth repaid their loans better than adult clients: “I would rather work with youth clients because they are more punctual and more regular with their payments.” -Loan officer, Agadir. Others stated that the female participants were more likely to repay their loans on time than the male participants.

The second most commonly stated advantage was that the youth were ambitious. The employees stated that it is a quality that is lacking among many of their adult clients but always present with the youth clients. Ranked third was the fact that the majority of the youth use the loan for their business and some of them use the loan for their household.


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Quick Links Employees found that youth were responsible and that they communicated well: “People think that youth aren’t responsible but that’s not the case. Many of them work to help their parents and to improve their households, and sometimes they are the only source of income for the household.” -Branch manager, Boumia. Another suggested, “The youth behave well, are more mature than you think, and more open.” -Loan officer, Agadir. Even a branch manager had praise for the youth: “I never have problems with youth clients filling out forms when they are asked, pertaining to loan request, awarding the loan, or the follow-up. Moreover, the youth learn quickly and I communicate very easily with them.” -Branch manager, Agadir.

Some employees saw advantages in the personal satisfaction of helping youth: “By offering the youth loan, we have the pleasure of helping youth, starting their career, and promoting their business.” -Business consultant, Agadir. Among others, there was the chance to nurture future client relationships: “By accepting loan requests from youth clients, and by interacting professionally with them, they learn, and they become loyal clients.” Another agreed, “There are youth who have become loyal clients, their businesses are prospering and they have come back to us for another loan.”

The employees saw innovation and competiveness as the youth were active in adapting and managing their businesses. One loan officer in Khenifra stated, “The youth businesses follow current trends, unlike those of adults who don’t worry about the latest fashions or technology in their businesses.” Some of the youth diversified their businesses and in turn diversified their sources of income. A loan officer in Khenifra noted,

“The youth have many business ideas and need a little kick start to get going.” Finally, one employee found that they had to modify the prejudice against youth clients: “We’ve corrected how loan officers used to think about youth clients. They used to think that the youth didn’t know anything, weren’t mature, weren’t able to start or manage a business.”


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Although some MFI employees were hesitant about lending to youth, many were surprised and satisfied working with youth clients for the first time. The partnership between MFIs and youth clients promoted customer loyalty, and the youth demonstrated their ambition by quickly learning how to effectively manage their businesses while promptly repaying their loans.

MFI employees recognize that there are many challenges ahead. The features of a loan require adjustment to more adequately match the varied needs and abilities of the youth. A greater attendance of youth at training sessions would support them to develop greater understanding of how to acquire market knowledge, conduct a feasibility study, and manage money – particularly debts. Further development of the training sessions is also necessary, so that the training shifts more smoothly into the loan granting process, and provides a level of experience that will assure MFIs of a knowledgeable and responsible client.

There has already been much success with the YouthInvest training and loan programme. With the right support and mentorship, MFIs in MENA and beyond can cultivate the ambition and innovation of youth clients while maintaining their bottom line.

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Quick Links ConclusionThis study has suggested that MEDA’s loan programming with MFIs under the YouthInvest initiative has had a positive effect on youth in Morocco. Chapter 1 documented the characteristics of youth loans, youth satisfaction with these loans and precursory financial education training sessions, and outlined their recommendations to MFIs. Chapter 2 examined the relationships between loans and livelihoods: revealing a positive relationship between youth loans and income, housing, and spending habits (though not always an equalizing relationship, particularly in terms of gender). Chapter 3 outlined the relationship between loans and savings behaviour: indicating that whether through formal savings, or more informal channels, youth save more after the program than before and are more focused on investing in their business. Chapter 4 registered MFI staff perspectives on youth lending products and financial education training: suggesting that they in fact share some sentiments with youth clients about interest rates, and the required flexibility in timing to make products that will cater to the diverse needs of youth.

As a whole, and within each of these four chapters, or vignettes, this study offers important conclusions for financial service providers. Among other things, it suggests that:

1. Youth are credit-worthy and responsible stewards of the loans in their charge, repaying loans as well as their adult counterparts;

2. Youth loans improve their incomes, household/living conditions and businesses – helping youth build assets for larger loans in the future, and stronger businesses that can support the economic development of the country;

3. Individual loans are strongly desired by, and have proven highly effective with youth in Morocco – spurring one MFI partner to expand its individual loans to other clients segments;

4. Youth loans (particularly with the short mandatory financial education trainings) improve youth savings behaviour

5. Coupling mandatory financial education training with the provision of a loan is appealing to both youth and MFIs as it helps youth cultivate the skills needed to manage their loans and grow their business. Youth and MFI staff agree that training must be accessible, streamlined, and relevant; and that more than the six-hour module could be beneficial for youth

6. There are significant differences between youth who participated in the training and loan programme and those who did not: youth loan recipients in particular learned to save, manage funds and expenditures, and develop their businesses. These skills reduce the risks of youth lending, and make them desirable clients to retain long-term.

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Quick Links Developing the features of a loan is a delicate task, balancing the perspectives of youth with the realities of financial institutions. Yet, getting the characteristics of youth loans right is important for FSPs on a number of levels – it builds client satisfaction and loyalty among a generation that is just beginning its relationship with the industry; it minimizes the risks to both the financial institution and the youth; and it ensures that FSPs can maintain a double bottom line in working with vulnerable or marginalized populations such as youth.

Although youth loan recipients were largely satisfied with the features of the loans they received (there were high levels of satisfaction for the type, amount, duration and granting process), many requested larger loans and lower interest rates. MFI staff serving youth also noted that the interest rates were too high, and given that the youth clients repaid their loans as well as their adult clients, they should be given the same opportunities. Thus, there may be room for partner MFIs to make a few further adaptations of their youth products as youth seek to develop the skills necessary to create successful businesses, and to launch financially viable careers.

This study has shown that with the right balance of youth credit products and financial education support, youth loans can be very beneficial to both clients and FSPs. Even in its early stages there has already been much success with the YouthInvest loan programme, proving that MFIs in MENA and beyond can cultivate the ambition and innovation of youth clients, while maintaining their bottom line.

Summary of respondent recommendations

Youth Recommendations MFI employee Recommendations

• Offer individual loans rather than group loans

• Lower the interest rates and offer the possibility of larger loans

• Develop internships so that the youth may acquire necessary experience

• Provide further financial education training, counselling or mentorship for business start-ups, and financial management

• Treat every client equally

• Financial Education Training should be done by a trainer or a loan officer with detailed knowledge of the youth product

• The training sessions should be made more accessible and should provide a natural and streamlined link to the loan granting process

• The MFI may benefit from creating a bonus for trainers/loan officers as incentive to reach a higher number of youth with loans

• Increased market knowledge, product awareness, and marketing, are all skills that should be further developed in the training sessions

• Increased awareness of the programme and more support from MFI management will lead to more loans and more clients

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Quick Links End notes1. The agreement between ARDI and MEDA MAROC was signed in February 2011 and the first training sessions started

in the end of March in Fez on 31/03/11. No youth loan had yet been issued by ARDI.

2. These three regions were selected for the study as they are the sites of each MFI’s youth programming in Morocco. Note that Al Amana is active all over Morocco. The youth program with Al Amana was active in many regions, including Tangiers, Khenifra, Casablanca and Agadir, however the study focused on only one region. AMOS has been active in Khenifra region- one of the most neglected, poor, and largely rural regions in Morocco - for more than 10 years. This is their only area of operations. For ARDI, most of the youth trained were from Fes at the time the study was conducted so this was the natural choice for respondents, although no loan had been disbursed yet for the those youth.

3. We selected the sample on the basis of the total number of participants in each MFI. At the time of the study Al Amana had only 185 youth receiving loans, and AMOS had 131 youth loan clients; a collective total of 316.

4. A number of youth were selected from each community to serve as a control group. Out of a total survey group of 75, 28% was deemed sufficient for the control group overall, representing 18%-43% of the survey population per community.

5. Please note that some participants did not attend all sessions due to scheduling conflicts, personal reasons, etc.

6. At AMOS, clients can access two types of loans: micro-enterprise or business development loans, and agricultural loans. For most regular clients these are group loans. However, in designing a youth product, AMOS made the decision to offer individual loans because the market research suggested that this is what the youth wanted.

7. At Al Amana, youth do not qualify for individual loans until the age of 21. However from the age of 18, they can access a solidarity group loan. As of August 2011, solidarity loans comprised 36% of AAA’s loan portfolio, individual enterprise loans another 50% and individual housing loans 14%. Thus, youth had a lower incidence of solidarity borrowing than the broader portfolio, despite the age limitations pushing them in that direction. (Source: Al Amana’s Rapport D’activité 2011, available at: http://www.alamana.org.ma/Images/rapport2011.pdf)

8. Reflecting the main youth sectors of activity outlined in the ‘Youth Characteristics’ section, the majority of loans were given in artisanal industries, followed by trade. A small minority accessed loans for the service industry, followed by agriculture.

9. In both cases, MFI staff have indicated that the average size of their youth loan was larger than the average in their overall portfolio. For Al Amana, the average loan size in their overall portfolio was 6750 MAD.

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Quick Links 10. In addition to the larger minimum loan size in Al Amana, differences in loan size between the two institutions may also relate to geography. Al Amana is operating in the Agadir region, which tends to be more economically active prosperous than the region where AMOS is active, Khenifra. Businesses developed in the Agadir region tend to be bigger than those in Khenifra

11. There is a period (an average 13 days) between the date that the loan is request and the date that the loan is awarded to the participant.

12. Collateral are generally required for individual loans. The type of collaterals depends on the MFI. Generally, it could involve having a minimum of six months experience/having an existing business/having a premises (rented or owned)/signature of guarantor (e.g. one or both the parents in the case of youth)/having a register of trade/asset/housing title.

13. Note that this section includes feedback from loan recipients, training participants at ARDI and non-participants (youth who work but who have not undergone the training or received a loan) to contrast their needs with those of the other groups.

14. The acquisition of an asset does not exclude the possibility that the household already owned that asset and exchanged it or replaced it.

15. During training, a bank employee was often invited to explain savings characteristics and the process of opening a savings account. Furthermore, on the last day of training, the staff at ARDI accompanied youth on their first visit to the bank. They offered to help open savings accounts for those who wanted to open one.

16. The loan officers and the branch managers at AMOS had all undergone training given by MEDA staff in Morocco. The training aims to give the MFI employees a better understanding of the youth loan and principles to follow when teaching youth.

17. The staff of the MFIs was comprised of loan officers, branch managers, business counsellors, and the project coordinator for the YouthInvest product, who also holds the post of development director at AMOS. The interviewed staff had on average six years of experience and seniority in their position at their MFIs (one year was the minimum and 13 years the maximum) and the majority of the staff started working with the YouthInvest product from its inception. The staff of the MFIs responded to a questionnaire pertaining to youth and programmes designed for youth clients and comparing youth products with similar products designed for their usual clients, namely adults (average age, 40 years). A detailed methodology is available in Annex 1.

18. Note that the youth’s actual name has been changed to respect confidentiality.

19. Note that a housing loan is offered at AAA but not at AMOS. However, in their on-site visits the staff at AMOS noted that the youth did use some of their loan for household improvements.

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youth loan products · fsp financial service providers iga income generating activities mfi...

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