Youth Loan Scheme Proposal

          Subject: Youth Loan Scheme Proposal

In spite of the increasing recognition of entrepreneurship as a source of job creation, empowerment and economic dynamism in a rapidly globalizing world, there has been no systematic attempt to look at it from a youth angle. The tendency has been either to subsume the youth into the general adult population or to ignore their efforts to forge a livelihood through enterprise activities. This has resulted in the lack of an adequate understanding of the potential benefits of youth entrepreneurship as a means of improving youth livelihoods. Youth entrepreneurship as a viable career option.  Practical application of enterprising qualities, such as initiative, innovation, creativity, and risk-taking into the work environment (either in self-employment or employment in small start-up firms), using the appropriate skills necessary for success in that environment and culture.

Among others, the importance of promoting youth entrepreneurship (Youth Loan Scheme) in Pakistan lies in some of the following:

1.       Creating employment opportunities for both the self-employed youth and other young people

2.       Bringing back the alienated and marginalized youth into the economic mainstream of Pakistan

3.       Helping address some of the socio-psychological problems and delinquency that arise from joblessness

4.       Promoting innovation and resilience in Pakistani youth

5.       Promoting the revitalization of the local community

6.       Young entrepreneurs may be particularly responsive to new economic opportunities and trends

7.       Youth Loan Scheme gives young people, especially marginalized youth, a sense of meaning and belonging.

8.       Enterprise helps young women and men develop new skills and experiences that can be applied to many other challenges in life.

In general, as compared to adults, young people are disadvantaged in the following areas:

• more youth face problems of access to resources such as capital;
• more young people start their enterprises with lower levels of initial capital;
• more enterprises owned by young people have a lower market value or inventory;
• more youth entrepreneurs are engaged in a narrower range of activities;
• more young people tend to operate from homes or streets (lack of access to space);
• more young people do not bring experience and contacts to the business, and;
• More enterprises owned by youth tend to rely on simple tools or have no equipment at all.

Looking at some of the above advantages of Youth Loan Scheme and some of the disadvantages, the government of Pakistan needs to make sure that the major limitations of Youth Loan Scheme should be cubed so that many youths should be able to benefit from the Loan Scheme. For example about 2000 000 youths may apply but at the end of the process only about 150 000 youths may succeed to get the Loan scheme.

Mr. Prime Minister below are some of the reasons that may cause some youths not to be able to benefit from the Youth Loan scheme:-

            Limitations of Youth Loan Scheme.

1.      One of the major limitations of Youth Loan Scheme provided by the Government is the youths are always required to provide requirement of two references and one guarantor which is impossible for a common man (unsettled, unemployed and jobless youths.).

2.      With the Youth Loan scheme that I have worked with the under privileged and youths are always required to provide guarantors who are civil servants or higher and attachment of his pay slip. This is definitely not conceivable for a common man and some youths to achieve.

3.      In most cases the guarantee is needed from some rich individuals who should have at least one-and-a-half times the money against which the loan is sought. It is partially possible but not easy for poor people and some youths.

4.      Applicants will always need to provide six months’ bank statements as a proof of verification. It is not workable as people do not have such types of accounts. This is a headache for the guarantor.

For the Government of Pakistan to be able to empower the youths through the youth scheme loan the above points must be reversed or the conditions for granting the loan should be revisited if at all the government is implementing the above conditions. Because the targeted people that is unsettled, unemployed and jobless youths will not be able to fulfill these conditions.

Mr. Prime Minister, for your government to be able to archive so much from this Youth Loan scheme, you need to consider some of the following points:-

1.      It is advisable that youths are given loans to operate businesses in the field they have studied at the university or college. This will lead to efficient and effective management of resources and greater output.

2.      Youths should be encouraged to do what their hearts desire because with that they will do their best automatically to achieve their dreams.

3.      Youths who have running and lucrative businesses but with limited capital should also be part of the youth loan scheme so that their businesses should grow bigger and they will be able to employ other jobless youths.

4.      Clear and Concise Objectives. The Government should state clearly the major objective of the Youth Loan scheme. Is it to empower and provide loans to the Jobless and underprivileged youths or the Youth Loan scheme is for any kind of youth.

5.      Commercial Orientation. Since the Youth Loan scheme is not welfare or social services professional capability and technical competence should be developed that can lead to the success of Youth Loan Scheme program.

6.      Adequate Funding: Adequate funding of the scheme is able aid the government implements the youth loan program which will have significant outcomes on the target youths.

7.      Well-trained and properly supported staff. The government should be able to establish professional capability in their operations. The staffs should be highly trained and properly supported in their work. Lack of competent staffs to handle this Youth Loan scheme is a major factor that explains the failure of the Youth Loan scheme.

8.      Flexible and adaptable operation style. The government should adopt or initiate flexible administrative procedures and operation styles in delivering the Youth Loan Scheme so that every youth should have access to this Loan scheme. Rigid administrative procedures are a factor in the failure of Youth Loan schemes.

9.      Reliance on appropriate ‘micro’ delivery mechanisms.

10.  Reliance on local business specialists. The Government should also rely on a network of local people with specialized business knowledge or experience to provide informal advice and training to Youths.

11.  Initiative-Based. The Government should not attempt to impose choice of enterprise activities on the youths. The initiative to start an enterprise should come from the youth themselves which can even partly serves as collateral for the loan. As several experts observe, setting up young people as independent micro-enterprise owners, often in a line of business in which they have no prior experience with, and often without sufficient skill, is both high risk and a recipe for failure.

12.  An ‘integrated’ package for youth. This Youth Loan scheme should be like a package whereby the youths, who benefit from this scheme, the government should provide a wide range of services to youth including skills training and advice.

13.  Customer-centered loans. This point implies that for the government to be able to succeed with the scheme they should treat the youth as "clients" this is in marked contrast to many youth programs in many countries which treat youth as mere "beneficiaries". They should be given conditions for accessing the loans like bringing a business plan and accepting a mentor.

14.  Proper targeting and selection. The government should recognize that the youth are not a homogenous group, the government should make attempts to identity variations amongst young women and men in their skills, experiences, status, needs, aspirations and capacity to obtain resources - all of which influence their ability to establish and run a small business successfully.

15.  Mentoring. The government should have strong and highly effective mentoring programs that are designed to provide young people with informal advice and guidance on how to properly manage their businesses. This helps the youths entrepreneurs to overcome the constraints of limited business experience, contacts and skills.

16.  With Regards to collateral, Innovative steps are needed for new types of collateral, such as business plan, level of education, and residence status.

17.  Training and Business Development Services. Potential youth entrepreneurs and existing youth entrepreneurs need more than access to credit. The government also needs to teach the youth to know how to develop a business plan, business management, management of business finances (budgeting), time management, stress management, improving sales, managing and reducing costs, debt recovery techniques, stock control techniques, marketing and recruitment.

18.  Also with regards to providing references and a guarantor which is impossible for many youths to provide, the government should initiate other means of collateral like granting a poor youth the loan and opening (register) the business in the name of the government and but the youth should be the one operating it after which he or she has succeeded in paying back the loan, the business can now be registered in his or her name and given full ownership. Or better still, Innovative steps are needed for new types of collateral, such as business plan, level of education, and residence status. Again family compounds should be mortgaged as collateral.

19.  The Government should also realize that the Youth Loan scheme is not a robot it is a system being managed by human beings. This point is so important because situation is always like a robot dealing with a human.

JAVNYUY JOYBERT