FIG-Somalia supported financial institutions in Somalia helping create jobs among the youth

Despite comprising up to 80% of the population, the youth in Somalia remain largely out of the income-generating bracket with studies showing that 67% of the youth lack a source of income.

This economic exclusion has been cited as one of the contributing factors to some of the youth joining extremist groups in the hope of earning a livelihood. Others risk dangerous journeys to Europe through the high seas with some losing their lives before reaching their destinations.

However, the trend is gradually changing as more youths are now starting up small-scale businesses and slowly building sustainable sources of income. For Ahmed Mohamud, starting a business in Bosaso was the best alternative to attempting the perilous journey through the desert, and sea and hopefully landing on a European nation border. “My friends told me they were planning to travel to Europe through Sudan, and Libya before taking an overcrowded boat to Italy,” Mohamud said. He says he pondered over the idea and decided it was not worth the risk. “I approached a distant family member who was running a business in Beletweyne. He loaned me $200 and right away I started my fruit juice business.”

After six months, Mohamud says he needed to expand his business to meet the growing demand but did not have anyone to turn to. “I heard from a friend that MicroDahab was offering loans for young entrepreneurs. I approached them and for sure they loaned me $500 which enabled me to buy more equipment and increase my juice production.”

The story of Mohamud resonates with many youths in Somalia who are keen on starting up their business and earning an income instead of travelling overseas or even falling to extremist groups. Many of them lack collateral to access credit from financial institutions but with the gradual increase in access to finance from banks and microfinance institutions, more youth are now able to acquire capital to start or expand their businesses.

Hannah Hassan, the marketing manager at MicroDahab, a microfinance arm of Dahabshiil Group says MicroDahab has developed credit facilities to support the youth to start and run businesses. “MicroDahab has contributed to supporting job creation among youth in Somalia by providing them an avenue to secure funding that they otherwise may not receive anywhere else to start a business or expand an already existing one,” Hannah said

She says the lack of funding is a major impediment to youth employment in Somalia but adds that MicroDahab has been at the forefront to address this challenge. The Finance for Growth programme in Somalia (FIG-Somalia) which is funded by the European Union has been instrumental in widening access to finance in Somalia through financial institutions such as MicroDahab.

Professor Yahye Ahmir, the dean of Mogadishu University and also an economics professor says financial institutions in Somalia are critical in supporting the youth to start businesses and create jobs. “Financial institutions can impact job creation by contributing to the growth and sustainability of small and medium enterprises by offering credit/loans,” Professor Ahmir says.

He adds, “Moreover, they can give a boost to employment through access to finance in infrastructure and the real sector of the economy which provides significant employment and spillover impact to the supply chain in the economy.”

As the population in Somalia grows, thanks to the improving economic situation and relative stability, the demand for sustainable incomes equally rises. Financial institutions will therefore need to continue innovating and developing responsive products to widen access to finance among the youth and spur economic growth through job creation. Programmes such as FIG-Somalia critical in realising this objective.