Youth entrepreneurs engaging in the digital economy: the next generation

The COVID-19 pandemic is impacting the lives of billions of people across the globe. National authorities have responded with large-scale economic measures, but more targeted efforts are needed to support the most affected populations. Youth entrepreneurs in South and South-East Asia are one example. A better understanding of the youth entrepreneurship context can help to tailor policy responses to support their needs during the crisis, and to build more inclusive and resilient economies in the long run.

This blog presents youth entrepreneurship and financial inclusion trends in South and South-East Asia. The analysis is based on the findings of the Youth Entrepreneurs Engaging in the Digital Economy: The Next Generation report published in April 2020 by the United Nations Capital Development Fund (UNCDF), the United Nations Development Programme (UNDP) through Youth Co:Lab – co-led by UNDP and Citi Foundation – with the support of the Australian Government.

The full report can be found here.


Rates of entrepreneurship in ASEAN and SAARC countries are consistently lower for youth than for adults. This is a positive sign if younger adults are studying and developing their skills. For example, more than 45 percent of youth (aged 15-24) in India, Viet Nam, Thailand, Malaysia, and Singapore are in education, paving the road to a lower share of necessity-driven entrepreneurship in these countries.

Consistent with education trends, the share of opportunity-driven entrepreneurs is increasing among youth populations in South and South-East Asia. Governments of low-income countries are keen to incentivize this transition, replicating their medium- and high-income neighbours.

There is some positive progress in this regard. For example, falling regulatory costs are increasing the share of opportunity-driven entrepreneurs among youth. In 2018, compared to the global average it was cheaper to start a business in ASEAN and SAARC countries (World Bank, 2018). Thailand, Brunei Darussalam, India, Indonesia, and Pakistan have all lowered the time and costs associated with starting a business.

When analyzing youth engagement in entrepreneurial activities in the region, it is crucial to take a gender lens, since female youth face higher barriers to starting and growing a business. Linked to these barriers, our study finds that in most countries young women are less confident in their business skills than young men, raising a significant obstacle to inclusive growth. Positive trends are visible in Thailand, Indonesia and the Philippines, where the share of younger women who report being confident in their business abilities was similar or even better than male youth.

Graph: Share of Youth by gender seeing themselves fit to open a business in 2015 (use tabs to see different countries):


Digital technology has the potential to enable youth entrepreneurship and lower barriers associated with it. Young entrepreneurs from Asia-Pacific surveyed identified the critical role that digital business solutions play in both enabling business expansion and boosting the efficiency of existing operations. The 64 entrepreneurs who responded to the survey used a wide variety of digital solutions including resource-planning and data analytics softwares, on-line recruitment portals, and digital platforms. They applied these digital technologies particularly for marketing, sales, customer services and business operations.

However, the adoption of digital technologies in South and South-East Asia is far from evenly distributed across and within countries, particularly across education levels and gender. The rates of mobile phone ownership displayed below provide a snapshot of these inequalities.

Table: Mobile phone ownership in SAARC and ASEAN in 2017


The potential of digital technologies also lie in enabling financial inclusion. Almost two-thirds of all businesses in South and South-East Asia experience difficulty in accessing financing (World Bank Enterprise Surveys, 2017). Approximately half of all business exits in ASEAN and SAARC countries were due to either a lack of capital or limited profitability (GEM, 2019). The MSME finance gap is also expected to increase during the COVID-19 crisis. Youth-led enterprises can find it particularly difficult to obtain capital due to:

  • Lack of collateral and credit history
  • Inability to meet know-your-customer requirements
  • Low perceived estimation of their business skills and experience
  • Regulatory issues, such as minimum age requirements to open an account
  • Social and cultural norms

Although youth populations have lower access to formal finance than adults, they are closing the gap with the help of digital finance. The share of youth receiving or sending digital payments rose from 2014 to 2017 in ASEAN and from 13 percent to 21 percent and in SAARC from 24 percent to 32 percent.

In the context of the lockdowns and distancing measures under the COVID-19 crisis, digital finance can deliver an innovative and alternative means to access capital. Youth in particular are often more tech savvy and able to adopt digital finance solutions such as mobile wallets, digital credit based on alternative credit scoring, and P2P payment platforms faster than other population segments (UNCDF, 2020).

Graph: Percentage of access to digital payment services by youth

However, access to digital finance is not spread evenly amongst youth. For example, there is a 31 percent gap in ASEAN countries and a 21 percent gap in SAARC countries in digital payment usage between youth with tertiary education and youth with secondary or lower education. The gender gap in access to digital payments is significant in South Asia.

Graph: Rate of access to digital payments by male and female youth, in ASEAN and SAARC regions

COVID-19 and how Youth can be part of the Response:

As highlighted by the UN Secretary General’s Report “Shared Responsibility, Global Solidarity”, young people are among the groups most affected by the socio-economic impacts of the pandemic. Youth are more likely to be engaged in the informal and gig economy and are less likely to have assets, savings or social protection.

For youth-led micro and small businesses, the collapse of economic activities is an existential threat. Some SMEs have closed down their business, halted production, or laid off their workers; others face an uncertain future (UNCDF, 2020). At the same time, young people are key to the response to the crisis. Youth Co:Lab is capturing how young entrepreneurs have been impacted, but also how they are innovating to support their communities.

It is important to note that many of the economic relief measures rolled out to date do not reach SMEs and young people, particularly those engaged in the informal sector. Governments should consider scaling up measures such as digital cash transfers (including basic income), MSME e-grants and soft credit, and enabling access to internet and digital technologies. Other measures could include allowing international remittances agent points to re-open as essential service under the lockdown so that youth and other population segments can receive and sent funds.

COVID-19 is accelerating the uptake of e-commerce and cashless economy solutions. And globally, digital finance and business solutions are being leveraged to help mitigate the socio-economic impacts of the crisis. For example, in Malaysia UNCDF is launching a challenge to find solutions to improve the financial health of gig economy workers. In Uganda, UNCDF is supporting motor service SafeBoda to pivot its business from ride-sharing to home delivery of food, medicines and other goods.

At the same time, access issues must be addressed to ensure all youth can benefit from digital solutions. As our study shows, young women and youth with lower education and incomes are too frequently left behind. Addressing digital and financial and digital literacy will become more crucial components.

Young entrepreneurs are part of the solution, they themselves are increasingly and proactively dealing with the crisis and mitigating the impact of the COVID-19 crisis. Especially now during the current pandemic, in order to enable youth entrepreneurship and financial inclusion in South and South-East Asia, our research recommends the following key measures:

For Financial Service Providers (FSPs)

  • Develop alternative credit scoring systems for young entrepreneurs
  • Tailor mobile wallets and digital banking services to young people
  • Leverage business funding online platforms
  • Link digital financial services with existing digital services platforms
  • Introduce digital financial literacy tools tailored for children and young people
  • Support hubs and accelerators for youth social enterprise financing.

For Regulators:

  • Collect demand and supply-side data on the financing of youth-led MSMEs
  • Set ambitious and actionable targets for improving youth access to financial services
  • Formulate policy and regulatory frameworks that are conducive to digital finance and fintech solutions that have been effective in improving youth financial inclusion
  • Address gender barriers to entrepreneurship
  • Encourage partnerships between banks and non-financial institutions
  • Close the digital divide to leave no one behind

This blog was written by Azar Sultanov, Dr. Robin Gravesteijn and Dr. Zamid Aligishiev of the UNCDF in close collaboration with UNDP Youth Co:Lab. The views expressed in this article are those of the authors alone and are not necessarily the views of UNCDF.


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