Blog
Posted on March 18, 2020

The art of cultivating youth skills and employment

This is the second blog in a three-part series on youth employment and skill-based work. You can read the first blog on Kenya’s youth and the long road to skill-based work here.

 

Background

In developing countries, the prevalence of poorly paid jobs and informal employment point to a mismatch of skills. According to the ILO 2013 Global Employment Trends for Youth Report, “as many as eight out of ten young workers are in informal employment, six in ten lack a stable employment contract, five in ten are undereducated or overeducated for the work that they do, and six out of ten receive below-average wages.” Lack of education, professional qualifications, and prior experience are the primary obstacles that prevent youth from entering the labour market. Though education is one of the strongest predictors of employment and earnings, university education requirements are unattainable for the vast majority of students in Kenya. Most drop out of school after the primary level. University fees are out of reach for a majority of the population, particularly those from rural or marginalised communities, discouraging enrolment.

One government-led approach around the skills mismatch, affordability of education, and informality, is to foster apprenticeships and skills-based career pathways. Prior to the Lynk pilot, BFA Global and FSD Kenya conducted a feasibility study on apprenticeship and TVET programmes and determined that there was sufficient funding flowing to private and public education, which enabled students to afford loans and win scholarships. If students had access to financing however, why were the post-graduates still finding themselves unemployed? We realised, through the feasibility study, that the lack of quality tools and equipment was holding back graduates from getting work.

The concept of Starter Pack loans

Lynk offers various service categories under its portfolios. At the time of the pilot, manicure and pedicure services were a low- demand category and Lynk sought to be proactive in spurring business for their Pros. BFA and Lynk designed a pilot experiment to test whether improvements to service quality would make a difference. These changes included standardisation of supplies and a loan programme for productive assets, such as tools. Within two weeks, the Pros managed to sell manicure services to over 100 clients, which is more than what they had sold in the previous years combined. The workers who participated in the experiment also realised a significant increase in earnings.

One of the main reasons why this experiment was so successful was because the push for standardisation in the quality of products and tools used by the Pros. Lynk provided their Pros with “Starter Packs,” which included basic equipment, branded Lynk aprons, branded towels, a branded backpack to improve their professional look, and a clear list of required products to uphold their quality standards.

Thanks to a learning grant from Digital Data Divide, Lynk could upfront the cost of the Starter Pack experiment. Starting in February 2019, the Starter Pack loan programme was made available to 51 Pros in the beauty and wellness categories. Most of these Pros had gained their technical skills through an apprenticeship or TVET programme. Each Pro received the equivalent of approximately US$192.13 in required tools and equipment. Starter Packs can also come in different categories with price and quality guidelines. Recent graduates of vocational training programmes, who otherwise did not have savings or tools, were eligible for an US$80 Starter Pack programme. Throughout the year, Lynk expanded the Starter Pack loans to other categories such as installation and repair, rather than offer cash in hand for the Pros to go and purchase the tools/equipment themselves.

With increased demand for services, the Pros had sufficient job opportunities, and demonstrated steady repayment on their Starter Pack loans. The most recent cohort of graduate Pros managed to pay off 50% of their loan within three weeks and the repayment rate for the subsequent group of 51 Pros in beauty and wellness is currently repaying at a steady 76.5%. 

 Meet Doris, a Lynk Pro finding beauty in work

Doris trained for one-and-a-half years at a local beauty college in Nairobi after she completed high school. She had aspirations of becoming a doctor or a pilot, but after high school, her low-income family could not afford university fees. Doris’s academic record had suffered as a result of inability to pay and attend classes, so she resolved to pursue a skills-based career that would still allow her the opportunity to own her own small business. She easily got a partial scholarship to attend the beauty college in Nairobi with affordable tuition fees.

Doris started with her mani-pedi Starter Pack in March 2019. The pack cost about US$123, required repayment term over 12 months and a minimum repayment of US$11 per month. Six months into the term, she had already repaid 75% of the loan, leaving a balance of US$33. Beyond successfully paying back her loan, Doris also feels the following impact as a worker:

  1. She has seen a drastic increase to her earnings;
  2. She is able to generate a steady income, which has enabled her to fully support her family and siblings;
  3. She has access to more work opportunities, both within and outside of the Lynk platform; and
  4. She sees herself as a professional, especially because of the branded equipment, giving her a sense of belonging to a more formal employment category.
  5. Doris believes the Lynk platform is a pathway to creating more jobs for youth who would otherwise be jobless. By creating jobs for other youths in the same boat, the Lynk platform creates an entire ecosystem for employment and economic growth. Her aspiration is to set up a physical beauty parlour, a one-stop-shop where she will continue offering her services to other customers. She now boasts a large customer base and hopes to employ other youths in her beauty parlour to empower them.

Meet Ken, a Lynk Pro supplying the demand for plumbers 

Ken completed an apprenticeship after he finished secondary school. His uncle has been a plumber for about 20 years, and Ken used to assist his uncle while at school. Ken heard about the Lynk platform and wanted to become a Lynk Pro. He saw the platform as a great opportunity for him to continue refining his plumbing skills because he knew that his lack of any academic or professional certification would prevent him from getting hired into a salaried job. Ken also knew the market scarcity was in his favour, based on a high demand for plumbers in Kenya.

Ken also obtained his Starter Pack loan in March 2019. The plumbing equipment pack was worth US$349, and offered a repayment term over 12 months with a minimum monthly payment of US$29. By the six-month mark, Ken had repaid without interruption. By owning the right tools, he is able to take on more gigs and complete the work in less time. Nor does he have to rely on borrowing tools from friends or leasing the tools, which consumes his time and margins. The added work has allowed him to take on two new permanent assistants, effectively having become his apprentices. He also finds himself with an improved customer rating on the Lynk Platform and an uptick in demand for his services as a result.

A sketch for unlocking productivity through asset financing

Despite systemic barriers to finding a job, Lynk Pros Doris and Ken are using the Starter Pack to pioneer their livelihoods and opportunities. The Starter Pack loans have impacted their professions and lives in a  substantially positive way. The critical design feature of the loan is to finance a productive asset, an asset that is married to the work. The Pro needs the tool to qualify for the job, to do the work well and efficiently, and to build a reputation and customer base that relies on quality of output. With the tools in hand, Pros can literally get to work immediately. Both Doris and Ken believe that if they received cash loans, they would not have made the strides that they have to date. We can see why. When faced with immediate financial pressure and scarcity, it’s too easy for unrestricted cash to go towards paying off another debt, school fees, or any emergency at the expense of purchasing a tool for future income. Any selfless worker who is also a mother, a father, or a sibling would do the same. This is also why BFA is looking closely at how financial services providers can tailor credit, savings, and insurance products that help MSEs manage their intertwined personal and business finances in weathering shocks and pursuing growth.

Through the Lynk Starter Pack loan programme, asset financing shows a lot of promise, one that creates a virtuous cycle for youth workers, customers, and the platform ecosystem. Better quality, transparency, experience, and price for both sellers and buyers in an online marketplace will only accelerate its adoption and benefits. If Lynk manages to scale its operation and model, the ability to make the loan programme sustainable seems more likely, as the repaid loans can be revolved back into the programme. In doing so, we get closer to our ultimate goal to not just create employment, but also to close the skills gap and provide opportunities for young adults to grow and prosper through decent, meaningful work.

Anne Gachoka is Qualitative Researcher at BFA Global.

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