Calls for relaxation of collateral requirements for young people after budgetary allocations

Calls have been made for the relaxation of collateral requirements for young people following the capitalisation of institutions aimed at supporting young entrepreneurs and job creation in the 2025 National Budget.

The 2025 National Budget has sparked debate regarding its provisions for youth empowerment, following the government’s prioritisation of youth empowerment programmes, such as substantial financial allocations earmarked for institutions such as the Youth Empowerment Bank and the National Venture Capital Company of Zimbabwe.

These institutions are set to receive ZiG 77.4 million and ZiG 108 million, respectively, to assist in funding youth-led ventures and businesses.

Additionally, ZiG 113.9 million has been allocated for the refurbishment and equipping of Vocational Training Centres across the country, which will provide hands-on skills to young people, helping them transition into competitive entrepreneurs. 

Treasury also earmarked ZiG 72.1 million for the National Youth Service Programme, which aims to instill values of patriotism, discipline, and responsibility in young citizens.

However, a prominent analyst, Thokozile Ruzvidzo, also Director of Zimbabwe Women’s Resource Centre and Network (ZWRCN), raised concerns about the need for more inclusive access to financing, particularly regarding the stringent collateral requirements that limit young people’s ability to secure loans.

Ruzvido said despite these positive developments, many young Zimbabweans face significant barriers in accessing the financial resources needed to launch or expand their businesses.

“Most young people have very little in the way of collateral, which makes them unfit as borrowers in the eyes of most traditional financial institutions,” Ruzvidzo explained in a post budget analysis. 

“To address this, we need to rethink our approach to financing youth entrepreneurship. The government can learn from the Grameen Bank’s microlending model in Bangladesh, which provides loans to self-formed groups without collateral requirements. This model has proven successful in enabling access to credit for those who would otherwise be excluded from traditional financial systems.”

Ruzvidzo also pointed out that while the National Budget outlines crucial steps to support youth empowerment, it lacks direct and clear interventions to address the challenges of youth employment and underemployment.

“In view of the huge labour market challenges facing the country, the National Budget does not contain any direct and clear interventions to incentivise and promote the hiring of women, youth and persons with disabilities,” she said, noting such incentives can take the form of tax credits for employing women, youth and persons with disabilities as well as tax deductions for expenses incurred by businesses in removing physical, structural, and transportation barriers for persons with disabilities at the workplace. 

A significant gap identified by Ruzvidzo is the absence of a comprehensive Youth Employment Promotion Policy Framework, calling for the development of a policy that would create a “harmonised, integrated and coordinated approach to tackling youth unemployment and underemployment.

“The Policy will ensure the realisation of decent, secure and sustainable employment and entrepreneurship for youth,” she explained.

Ruzvidzo added that Zimbabwe’s national budget must go beyond financing empowerment programmes.

“We need a clear strategy that incentivises youth employment and entrepreneurship, and addresses the broader issues of accessibility for all marginalised groups,” said the analyst.

“Earlier in my presentation I spoke to the capitalisation for the development and empowerment of the youth programmes. However, in totality the Ministry of Youth Empowerment, Development and Vocational Training was allocated ZiG1,018.4 million (or US$28.3 million), which is equivalent to 0.37 percent of the total vote or allocation.

“The outturn for the Ministry of Youth Empowerment, Development and Vocational Training as at September 2024 was ZiG222.98 million which is about 0.34 percent  of the total expenditure. The Ministry had utilised 55.8 percent of its total vote or allocation for the year by September 2024.”

General Secretary of the Zimbabwe Communist Party (ZCP), Nicholas Ngqabutho Mabhena, weighed in that relaxing collateral requirements for young entrepreneurs was necessary because “many” young people struggle to access credit due to lack of collateral.

“Relaxing collateral requirements can help more young people secure loans to start or grow their businesses. Easing collateral requirements can actually encourage more young people to pursue entrepreneurship, leading to job creation and innovation,” Mabhena said in an interview.

“Otherwise there is no use for banks to be highly capitalised yet fail to help the very people who are in need such as the marginalised groups, Institutions should provide better access to credit and financial services.”

Mabhena noted that to address concerns about risk, banks can consider alternative forms such as intellectual property or social media followers.

“Banks can also focus more on the entrepreneur’s character and business plan, rather than demanding collateral. These banks should also give money to deserving young entrepreneurs, not those aligned to the elite or ruling,” said the ZCP leader.