Decent Rural Employment

Assessing youth financial inclusion in Guatemala


Guatemala is a young country. Almost 70 % of its population is under 30 years old, with a median age of 19.7 years. The agricultural sector is an important employer for young people: 1 in 3 economically active youth work in the sector. However, limited access to finance continues to be a barrier that limits youth entrepreneurship, and in general the competitiveness and productivity of micro, small and medium (MSME) enterprises.

According to data from the National Economic Research Center (CIEN, 2010), approximately one third of MSMEs in the country have been rejected or have excluded themselves from the formal financial sector.

To provide updated evidence and inform FAO’s work on youth employment in Guatemala, FAO’s project Integrated Country Approach (ICA) for boosting decent jobs for youth in the agri-food system decided to develop a study on the financial inclusion of youth in Guatemala, entitled in Spanish La inclusión financiera de los jóvenes rurales en Guatemala - Barreras, desafíos y oportunidades

This study is the result of a collaboration between the Rural Institutions, Services and Empowerment Team (RISE) and Decent Rural Employment Team (DRET) of FAO, which are both part of the Inclusive Rural Transformation and Gender Equity Division (ESP). It benefited from the technical and financial contribution of the CABFIN Partnership (Improving Capacity Building in Rural Finance), a collaborative effort in the field of rural and agricultural finance carried out by leading development agencies in this domain (FAO, IFAD, WFP, GIZ, UNCDF and the World Bank). This the third of a series of studies and corresponding ones are available for Uganda and Kenya.

Among the conclusions of the study is that the Guatemalan financial market in rural areas is highly informal, especially with regard to young people. The main barriers to formal financial inclusion for young entrepreneurs are their lack of access to forms of conventional guarantees, especially titles to arable land and real estate, as well as start-up capital or commercial contracts with other actors in the value chains. Furthermore, youth have limited financial and business education, including limited information on available financial products. This happens in a context of widespread predatory lending practices, and a rigid financial regulatory framework. According to the study, there is a pressing need to reform the current regulatory guidelines that regulate the introduction and management of digital financial products or the banking through rural agents, as these two categories of innovations have invaluable potential in terms of promoting inclusion rural finance.

In Guatemala, the banking agent model has been regulated since 2010 but can only be used by commercial banks and not, for example, by microfinance institutions or financial cooperatives. This limits the potential for expanding financial inclusion in rural areas, especially among young people. The national strategy of financial inclusion (ENIF 2019-2023) has committed to exploring in the near future the feasibility of expanding the banking agent model to microfinance institutions, savings and credit cooperatives and electronic money issuers.

The study's recommendations point to following:

  • Collect accurate data on the status of youth financial inclusion, with the objective also of updating the ENIF to specifically target young people;
  • Promote the use of alternative forms of collateral and dedicated financial support mechanisms,
  • Synergistically address barriers to inclusion found at the gender and age nexus,
  • Promote a tailor-made financial offering for those under 18,
  • Promote links contractual agreements with established actors in agricultural value chains,
  • Foster youth financial inclusion by improving the offer of digital financial services, and
  • Refining the banking agent model to directly target young entrepreneurs.

Based on the conclusions of the study, FAO Guatemala through the ICA programme has initiated the design of a financial pilot in support of young Agripreneurs.