LEARNING REPORT #2 Al Amal Rural Youth Case Study March 2015 IFAD Rural Youth Economic Empowerment Program (RYEEP) (IFAD Grant Number: I-R-1419-MCI) Prepared by: Timothy Nourse Making Cents International In Collaboration with: Al Amal Microfinance Bank and Silatech For: Abdelkarim Sma Regional Economist Near East and North Africa Division International Fund for Agricultural Development (IFAD) March 20, 2015 Washington D.C.
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LEARNING
REPORT #2 Al Amal Rural Youth Case Study
March 2015
IFAD Rural Youth Economic Empowerment Program (RYEEP)
(IFAD Grant Number: I-R-1419-MCI)
Prepared by:
Timothy Nourse Making Cents International
In Collaboration with:
Al Amal Microfinance Bank and Silatech
For:
Abdelkarim Sma Regional Economist
Near East and North Africa Division International Fund for Agricultural Development
1. Executive Summary With funding from the International Fund for Agricultural Development (IFAD) and in partnership with Silatech,
Making Cents International is implementing the IFAD Rural Youth Economic Empowerment Program (RYEEP); a
three-year grant to increase employment and self-employment of young people aged 15-35 in the Near East and
North Africa (NENA) countries of Egypt, Yemen, Morocco and Tunisia. The program provides capacity building
and technical assistance to local institutions to pilot youth-inclusive financial (YFS) and non-financial service
(NFS) delivery models to rural youth and to the enterprises that employ them. By 2016, RYEEP pilot projects will
reach more than 18,000 young people, facilitating formal sector or self-employment to over 3,750 youth and
delivering financial services to over 15,000 youth.
As important as these quantitative outputs is the knowledge generated by these five pilots; and thus a major
focus of the program is on capturing and disseminating this learning, with the goal of helping IFAD and youth-
inclusive financial services practitioners develop more effective and scalable programs for rural youth. The
program builds upon what we know works, to extend learning around five research topics:
Adapting and Developing Effective Financial Products for Rural Youth
Determining the Appropriate Level and Delivery System for Supportive Non-Financial Services
Using Technology to Lower Costs and Provide Youth with Alternative Forms of Finance
Linking Products or Institutions to Facilitate Movement from Informal to Formal Financial Services
Designing Innovative Approaches for Scaling Products in Rural Environments
The pilot project in Yemen has begun to produce learning across these learning topics. The Al Amal Rural
Expansion project aims to reach 6,000 rural youth with a mix of basic and adapted financial and non-financial
services. After one and one half years of operations, the project has developed a rural expansion strategy and
launched operations in 13 rural areas that are now serving 3,583 youth and counting rapidly. Experience to date
indicates that high pent-up demand for financial services in general has not yet required Al Amal to tailor its
products significantly for youth, but that as they expand further, additional refinements will be necessary to fuel
growth and secure repayment. In addition, technology and local capacity building are coming to the fore as
critical issues that will drive long-term success of the program.
This Learning Report is one of five learning products to be delivered by the RYEEP grant. It introduces the learning
agenda of the overall program and focuses on what has been learned so far from the pilot project in Yemen. It
will be updated at program end to capture lessons gained after publication.
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2. The Rural Youth Economic Empowerment Program Learning Agenda
2.1 The Challenge of Serving Rural Youth
Rural youth in developing countries make up a very large and vulnerable group. Globally, three quarters of the
poor live in rural areas, and about one-half of this population is young people.1This young and growing
population is confronted with a number of challenges to building sustainable livelihoods. The quality of
education in rural areas is worse than in urban areas and does not prepare youth adequately for existing
livelihood opportunities. The lack of basic infrastructure such as electricity and water supply limits livelihood
options and burdens youth with responsibilities that can reduce training and educational opportunities. While
agriculture is for many the most viable livelihood option, growing populations, the ongoing subdivision of land,
and soil degradation means that youth often lack access to or control of sufficient land for farming, thus
preventing or inhibiting their pursuit of this opportunity. Finally, for girls in particular, more traditional cultural
stereotypes in many societies reduce livelihood options to those within the household.
Nonetheless, rural youth are economically active and options exist for improving their livelihoods. In contrast to
urban areas, the problem for youth in rural areas is not one of unemployment, but underemployment. Youth
are active in a variety of farm and non-farm activities and for those who cannot pursue farming directly, the rural
non-farm sector can serve as the “ladder” from underemployment in low-productivity, smallholder production;
to regular wage employment in the local economy, and from there; to jobs in the formal sector.2In this context,
the challenge for those interested in rural youth development is to develop the right mix of cost-effective and
appropriate financial and non-financial services that will increase youth capacity and access to the resources
that they can use to invest in farm or non-farm opportunities.
2.2 RYEEP Pilot Projects The five RYEEP pilot projects are designed to address many of these challenges and to test different financial
and non-financial service delivery models for rural youth. Pilots are implemented by local partners, including
commercial banks, microfinance banks, local community development organizations, and for-profit companies,
and supported technically by Making Cents International and Silatech.
Plan Egypt (Egypt) – RYEEP is supporting Plan Egypt (Plan) to modify its existing village savings
and loan (VSLA) financial model to meet the needs of rural young people in the form of a youth
savings group (YSG) model. Additional non-financial services, such as enterprise development
training, offered during savings group meetings or at partner CDA training sites, will help build
beneficiaries’ capacity to improve their income generating activities and effectively utilize
financial services (formal or informal). In addition, Plan Egypt is developing partnerships with
1Bennell, Paul. Investing in the Future: Creating Opportunities for Young Rural People. Publication. IFAD, Dec. 2010, pg. 1. 2Bennell, Investing in the Future, pg. 6.
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local, formal financial service providers (e.g. Alexandria Businessmen’s Association) to encourage successful YSG
members to graduate to formal services such as credit and formal savings accounts.
The project will demonstrate whether the large-scale outreach demonstrated by VSLA programs in other
countries can be replicated with rural youth. The additional training component through the YSGs will provide
information to practitioners on low-cost ways to serve youth with non-financial services, while linkage activities
will explore how informal savings can serve as a stepping stone to greater financial service access.
Al Amal Microfinance Bank (Yemen) – RYEEP is supporting Al Amal Microfinance Bank (Al
Amal) to develop and implement its “Rural Finance Strategy for Youth.” Al Amal has proven
successful in the development of youth-inclusive financial services in urban areas, and is now
looking to increase its capacity in rural and youth-inclusive finance and then translate these
skills into service delivery to rural youth. Al Amal is exploring a variety of Islamic products3 in
rural areas, including those for livestock, which will test models beyond the typical Murabaha
model.4 In addition to tailoring its financial products and service delivery to the rural youth
market, Al Amal is partnering with its sister organization, the Reyada Foundation, to develop
and test partnership models that assist in the delivery of non-financial services, such as training on finance,
entrepreneurship, and specific livelihood practices.
The project will demonstrate how a model of urban youth financial and non-financial products can be adapted
and delivered cost-effectively in rural areas.
Al Barid Bank (Morocco) - Through RYEEP, Al Barid Bank (Al Barid) is adapting its brand-new
youth savings product, Tawfir al Ghad (designed in partnership with Silatech), launched
nationally in June 2014, to better suit the distinct needs of the rural youth clientele. In
addition to savings, Al Barid Bank will also work with microfinance institutions (MFI) to link
qualified rural youth to formal enterprise lending options and to encourage MFI youth
clientele to open Tawfir al Ghad savings accounts and manage their loan disbursements and
repayments through these accounts. In addition to the financial service provision, Al Barid will use market
research to develop customized financial literacy training and outreach models to reach rural youth. Al Barid will
also seek out partnerships with other rural youth-focused organizations to embed these trainings into existing
outreach programs.
3 Islamic Products: financial products that are compliant with sharia law, e.g. do not charge interest 4A form of Islamic lending that finances a specific good or asset for a fixed mark-up
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The project will provide learning about how large formal financial institutions can sustainably increase savings
services to rural youth. In addition, it will provide insights into how formal institutions can effectively partner
with MFIs to extend additional enterprise loans to young people.
Pro-Invest (Tunisia) - Leveraging its highly successful MobiWorks technology,
Pro-Invest will pilot MobiPOS, a mobile phone application to address supply
chain, inventory and transaction bottlenecks experienced by young rural shop
owners that by design will enable retailers to use a basic mobile phone to automate and record what they are
doing manually. This will create a formal transaction and credit history that can be used to access trade finance
from suppliers and to improve business performance through efficiency gains. The formal transaction data will
also be used as a proxy credit rating to help the retailers receive enterprise credit from microfinance institutions.
Pro-Invest will also provide supplemental non-financial services, such as training in business and financial
management, which will be customized to the needs of rural youth retail shop owners and delivered by partner
NGOs and via the MobiPOS platform.
This project will provide valuable insights into how value chain strengthening approaches can be developed
to serve rural youth. In addition, it will provide useful information concerning how to integrate technology
into rural youth support programs.
MicroCred (Tunisia) – RYEEP will support MicroCred, a newly established greenfield MFI in
Tunisia, in the design and development of Creations, the first small enterprise start-up loan
developed specifically for youth in Tunisia, with a focus on roll-out in rural areas. The
service will target start-up enterprises run by young people who are seeking financing in
agriculture and animal husbandry as well as those working within rural value chain linkages
(handcrafts, fruit and vegetables, clothing, etc.) In order to support its clients’ non-financial
skills, MicroCred will partner with CESED, a Tunisian non-governmental organization, to design, develop, and
deploy a package of business development services (BDS) in conjunction with the Creations product. The NFS
will be offered both pre and post-financing and will include concepts such as idea generation, business plan
development, and financial literacy, bookkeeping, and market access solutions.
The learning from this project will inform how best to serve rural start-up businesses through a combination
of financial and non-financial services. It will also provide information on the pros and cons of supporting
larger small enterprises as compared to microenterprises for rural youth.
2.3 RYEEP Learning Agenda – The Starting Point:
RYEEP’s point of departure for designing the pilots is the strong body of practices that youth-inclusive financial
services practitioners have developed to guide the design and delivery of financial and non-financial services for
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youth. These practices can be summed in the following principles for the delivery of inclusive financial services,
also known as the Emerging Guidelines in Youth-Inclusive Financial Services.5
1. Involve youth in market research and product development. Attention to the particularities of the
youth market and involvement of youth in product development processes may result is simple yet
critical changes to existing and new products and delivery channels.
2. Develop products and services that reflect the diversity of youth. The youth market contains sub-
segments related to age (legal age), life cycle stage (marital and parental status), gender, education,
employment status, and vulnerability. These differences should be taken into consideration in product
design and delivery.
3. Ensure that youth have safe and supportive spaces. Safe spaces help build youth’s confidence and
enable them to take advantage of opportunities. This may involve infrastructure considerations, delivery
mechanisms, and social networks.
4. Provide or link youth to complementary non-financial services. Non-financial services may include
mentoring, financial literacy, the cultivation of a savings culture, lifeskills training, and support in
livelihoods and workforce development.
5. Focus on core competencies by utilizing partnerships. Assess and complement institutional strengths
and weaknesses by collaborating with youth-serving organizations (YSOs), schools, training institutes,
and other entities, particularly in the provision of safe spaces and non-financial services.
6. Involve community. Involve the community—including family, schools, teachers, and other local
groups—to mutually reinforce and enhance the effectiveness of financial and non-financial services.
7. Establish institutional readiness. Ensure a strategic rationale for serving youth and establish
institutional readiness, including adaptable policies and appropriate staff capacity.
2.4 RYEEP Learning Topics Pilot project implementation under RYEEP will lead to learning around how these principles need to be adapted
for rural areas. In addition, Making Cents, IFAD and Silatech have decided to focus knowledge management
efforts on five learning topics of interest specifically to those serving rural youth.
Adapting and Developing Effective Financial Products for Rural Youth
Inspiration for effectively serving rural youth can be found in successful rural finance models for adults or youth-
inclusive financial service programs in urban areas. What are the key aspects of these products that need to be
adapted for successful rural environment delivery?
Determining Appropriate Level and Delivery for Supportive Non -Financial Services
5Making Cents International, December 2009
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Rural youth tend to be more poorly educated, have fewer livelihood opportunities, and are harder to reach.
What financial capability or livelihood development services should be provided in rural areas, who should
deliver them – financial institutions, NGOs or the government, and how?
Using Technology to Lower Costs and Provide Youth w ith Alternative Forms of Finance
Making the business case for providing financial services to rural youth is especially difficult considering youth’s
general tendency to save less and demand lower loan sizes, combined with the low population density and poor
infrastructure in rural areas. How can technology lower the cost of financial service delivery to youth, whether
through financial institutions or value chain actors?
Linking Products or Institutions to Facilitate Movement from Informal to Formal
Youth capacity to use financial services develops over time as they grow in experience and knowledge. While
informal financial services such as savings groups may be appropriate for youth starting out, how can these
services be linked to formal financial institutions to provide youth with the greater variety and sophistication of
formal financial services? Similarly, many youth begin informal income generating activities as their first foray
into business; how can financial or non-financial products encourage business growth and graduation from
informal to formal enterprise management?
Designing Innovative Approaches for Scaling Products in Rural Environments
Successful pilot projects can be scaled through the government – by policy changes or adoption of services by
government agencies, the market – by private sector companies or entrepreneurs seeing value in services and
offering them on a for-profit basis, or culture – when public awareness campaigns and behavior change
strategies become adopted by communities and new practices are propagated. Which scaling-up pathways are
appropriate for successful elements of RYEEP pilots and what strategies can be followed for expansion?67
6Muthoo, Ashwani, David Francis, and Oanh Nguyen. IFAD’s Capacity to Promote Innovation and Scaling Up: Corporate-level Evaluation. Rep. no. 2240. IFAD, June 2010. Web. 7 Cooley, Larry and Kohl, Richard. Scaling Up- From Vision to Large-scale Change; A Management Framework for Practitioners. MSI and the Macrarthur Foundation. March 2006
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3. Case Study: Al Amal Rural Expansion–Adapting successful urban products
for rural Yemen
3.1 Project Summary The overarching goal of the Al Amal Rural Expansion project in
Yemen is to increase employment and self-employment of rural
youth by increasing their access and ability to use financial
services, while simultaneously building their business
management skills.
This goal is broken into two supporting objectives:
Objective 1: Build the capacity of Al Amal to develop and deliver youth-inclusive financial services in rural Yemen to 6,000 youth or 30% of the total rural clients served.
Objective 2: Build the capacity of Al Amal to select and support partners to provide youth-inclusive non-financial services to 6,900 rural youth (30% of the target of 23,000).
Through RYEEP, Al Amal Microfinance Bank is adapting its urban
focused youth-inclusive microfinance approach to rural areas. Al
Amal is already a regional leader in youth-inclusive financial
service; as of December 31, 2014, it was serving 8,652 youth, or
over 22% of its overall portfolio countrywide. Al Amal has
achieved this goal by recognizing youth as a major target
segment from the institution’s inception, training staff on youth-
inclusive practices, and setting ambitious targets for serving
youth. Under RYEEP, the challenge for Al Amal is to maintain this youth-inclusive focus, while extending its reach
into difficult to serve rural areas. To do so, Al Amal established its institutional readiness by developing a rural
expansion strategy that explicitly included targets for youth. It then developed partnerships to support youth
service delivery – most notably with the Reyadah foundation, a newly formed training institute that could offer
essential supportive non-financial services including financial literacy, enterprise development, and technical
skills training. Finally, it elicited additional technical assistance to consider how technology can lower the costs
of service delivery overall, but especially to youth, and product development assistance to develop new rural
and youth-specific products.
Al Amal Rural Expansion
at a Glance
Geographic area: Yemen— Rural sections
of: Dhamar, Sanaa, Ibb, Taiz and Lahj
governorates
Local Implementers: Al Amal Microfinance
Bank, the Reyadah Foundation, local NGOs
Financial Service: Individual and group
based credit products, individual savings
products
Non-Financial Service: financial literacy,
enterprise management and technical-
oriented training
Impact-to-Date: 3,583 loans, 3,061 savings
accounts; 397 have being trained
Beneficiaries: 6,000 Rural Youth, aged 18-35
Duration: August 1, 2013 – February 19,
2016
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By project end, RYEEP will learn how its urban-designed
strategy must be adapted for rural youth, what financial and
non-financial services are necessary to successfully target
youth, and how other factors, such as technology and
partners can help to extend their services sustainably.
3.2 Target Beneficiaries
The population served under this project can be described
as follows:
Youth ages 18-35. Al Amal uses a definition of youth as
between the ages of 18-35, reflecting more traditional rural
practices where young people do not gain control over assets (including land) until a relatively late age.
Underemployment among this segment is widespread, estimated to reach between 60-70% among in rural
areas.
Geographic zones: The geographic areas of focus for the project are in the rural parts of Dhamar, Sanaa, Ibb,
Taiz and Lahj governorates. Al Amal is serving these areas through a combination of purely rural branches and
urban/peri-urban branches with rural outreach units.
Youth Livelihoods: Youth are involved in a variety of on and off-farm activities in these rural areas. The Market
study conducted by Al Amal Bank in the fall of 2014 identified youth as being very involved in the honey,
livestock, fishing, horticulture, and textile/weaving industries, as well as engaged in small businesses such as
motorcycle transport, trading, and traditional food production (e.g. cheese). While youth may have a primary
business, their income is diversified, generally derived from at least two sources.
Gender. Women’s livelihoods are constrained by traditions that restrict movement and the type of businesses
deemed suitable. Nonetheless, young rural women contribute significantly to household income and are
particularly involved in activities such as livestock raising, textiles/weaving, and traditional food production. Al
Amal seeks to target a minimum of 35% women in its clientele.
3.3 Financial Services Offered
Al Amal Bank is providing savings, general lending, and rural livelihood specific lending products under this
project. To date, Al Amal is only offering savings and general lending products; it plans to develop and deliver
rural livelihood specific products in 2015.
Savings: For savings, Al Amal is delivering its specialized youth savings product. This product was developed in
partnership with Silatech especially for youth and offers lower minimum balances and incentives to join, such as
a gift when youth client open their accounts and enrollment in lotteries. Al Amal has not changed any of the
product features for rural areas yet, though it is studying roll-out to determine if adaptations will be necessary.
Girls are a key target group of Al Amal's rural expansion
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General Lending: Al Amal offers five different products for adults and youth. These products are designed to
serve different purposes and types of collateral. While the features of these products are generally the same as
those offered in urban areas, there are differences in how young people are utilizing the products.
Group. Group lending provides relatively small loans to clients for business or household needs. Loans
are short-term, group-guaranteed, and increase in size over time with good repayment. In rural areas,
in order to decrease the cost of lending, the size of the group has been expanded from 5 to up to 25.
Considering the smaller loan size and group guarantee, the product has been attractive to youth,
comprising 28% of the youth portfolio.
Reayah (Welfare). The Reayah product is targeted at poor households who receive government support
payments. The loan sizes are small and the government payments are used as collateral. It has been
designed as a graduation product by Al Amal – used to test low-income borrowers for credit-worthiness,
with the idea that those who repay on time and have a successful business, can graduate to larger loan
products. To date, this product has been the most attractive for rural youth, with 56% of the rural youth
borrowers beginning with this product to date.
Individual. The individual loan product is Al Amal’s core enterprise lending product for adults. It offers
loans of up to 1,000,000 YR, but requires more stringent business plans and collaterals. To date, only
few rural youth have been able to obtain this loan, indicating their relative lack of assets and
opportunities. Once additional funding or donor guarantees are secured, Al Amal plans to begin delivery
of its specialized individual loan product for youth - the mashrou3i product – which has lower barriers
for collateral and smaller loan sizes.
Mawsimi (Seasonal). The Mawsimi loan is a consumption oriented product that helps active borrowers
to respond to cash-flow needs around holidays or the school season with an additional supplementary
loan. It has not been used significantly by rural youth to date, making up only 1.4% of the youth
portfolio. Due to the on-going conflict, Al Amal has decided to suspend this product because it does not
believe clients will be able to repay larger loan amounts.
Sharakat (Salary). The Sharakat loan product is for salaried employees and is generally used for
consumption purposes. Considering the under-employment of youth in rural areas, this product has not
been used significantly by rural youth to date.
Rural Livelihood Specific Loan Products: Based on its Rural Market Survey, Al Amal intends to develop value
chain specific products that include repayment terms based on the seasonality of income, and on the specific
characteristics of the income generating activity. Lending products for bee-keeping and livestock, two activities
which are popular among youth, are planned to be developed and launched in mid-2015.
The financial services offered by Al Amal that are most appropriate for youth are summarized below:
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Table 1 Financial Services Offered
Features Youth Savings Product Youth Lending Products (Mashrou3i)
To be offered by June 2015
General Group and Reayah
Products
Purpose Build assets for enterprise or consumption
Start micro enterprise Finance enterprises or consumption activities
Target Youth, ages 18-25 Youth, ages 18-35 Adults and Youth
Islamic Category
Mudaraba Murabaha, Ijarah (when applicable)
Murabaha
Amount Minimum Balance of YR250 - $1 USD
YR 30,000 to YR 250,000 ($140-$1,162)
Group: YR 50,000-200,000 Reayah: YR 35,000-100,000
Duration Demand deposit and term deposit options available
6 – 24 months Group: 6-24 months (longer terms as loans increase in size) Reayah: 12-24 months
Fees Small return based on profit of bank
1.2-2.4% per month, + .05% fees and 1% takaful (life insurance)
1.2-2.4% per month, + .01-.05% fees, and 1% takaful (life insurance)
Collateral None 1 co-signer and in some cases a group guarantee (group size 4-7 youth)
Group: Group Guarantee Reayah: Social Welfare card
Delivery Vehicle
Mobile Branches Rural Branches
Agents (disbursement/collection) Mobile Branches Rural Branches
Agents (disbursement/collection) Mobile Branches Rural Branches
Other For start-up businesses, a business plan is required and the loan is partially guaranteed by funding from Silatech
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Key Differences to Adult-focused Products
Lower minimum balance
Incentives to join, including gift upon account open and enrollment in lottery
Alternative IDs accepted (letter from municipality, marriage license) for clients who do not have national ID
Can be used for start-up businesses, as compared to adults where business must have been in operation for six months
Option for group guarantee for collateral
Alternative IDs accepted (letter from municipality, marriage license) for clients who do not have national ID
Adult and Youth products the same, however, lower loan sizes and easier collateral requirements favor youth utilization
3.4 Non-financial Services Offered
Al Amal believes that non-financial services are a crucial component of its rural expansion strategy, providing
knowledge and skills to youth that will help them to better understand the financial products offered, and to
manage enterprises more effectively, ensuring better repayment. To this end, Al Amal has partnered with the
Reyadah Foundation, a non-financial services provider based in Sanaa that Al Amal helped establish in 2013.
Through Reyadah, three types of non-financial services will be provided to youth: financial literacy, business
management training, and technical training.
Beekeeping
Al Amal’s rural market study explored prominent value chains to understand the income generating activities
that rural populations were engaged in and how they could best be supported with financial services. The study
indicated that the honey industry was a prominent one for youth, with almost three quarters of producers being
under the age of 35. In a survey of 82 producers, participants requested credit to purchase equipment, but also
training on production and business management techniques. Reyadah plans to contract local NGOs to provide
this technical training in conjunction with Al Amal’s lending activities.
Table 2 Non-financial Services Offered
Financial Literacy Training Business Management Training
Technical Training
Delivery Vehicle
Reyadah conducts TOT on financial literacy curriculum for local trainers who deliver it to youth
Reyadah conducts TOT on business management curriculum for local trainers who deliver it to youth
Reyadah contracts local technical experts to provide training
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Purpose Improve personal financial management skills and increase knowledge of financial products offered by Al Amal and other institutions
Improve business management skills of youth starting or expanding income generating activities
Improve specific technical skills of youth in promising value chains.
Curriculum Current Financial Literacy Curriculum, adapted for lower literacy and rural contexts
Adaptation of Build Your Business curriculum currently offered by Reyadah
New Training curriculum developed for specific technical skills offered