Impact of Credit Counseling on the Entrepreneurial Behavior of Ugandan Youth

Uganda’s population is one of the youngest and most rapidly growing in the world with more than half under the age of 15, and three-quarters of the population under 30. Unemployment continues to pose a serious challenge in the country, particularly among youth. Furthermore, while the number of Ugandans living below the national poverty line has more than halved over the last 20 years there is still a way to go, with 19.5% still living in poverty in 2012. The Ugandan government has recognized these issues and initiated a number of interventions including business and management skills training for youth, integrating vocational education into primary and secondary level courses, developing industrial and service parks, and promoting agricultural commercialization and agroprocessing through business incubators. However, there has been low uptake of the resources available and a high default rate, which creates problems for operating the initiative as a revolving fund. A team of local researchers in Uganda set out to investigate how entrepreneurial risk tolerance determines credit demand amongst young entrepreneurs, and the impact that credit counseling has on their borrowing decisions. Their study aims to provide a deeper understanding of the personal factors associated with risk tolerance and the effect that credit counseling has on young entrepreneurs’ willingness to use credit.