Financing and Financial Inclusion: Accelerating Youth-Led Economies in Asia-Pacific

By Faiz Shah, President, Yunus Thailand Foundation and Executive Director, Yunus Center, Asian Institute of Technology

Youth Co:Lab’s 10^th anniversary is a reminder of the financial inclusion dilemma that catalyzed its vision. For the region’s 1.2 billion young people, access to business finance remains a huge challenge. The past decade has been transformational, with seamless digital ecosystems more accessible than ever. Yet, financial inclusion remains a challenge for young people.

At the core of this challenge lies the digital divide, characterized by two dynamics.  As Youth Co:Lab enters its second decade, bridging the last mile of Financial Inclusion, particularly for rural, non-tech enterprises is critical to regional economic stability.

At the practical level, this dual challenge manifests as data asymmetry where the lack of credit information about vulnerable individuals, particularly the unbanked, increases risk for private sector lenders, bottlenecking accessible financial services to low-income populations, where it is most needed. Market failure in financial inclusion is structurally rooted in free market principles, where profit is determined by client stability, credit risk, and transaction costs. Markets evolve to make room for alternatives such as Muhammad Yunus’ Social 2007 business model, which has shown how philanthropy can successfully be channelled into viable social investments.

This market evolution is already visible in critical shifts in financing models. Over the past decade, we have witnessed steady financial evolution from rigid, collateral-heavy, high interest banking to well-designed dynamic data-driven systems that move borrowers from cyclical microloans, to moveable assets or reputation-leveraged cash flows. For example, conventional microfinance has made way for blended finance, where public or philanthropic funding is used to reduce risk and attract private investment into underserved markets. In the Asia-Pacific region itself, this systemic shift is exemplified by young people evolving from borrowers seeking credit, to becoming innovators of blended capital.  

Blended finance is a gamechanger, drawing public or philanthropic funds to "de-risk" private investments. Data symmetry is its decision-support backbone. Equal access to secure financial data across consumers and lenders bridges the digital divide.  It enables more reliable credit scoring and expands access to mainstream finance for underserved populations.

The coming decade will have to see a faster transition towards inclusive financial frameworks and replicable structures. Templates are emerging. UNDP’s Strategic Framework for Blended Finance showcases replicable, market-wide structures. OECD’s DAC Blended Finance Guidance demonstrates that the highest private capital mobilization accompanies market-wide risk-sharing. Thailand’s pioneering Social Enterprise Promotion Act (2019) creates regulatory space for impact businesses and links them to earmarked credit lines from the Government Savings Bank.

South Asia too has good examples of ecosystem shifts, spanning policy and practice, that boost youth financial inclusion. India’s Account Aggregator Framework, with its access to 250 million digital accounts, enables the Mudra Yojana initiative, a national micro-lending scheme, to offer low-risk collateral-free loans to young entrepreneurs. By integrating its Youth Business & Agriculture Loan scheme with commercial banking, where the government absorbs 90% of the risk, with a 90:10 debt-equity ratio, Pakistan lowers the entry barrier for first-time young business owners. In Bangladesh, BRAC’s microfinance products prioritize climate-adaptive and device-based loans for 12 million youth. 

With digital account ownership in Asia-Pacific standing at 83%, while business borrowing is as low as 14% in select pockets, it is clear that data asymmetry remains a persistent bottleneck across the urban-rural digital divide. While an urban fintech start-up can leverage transaction data to attract investment, lack of impact data for an organic farmer restricts access to business funds. The issue is not investor interest in sectors like agriculture or circular economy, but the data vacuum that pushes investment towards low-risk tech sectors.

Two persistent obstacles remain: the digital divide between urban tech hubs and rural areas, and a capacity gap in financial literacy. This creates a scenario where urban youth gain access, while rural youth have access but lack agency to navigate complex financial systems.

A much faster transition is possible by creating data symmetry solutions across four key system-level problems. One, building alternative risk frameworks that make fragmented financial data compatible with existing credit rating frameworks, such as those used by S&P and Moody's. Two, attracting Development Finance Institution (DFI) investments away from “senior debt” (42%) towards “junior” prospects (11%), augmenting philanthropic funding available to “first-loss” entrepreneurs. Three, filling regulatory gaps to tighten data security, to prevent investors shying away because of “headline risks” associated with data breaches. And four, reducing due diligence and transaction costs by bundling thin-file portfolios into investment-grade assessments as done by The World Bank.

The World Economic Forum recommends five milestones that can be championed over the next decade. First facilitating development of legal frameworks for collateralizing movable assets. Second, co-creating scalable social collateral models that build trust and technical capacity. Third, exploring revenue-based financing options, where repayments are tied to a business's actual income rather than fixed instalments, that match business cashflows. Fourth, aggregating impact data for investors to unlock finance pools. And fifth, identifying and promoting purpose-driven investments in response to rising demand for long-term community resilience.

Youth Co:Lab is well-placed to drive this transition, connecting young entrepreneurs, policymakers, and investors around the data and financing solutions that make youth-led economies across Asia and the Pacific not just possible, but sustainable.

About the Author

Faiz Shah is President of the Yunus Thailand Foundation and Executive Director of the Yunus Center at the Asian Institute of Technology. His work focuses on social business, financial inclusion, and blended finance solutions for underserved communities across Asia and the Pacific.