Business Opportunities For Arab Youth

The Middle East, North Africa, and Pakistan (MENAP) is one of the world’s youngest regions, with nearly 60% of its population—or almost 350 million—under the age of 30, according to new data by McKinsey.

The Middle East, North Africa, and Pakistan (MENAP) is one of the world’s youngest regions, with nearly 60% of its population— or almost 350 million—under the age of 30, according to new data by McKinsey.

In McKinsey’s latest report, “Opportunity Youth,” the consultancy argues that the contribution, innovation, and full participation of the region's youth in the economy, could double MENAP's economic output and increase job opportunities by 50%.

It helps that the vast majority—74% of the 18-64 MENAP population—view entrepreneurship as a desirable career choice. In comparison, the global average stands at 64%, while the U.S. ranks slightly lower at 63%, according to research by the World Bank. In particular, young people in MENA highly regard social entrepreneurship as a means to create a job for themselves and to gain experience that can act as change agents in various fields, as highlighted by the UN. Research by Bosma et al. found that budding social entrepreneurs outnumbered nascent commercial entrepreneurs within the region's 18-34 age group.

This interest and perspective, however, aren't translated into concrete action. MENAP's total earlystage entrepreneurship activity (TEA) is 11%, which is lower than the global average of 15%. This relative lack of entrepreneurial activity can be attributed to a fear of failure by founders. Setting up a business in this region carries a higher risk than in the U.S., for example. According to the U.S. Bureau of Labor Statistics, half of new American businesses fail within the first five years. On the other hand, MENAP's survival rate is worse, with only 50% of startups making it past the first three years in the U.A.E., the region's top country for ease of doing business.

To boost these statistics, McKinsey suggests that countries can offer government workers approved leave for starting new businesses given that the share of people in the region employed in the public sector is much higher than average. An estimated 18% of MENAP employees work in government jobs compared to only 11% globally. Additionally, by improving bankruptcy practices and IPO regulations, authorities can aim to improve exit options to reduce entrepreneurship risks.

In an attempt to bridge the SME financing gap for new businesses in the region, the banking sector can act as an intermediary and help unlock access to capital. MENAP could establish SME banks that are initially funded by the government with the target of luring private investors by offering risk guarantees on their investment in local startups and SMEs. Currently, the region covers 16% of its SMEs' financing demand.

Given the youth's extensive hold on our futures, it's critical for the Arab world's policymakers to factor this sizeable population in delivering a promising and supportive entrepreneurship ecosystem. By recognizing them as changemakers they can be empowered with the opportunity to make the world a better place for all its citizens.