Description of the core change(s) brought by this policy instrument
Nigeria YouWIN! is a unique youth entrepreneurship initiative led by the Nigerian government which 1,200 grants of 10 million Naira each (around €28,000) to young Nigerians with the aim of empowering young Nigerians to start or expand existing businesses. What is unique is that the programme did not actually select the winning applicants; they were chosen randomly.
Abstract summary of this Policy resource
YouWIN! was founded in 2011 to address the growing unemployment rate in Nigeria. Led by the Nigerian government, this unique initiative distributed 1,200 grants of 10 million Naira each (around €28,000) to young Nigerians with the aim of empowering young Nigerians to start or expand existing businesses. Over 24,000 hopeful entrepreneurs submitted business plans to the competition. The highest scoring plans were automatically funded, though perhaps the most interesting thing about the programme is that 729 of the 1,200 winners were randomly selected from a group of 1,841 runners up.
Evidence of results
A World Bank Report found that this initative was highly successful and created 7'000 jobs (i.e. that each job cost about 8.5k to create, a way cheaper investment than most other job-creation policies).
To some surprise, the random funding initiative was successful: a study by the World Bank found that winning the competition resulted in a 37 per cent point increase in the likelihood that a new firm would still be operating three years later. The study also found that the competition was responsible for the creation of 7,000 new jobs, meaning each job cost about $8,500 (€7,624) to create; cheaper than most other job creation policies in developing countries.
Notes and additional context
About grant-type of policy instruments (excerpt from Nesta's ‘Idea Bank’ for Local Policymakers):
Since they do not require payment of interest or equity, grants are the ‘cheapest’ form of financing from the entrepreneur’s perspective. As such, they are understandably popular with early-stage startups – despite often involving stiff competition, time-consuming applications and restrictions on the use of funds. Grants are often used to encourage growth in sectors which satisfy a greater societal need, and so may be targeted at entrepreneurs belonging to a specific demographic or to businesses with a specific purpose. Although winning a grant may give confidence to investors and banks, thus making it easier for the business to raise further finance elsewhere, reliance on public grants may be a warning signal to private investors that insufficient consideration has been given to the ultimate commercial viability of the venture. From a policy perspective, therefore, the risk of encouraging reliance on public money is often countered by requiring grants to be matched by private money.