What matters – and what doesn’t – for youth financial inclusion

YouthSave, created in partnership with The MasterCard Foundation in 2010, investigates the potential of savings accounts as a tool for youth development and financial inclusion in developing countries by co-designing tailored, sustainable savings products with local financial institutions and assessing their performance and development outcomes with local researchers.
 
The project is an initiative of the YouthSave Consortium, led by Save the Children in partnership with the Center for Social Development (CSD) at Washington University in St. Louis, the New America Foundation, and the Consultative Group to Assist the Poor (CGAP).
 
YouthSave provides an opportunity to assess the effects of savings on tens of thousands of youth and find out what matters – and what doesn’t – for youth financial inclusion. Which youth will participate in a savings program? How will participants use their accounts? To track this, YouthSave has built the largest database of its kind and recently released a report on 10,710 young participants.

 
Demographics
 
 

• Among account holders, 96 percent are enrolled in school, which seems to be a result of bank marketing strategies and reflects unique obstacles to account access faced by out-of-school youth.
• Averaged across countries, an estimated 40 percent of account holders live on less than US$2.50 per day, and 13 percent live on less than US$1.25 per day.
• Overall, girls make up 47 percent of account holders, which varies from a high of 57 percent in Ghana to a low of 38 percent in Nepal. While exact proportions fluctuate, the rankings have remained constant and coincide with these countries’ relative rankings on the UNDP’s gender inequality index.
• YouthSave appears to be contributing to the goal of financial inclusion. An average 89 percent of account holders in Ghana, Kenya and Nepal had no prior experience with formal financial institutions, and an average of 19 percent reported that the head of household was unbanked.

 
Account uptake and savings performance
 
No single demographic variable across countries explains why certain youth signed up for accounts or how much they saved. More consistent are factors related to institutional strategies.
Alternate service delivery channels. Financial institutions in three of the four countries offer account opening at schools or youth group locations. In Nepal and Ghana, there is significantly higher account uptake at branches that participate in school delivery than branches that do not. In Kenya, account uptake is highest among the four countries, perhaps because marketing outreach involves visiting schools and opening accounts on a large scale. In Colombia, the new strategy of having the bank host school assemblies and account-opening services has helped increase account uptake.
 
Marketing outreach. Financial institutions have used direct and mass-media approaches, and how account holders learned about the account is the only variable consistently associated with savings across the countries. At this early stage, we can only speculate about the relationships, but the findings suggest that savings are affected more by institutional strategy than individual characteristics.
 
Institutional commitment
 
Designing youth-friendly products, developing alternate delivery channels (e.g., schools) and conducting effective marketing for youth all require serious commitment from the financial institution. Bank partners had to work with banking regulators to facilitate access, and bank staff were trained, and often incentivized, to sell the product to a new client segment. All four partner banks forged relationships with youth-serving organizations — including Save the Children, partner NGOs, schools and others — to help connect low-income youth to the accounts.
 
Would the same youth have opened accounts without these supportive institutional arrangements? While it is too early to draw firm conclusions, our results indicate that institution-level rather than client-level factors are associated with account uptake and savings. This supports the institutional theory of asset accumulation, which states that youth respond positively when organizational frameworks and policy support for savings are in place.
 
How can other financial institutions be motivated to include youth as a valued customer market segment? As noted by one of YouthSave’s advisory board members — a senior manager at a bank that serves hundreds of thousands of youth — at our recent learning conference, broader political commitment is critical for achieving this goal.
In YouthSave countries, no explicit government mandate addresses youth financial inclusion, but other government policies encourage it. Colombia allows youth as young as age seven to open accounts on their own, and Nepal’s age of majority, 16, reduces the account ownership barrier. YouthSave stakeholders worked with regulators to allow a trusted adult to co-sign on accounts in Ghana and Kenya and provide alternate delivery channels in Nepal.
 
Given emerging evidence on the importance of taking the bank to the youth, expanding access to in-school banking may be an innovative strategy on a larger scale. Channeling youth-directed subsidies through savings accounts also could encourage financial institutions to offer such products.
 
Ongoing collection of evidence
 
YouthSave will continue to build evidence, work with financial institutions, and explore government policies that expand youth financial inclusion. In Ghana, YouthSave is conducting a large, experimental impact study focusing on developmental outcomes, including educational and health. Other experiments in Colombia and Kenya are testing the effectiveness of financial education and deposit reminder text messages. The next step will be to share evidence with policymakers and others in a position to expand access to safe savings for youth.