Banking the Youth Bulge: The Next Frontier in Financial Inclusion?
In the next 10 years, more than a billion children will cross the threshold into adulthood. The overwhelming majority of these newly-minted adults—nearly 90%—will live in developing countries.
There is immense potential in this “youth bulge”—a new generation that will shape the future of their communities. But it also presents many challenges. How will these young people develop the skills they need to thrive? Will they be able to ensure economic security for themselves and their families?
The global economy would need to create 5 million new jobs every month to keep up with the youth bulge. That is daunting. But, even if formal job opportunities come up short, self-employment and entrepreneurship can be promising avenues for sustainable livelihoods.
If today’s young people are to become tomorrow’s entrepreneurs, they will need much better access to financial services and much stronger financial literacy skills. That is the belief of Banking on Change—a partnership between Plan International UK, CARE International, and Barclays. Over the past three years, they have developed a Youth Savings Group (YSG) model that may prove to be a powerful tool for youth economic empowerment.
The model builds upon the successes of Savings Groups and Village Savings and Loan Associations (VSLAs). Through these groups, people come together regularly to save small amounts of money and make collective loans to other group members. As of August 2015, there were more than 11 million active savings group members in 73 countries.
These groups have many benefits: they can promote savings, act as a bridge to formal financial services, strengthen networks, and increase financial literacy. However, members are typically in their 30s, and the groups have struggled to reach young people.
Banking on Change has developed a practical guide to develop savings groups targeted specifically to young people, and to help organizations integrate Youth Savings Groups into their work. It is built upon nine key principles:
- Young people have their own spaces; reach them where they are. Invest in youth-friendly, peer-based and gender sensitive outreach.
- Young people in YSGs may have very different needs, reflecting their different backgrounds and life stages. Groups may be stronger if the young people in them are the same age or share the same goals.
- YSGs can be just as successful as VSLAs, but standard VSLA practices may need to be adapted to meet the needs of young people. Consult regularly with group members and adjust to meet their needs.
- Both saving and borrowing involve risk, especially for young people. Protection is essential, especially for the most vulnerable. Ensure that risk management is considered at every stage.
- YSGs can be a strong platform for the provision of tailored training and support to build the skills and capacity of young people. Include financial, life skills and enterprise training to support the birth and growth of sustainable livelihoods.
- YSGs can strengthen members’ welfare and resilience. Encourage groups to create a social fund, which can be used for health emergencies, school fees, etc. This will provide an additional buffer for the group and a safety net for members.
- Linking to a formal financial institution can be a logical and attractive next step. Where there is demand, link responsibly. Ensure that products and services are appropriate and that the members of the YSG have the financial skills they need. (Reference the Linking for Change Savings Charter Principles.)
- YSGs should foster youth governance, leadership and representation at the group level and beyond. Ensure young people take a lead role in designing, implementing and managing YSGs. Connect mature groups to wider youth-governed networks to represent young people’s voices and interests in society.
- Continuous learning is critical. Embed monitoring and evaluation tools in all elements of the program, and ensure that data can be disaggregated by age, gender and disability at a minimum. Include young people in the monitoring and evaluation process.
Goal 8 of the Sustainable Development Goals has committed the development community to “promote sustained, inclusive, and sustainable economic growth, full and productive employment and decent work for all.” Youth Savings Groups may prove to be a critical tool in tackling this challenge.
Banking on Change will be finalizing their model by the end of the year, but they want to hear from you! Share your thoughts in the comments section below or email [email protected].
Banking on Change presented this model at Making Cents International’s Global Economic Opportunities Summit. Now in it’s 9th year, the summit is designed to increase the impact, scale, and sustainability of youth economic opportunity programming.