An elementary school student in Nepal might stash some coins in a clay bank called a Khutruke; a teenager in Ghana might entrust her extra savings to a susu collector; while a child in Kenya might give some carefully saved money to a friend to keep for him. Around the world, context shapes the landscape for youth savings, not only shaping youth savings behaviors, but also informing savings policy, regulation, and products. Our Integrative Case Studies, conducted by research partners in the four YouthSave countries in collaboration with the Center for Social Development (CSD), aim to capture the contextual factors that will affect YouthSave outcomes and operations. Here we discuss early findings on institutional context for youth savings products in each of the YouthSave countries. These Case Studies reflect the perspectives of key informants from YouthSave partner institutions, financial institutions, and government ministries for youth and development. Case Studies will be published in early November.
One finding from the Case Studies is that financial institutions in all four countries have rarely had financial incentive to offer youth savings accounts because of policy barriers like legal age of contracting and because this type of account is expensive and less profitable than other products. Due to the low balances typically held in youth accounts, high monitoring costs and the assessment and management of risk act as barriers. “Financial institutions have little incentive to engage these clients because of the high maintenance costs involved in small transactions,” noted one Kenyan official. In addition, geographical barriers for delivery may raise financial and logistical concerns. Finally, it is harder for financial institutions to collect the information from youth that is needed to satisfy central bank or federal government requirements. For example, Know Your Customer policies require financial institutions to confirm customer identity with documents such as a birth certificate or passport. Youth often lack this documentation, and financial institutions may incur additional costs during the process of youth clients procuring these documents.
The Case Studies also report on key informants’ understanding of the barriers to saving faced by youth. These informants, who work with youth in a variety of capacities, perceive that lack of income, or low and irregular income, is a primary barrier to youth saving. Further, access to financial institutions may be limited or expensive, particularly for youth living in rural areas. Financial institution representatives observed that youth may not be literate and are not perceived as being able to save responsibly. Other financial institution representatives observed that youth may not know about financial services, or may believe that they are only for adults. Mistrust of financial institutions and concerns over privacy and security were also noted.
Other barriers to youth saving articulated in all four countries involve product features. Kenyan financial institution representatives noted that financial products are often imported from other countries, rather than being tailored to local context or needs. Colombian financial institution representatives speculated that low-income families may prefer assets with low liquidity, and that alternative or informal financial arrangements may offer better returns than formal institutions. Also, requirements in all YouthSave countries that parents/guardians have some involvement in youth accounts may be off-putting to youth who desire autonomy in managing their finances.
Yet, despite the challenges, many financial institutions remain optimistic about the promise of youth savings products. A comment from an official of Ghana’s central bank reflects this optimism about youth savings: “I want to believe youth saving is an area that the banks realize has potential to mobilize money….it takes a long time for people to draw on these accounts so it becomes a stable source of income for the banks. It is an area that when you venture into you are able to mobilize a lot so the banks can have stable funds.”
The Case Studies are a product of YouthSave. With support from the MasterCard Foundation, YouthSave is testing Youth Savings Account (YSA) innovations in four developing countries—Colombia, Nepal, Ghana, and Kenya. The five-year YouthSave project is coordinated by Save the Children in partnership with the Center for Social Development at Washington University in St. Louis (CSD), the New America Foundation (NAF), and CGAP (Consultative Group to Assist the Poor).