Exploring the Business Case for Youth Savings #2: Tipping the scale for youth savings accounts in Ecuador
This article is the second installment in the blog series, Exploring the Business Case of Youth Savings. The series presents views on the business case for youth inclusive financial services. You will hear from financial service practitioners, policy-makers, and advocates from around the world.
The experience of one cooperative in Ecuador highlights how making the business case for a youth savings account required management to change its way of thinking. Cooperative San José has its headquarters in San José de Chimbo, a rural mountainous area about a four-hour drive from the capital city of Quito. Since 2010, the Cooperative has partnered with Freedom from Hunger to design a youth savings product to be promoted during the delivery of financial education sessions delivered by the Cooperative staff at a number of local high schools. José Guillen, General Manager of the Cooperative, points to two main reasons why the Cooperative ventured into this new target market: to meet its corporate social responsibility (CSR) objectives and achieve its business case expectations. According to Guillen, the Cooperative wanted to reach out to a sub-segment of the population that needed financial services, innovate and diversify its portfolio of services and build the financial capability of young people through financial education. However, within the first year of implementation, the Cooperative realized it would not be able to serve both objectives equally well. While the Cooperative had been able to reach significant numbers of young people through the financial education sessions, the opening of savings accounts and their savings balances lagged far behind. Two years later, San José is at a point where it has opened 2,492 youth savings accounts, with an average savings balance of US$126, adding up to $314,000 in total savings, and is considered a leader in the country in youth savings and financial education. How did the Cooperative turn this around?
The leadership of Cooperative San José took a step back and carefully examined the balancing act between their CSR and their overall business case. First, they realized that they needed to consider the context of where youth live and how they access money. Drawing from market research conducted at the start of the project, they knew that young people, especially those under 18 years of age, relied on their parents for pocket money. While the Cooperative had also tried to reach parents through a financial education session tailored specifically for them, this wasn’t enough. Both parents and youth were aware of the importance of savings, but given their busy lives trying to make ends meet, working in agriculture and living farther away from a branch, saving was simply not a priority. In essence, the Cooperative realized the need to foster a savings culture not only among the youth, but also among their parents.
About the same time, the Cooperative ventured into the implementation of smart phones to capture savings remotely in the field. This technology enables those living in rural areas to make a savings deposit without having to spend time and money travelling to a local branch.
Finally, the Cooperative acknowledged that while it had been very effective in strengthening the financial literacy of young people—with youth reporting a high level of satisfaction with the education—this process was very time and resource intensive.
So the Cooperative decided that the only way it could continue meeting its CSR objective and business case was to invest more time and resources in capturing savings in the field from both youth AND their parents and less time offering financial education sessions. The Cooperative staff now have specific milestones to achieve in terms of both savings balances and financial education. Staff meets the savings goals by visiting households and encouraging both young people and their parents to save in their accounts. They have targeted households with parents who already have a programmed savings account. Since the Cooperative is fully committed to promoting the financial literacy of young people, it continues to offer financial education sessions, but on a smaller scale. This has allowed it to maintain engagement with the community while promoting the uptake and usage of savings accounts.
The key to Cooperative San José’s success is in its improved household-level approach. Offering the financial education is still integral to the Cooperative’s outreach strategy as it demonstrates its commitment to building the financial savvy of young people, while still maintaining an emphasis on building the savings of young people and their families, an asset and security net for the household. Tipping the scale was needed to make the business case work.