Imagine serving youth sustainably...And say yes!

UNCDF and UMUTANGUHA Finance

My name is Jules Ndahayo and I have been the CEO of a Rwandan Credit union network since its inception in 2005, which is now being transformed into a microfinance company called “UMUTANGUHA Finance” (UF Ltd) to better serve its clientele. Over this time, I am proud to have witnessed how our member base grew to 59,000 depositors and 3,200 borrowers, with a strong focus on vulnerable and low income people. Sometimes people ask me where is UCU’s business case for serving youth. Let’s imagine a country where youth between 12 and 24 years of age represent 30 percent of the population, of which 60 percent have not completed education, 40 percent live below the poverty line, 55 percent are unemployed or underemployed, and where despite the developmental reasons for serving youth, only 10 percent have access to formal financial services. That’s Rwanda. In this context, serving youth was both a strategic decision for enlarging our future clientele as well as part of our mission to serve and empower the most vulnerable. When I heard about the selection process among FSPs UNCDF was holding for the YouthStart programme, I had no doubts: UCU had to be in.

Yet many people doubted at first. I remember a visit to one of our branches in a rural area where the pilot test of youth services was about to start. One of the staff came to me shyly but seriously concerned and asked if I was sure we were not going to plant seeds in a barren land. A vivid metaphor in an agricultural region. He thought youth had no money and were irresponsible “by nature”. He feared the time before collecting any fruit would be too long and would make UCU lose a lot of money.

I understood the concerns of our staff and so we made great efforts in explaining our strategy. First, we defined two youth segments: Minors below 16 who would have access to saving accounts with the authorization of a guardian; and young adults, who could access savings and also loans. Secondly, we designed the products’ features according to youth needs. Finally, we developed the marketing and distribution strategy focusing on going to places where youth convene, such as schools and churches. The target was reaching 16,800 youth by end of 2014 and to that end we launched the pilot test in January 2012 and the roll out process in October of that very year.

A year and a half later we have more data to support our initial intuition: 13,764 youth opened a savings account, 183 got a loan and 10,340 received financial literacy training. Youth currently represent 23% of our clientele, proving they are eager to join UCU to save and realize their projects and dreams. Altogether they have accumulated over US$105,000 in savings and have an average savings balance of US$9 that increases over time. What may seem more striking for many is that youth’s savings capacity and behavior, in particular young adults, resembles that of adult small saver clients’. Their average balance and annual deposits growth are fairly the same. Finally, even though UCU had the chance of receiving the YouthStart grant that covered all the initial expenses, we expect to reach the break-even point of youth services in three years after launch.

Of course, we have found many challenges on the road to making youth services sustainable. We realized we had to optimise costs, most particularly those related to the provision of non financial services, initially proving very expensive. We decided to rely on youth peers as trainers and adopted a critical minimum approach in terms of number of sessions and key messages. We are also planning to further encourage youth to increase their deposits, as we need greater savings volume from youth to reduce the break even period. The whole team will have to work hard to overcome these challenges.

In all, UCU is fully satisfied with the results obtained from youth. We started with a vision but currently have enough grounds to believe that, in addition to developmental reasons for serving youth, there is a compelling business case for serving them. If you still doubt whether other FSPs you may know would be able to serve youth sustainably, ask yourself: Is the there a demographic explosion in your region or country similar to the one I described for Rwanda at the beginning of the post? Would those youth be eager to start saving and building financial assets now as means to ease their transition from childhood to adulthood? If you suspect your answer is yes, that can be the beginning of your business case for serving youth.