Children as Stakeholders: Towards the Hard Business Case of Child Savings
This article is the final 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 growing number of children and youth taking part in today’s society provides a clear imperative for financial institutions to give due attention to the role of young people in their business. Youth play a key role in corporate social responsibility policy, are children of employees, and can be lifetime value clients. Moreover, they are young workers, small entrepreneurs, and business leaders. If the future of youth financial inclusion remains limited to an elite market sector or is subsidized by governments as part of social policy, the sustainable future of youth access to formal bank products is discouraging. To encourage financial institutions to take a holistic approach to child and youth consumers, we must move beyond “the promotional piggybank” and consider children and youth as stakeholders in their futures and as a component of a profitable business model.
In response to the crucial work that is being done in this field by CGAP, Freedom from Hunger and UNCDF, we share a two-fold approach which may realize the perception of children and youth as serious stakeholders, considering the role of entrepreneurship and a cost/benefit analysis.
Much is written about the connection between financial education, financial access, behavioral change, and the development of financial capability for children and youth. However, there is a dearth of research that investigates the importance of linking financial and livelihoods education, focused on increasing the entrepreneurial and employability skills of children and youth so they can achieve sustainable livelihoods within their communities. However, results from the recent UNCDF study on the pathways to profitability for youth savings showed that 15% of youth held 90% of the total savings volume. It is important to emphasize that not all children and youth go on to become successful entrepreneurs, but if an entrepreneurial spirit shows to increase savings at an early age, a compelling business case can be made for financial service providers to link their financial capability programs to livelihoods training.
Second, a private business case can be made for offering accounts if the value of the benefits to the banks exceeds the value of the costs of endorsing such an account. One may hypothesize that children with a banking relationship are likely to retain that relationship into adulthood (particularly in an era of nationwide branching and severe bank consolidation). Tracking a multiplicity of banking relationships, with estimates balances and duration, and beginning to assign functional cost, revenue and profitability estimates for each retained account would be a step towards this hard business case.
Moreover, by tracking behavior, such as completion of higher education, employment history, family formation, use of high-cost debt such as payday loans and other financial "mistakes," we can eventually begin to supplement the private business case with the "social" business case for youth bank access, which will bode well for a sustainable future of universal youth financial inclusion.
Child and Youth Finance International (CYFI) is a non-profit organization established in July 2011 and based in Amsterdam. The organization focuses on increasing financial inclusion and education for children and youth, so that every child can graduate from primary school with financial education and a savings account they own and operate. The target for CYFI‟s global movement, launched in April 2012, is to reach 100 million children in a hundred countries by 2015. CYFI has built global knowledge and shares resources on best practices and industry research.
Professor Lew Mandell, CYFI Treasurer and Chair of its Academic Working Group, is Professor Emeritus of the Finance and Managerial Economics Department at Buffalo University.