BLOG: Why Invest in Young People? The Banking on Change Youth Savings Group Model, March 2016
Why Invest in Young People? The Banking on Change Youth Savings Group Model
Did you know that whilst almost half of young people in sub-Saharan Africa say they save, 80% do not have a bank account? Young people aren’t joining traditional savings groups either; a survey in 2013 found that of 103 organisations that promote savings groups in 43 countries, only 22 per cent include youth or child-focused groups.
Why don’t young people join savings groups, and is it worth investing in them?
Banking on Change, a partnership between Barclays, Plan International UK and CARE International UK, set out in 2013 to find out. Here’s what we found:
Young people can save…
It may sound obvious that young people can save, but when we were designing Banking on Change Phase 2 and set ourselves a target of forming and training almost 10,000 Youth Savings Groups in 3 years, we faced considerable scepticism – even from our own staff.
No other NGO had reached young people at scale through savings groups, and there were plenty of doubters telling us that young people have no money to save, fritter away the money they do have, want quick wins, wouldn’t attend regular savings group meetings, would migrate for work or marriage or education and drop out…
All of this was true, to some extent. But we learned that simply by delivering youth-friendly financial literacy and enterprise skills training and making some easy but crucial adaptations to the traditional VSLA methodology, Youth Savings Groups (YSGs) can be almost as successful as adult groups.
As the table below shows, the key performance ratios for our YSGs were definitely comparable with the adult groups. And by their second cycle, a sample of young people we surveyed were on average saving the equivalent of 16% of their country’s minimum wage every week; an impressive percentage.
So why should we invest in young people?
First, their relative need. Young people are more excluded than adults, both from formal and informal financial services; if you seek to target the most excluded, you need to target youth.
Second, the “global youth bulge” and youth unemployment challenge. 63% of the population of Sub Saharan Africa is under the age of 25 (compared with just 28% in developed regions), and population forecasts suggest that over 1 billion children will transition into young adulthood over the next decade.
Moreover, the Solutions 4 Youth Employment Coalition estimates that the global economy will need to create 5 million new jobs every month just to keep pace with the increasing youth population. Young people on the cusp of seeking further education, employment or the means to support a new young family will desperately need access to finance, skills and networks to help them. YSGs can provide all of these.
Thirdly, for financial services providers, young people are your future customers. One banker in Kenya pointed out that the typical customer at his bank is in their 40s and formally employed, while the average Kenyan is likely to be in their 20s and employed informally. To retain market share and reach new customers, efforts to reach young people will be needed.
Banking on Change found that YSGs can act as an excellent platform for teaching financial and bank literacy skills, fostering regular savings habits and the ability to take, invest and repay appropriate credit. YSGs can therefore be a stepping stone to formal financial inclusion (where the young people are over the legal age for opening a bank account, of course – this age varies from country to country).
What adaptations are needed to reach young people?
Whilst the traditional VSLA approach does work for young people, Banking on Change found some simple adaptations are essential.
First, traditional outreach methods don’t work for young people. Rather than calling a community meeting and expecting young people to come, you need to reach young people where they are – in schools, in youth clubs, in sports centres, churches and mosques. You need to use young people to reach young people.
You need to plan meeting times around school and other commitments. For minors, you should make sure an appropriate adult is present, and for young women, meetings should take place in safe spaces. You should consider forming more homogenous groups, of a similar life-stage (without compromising the self-selection principle, nor excluding the hardest to reach).
And you need to plan for it to take longer – Banking on Change has several examples of YSG members saying they were not convinced until the second cycle, once they had received a share out (or seen their friends receive a share out) – consequently, their savings increased in cycle 2 and they began engaging with the group more actively.
Trainings, Timescales and Costs
This finding, that young people may be more receptive after witnessing the benefits of a YSG, has a knock on effect on training strategies. Banking on Change found that delivering additional training to YSGs yielded impressive returns – financial education pre/post test results showed an improvement of 13% after training, whilst Enterprise Your Life training, our specially-adapted youth enterprise skills curriculum, saw uplifts of 43%. But we found delivering regular refreshing trainings was crucial, to make sure young people were applying the knowledge and to enable those who were ‘less convinced‘ in the first cycle to catch up.
Some of these adaptations can increase the timespan and cost of a programme – but working at scale and delivering outreach and trainings through Youth Village Agents means programmes are still very cost effective.
The Banking on Change Youth Savings Group Model
Banking on Change formed 11,715 YSG over 3 years with over 240,000 members, exceeding our target by 143%. Our experience has convinced us that YSGs are an effective part of youth economic empowerment strategies and programming – but we believe a global effort is needed to tackle the global youth financial exclusion and unemployment challenge. We hope the Banking on Change Youth Savings Group Model will help you invest in more young people. It’s an essential investment in their future – and ours.
Read the full model