A common criticism of international development work is that it is unsustainable. Grant funding dries out, the international development agency leaves, and the program or services offered phase out. What would a financial products and services program aimed at sustainability look like? A recently concluded project in Ethiopia is a promising illustration.
(meaning “for tomorrow” in Amharic) is a youth savings product offered by PEACE MFI S.CO
in Ethiopia. The financial service provider (FSP), with technical assistance from Women's World Banking, began offering Lenege in 2011 as part of YouthStart
, a UNCDF initiative established in partnership with The MasterCard Foundation. The aim was to increase access to savings and financial education for low-income youth in Sub-Saharan Africa. Since its rollout five years ago, the youth savings product, supported by YouthStart, has significantly contributed to the growth of PEACE MFI S.CO’s savings. As of June 2016, the number of youth clients exceeds the number of adult clients: 37,212 to 28,291.
With the end of the YouthStart program, we reflected on the future sustainability of Lenege and wanted to share how other FSPs targeting low-income youth can learn from this experience. Overall, PEACE MFI S.CO is doing many things right based on best practices in the field. Nevertheless, our analysis shows that they have an opportunity to make their youth savings product even stronger.
What Lenege is doing right
PEACE MFI S.CO senior management built internal buy-in
to target the youth segment by creating a Lenege task force, communicating the importance of youth savings to all staff, and assigning specific roles to senior staff who were accountable for the program. The FSP created the Child and Youth-Inclusive Finance and Education Department in December 2014 to support institutionalization efforts for Lenege and is striving to continue key activities, such as marketing and financial education, that they were able to start thanks to YouthStart. PEACE MFI S.CO also designated a child and youth-inclusive finance and education manager at the head office, as well as a youth champion at every branch.
This is coupled with management stressing to all branches the importance of performance against gender targets through regular monitoring and follow-up. This led to outreach tactics such as sponsoring events (for example, volleyball tournaments) that were appealing to girls. PEACE MFI S.CO also piloted Lenege to married, rural girls
in Amhara, in partnership with the Population Council’s Meserete Hiwot Program for Married Adolescents in Ethiopia. Participants and graduates of the program, which consisted of mentor-facilitated weekly groups covering a comprehensive livelihoods curriculum (reproductive health, HIV/AIDS, sanitation, and more), were linked to the Lenege account and complementary financial education.
In addition, the FSP increased its budget for marketing and financial education and regularly provides financial education in schools post-grant. Branches market Lenege to the community using local mini media (like public service announcements) and postcards, and at coffee and tea events. Ongoing deposit collection at schools and other accessible areas help make Lenege continually visible.
In terms of ensuring continued uptake and use of accounts, PEACE MFI S.CO decided not to charge dormancy fees for inactive accounts and is promoting deposit behavior through financial education. This has helped Lenege savings balances become an important source of low-cost funds for the institution for on-lending.
What Lenege could be doing better
The institution has not yet developed a migration strategy for Lenege clients once they surpass age 24, which is a missed opportunity to build customer loyalty, better serve client needs throughout their life, and ensure youth clients remain with the financial institution in the long-term. The institution is aware of this gap and is committed to developing a strategy in the long term. Additionally, the number of adult savings accounts at PEACE MFI S.CO has increased since Lenege was launched; however, this increase may be due more to the increase in branches or natural growth (i.e., expansion with or without the existence of Lenege). PEACE MFI S.CO’s system currently does not capture the number of adult savings accounts opened by Lenege client parents or guardians. Also, there are currently no cross-selling efforts to reach Lenege parents/guardians with other savings or credit products.
Unlike some other financial institutions, PEACE MFI S.CO was a credit-driven institution, and youth — not adult — savings was a key driver of its savings portfolio increase. The FSP has an opportunity to reach even more parents/guardians with its products given the strong growth and outreach activities of Lenege, and further build its adult savings portfolio.
PEACE MFI S.CO’s experience highlights the important role of funders in helping to jumpstart youth savings programs at financial institutions seeking to serve low-income youth. But it is equally vital that financial institutions are prepared to cover the necessary investments needed to institutionalize their youth products, particularly after donor funds are depleted. In the case of PEACE MFI S.CO, they continue to offer the youth savings product and now have a child and youth finance officer since funding ended in 2014.
If designed and operationalized well, these products can achieve profitability and sustainability on their own, which is a benefit for the institution but also for the financial inclusion of low-income youth in the long-term.