4.2.2 The next frontier is developing a business case for financial capability

Citi foundation recently released a report entitled, “Bridging the Gap: The Business Case for Financial Capability.” (found here: http://www.youtheconomicopportunities.org/resource/497/bridging-gap-business-case-financial-capability) The motivation behind the research was to analyze how building financial capability is linked to increased financial inclusion, and how to begin building a business case from this angle. The report summarizes lessons learned over 15 years and US$200 million invested in financial capabilities programs. Despite this large investment, report authors state that the business case for increasing financial capability remains complex and unresolved. The report lays the groundwork for a more evidence-based approach to expanding financial capability and calls for new ways of approaching financial capability, going beyond classroom based financial education and looking at innovative, technology-based solutions.

The report indicates that the price tag for taking financial capability to scale is a daunting one billion dollars. To do this requires significant coordination between government, financial service providers and NGOs to develop the appropriate structures and business models for building financial capability. In the coming years, Citi Foundation will support NGO partners who work to improve the supply and quality of financial products, like savings and microcredit, combined with innovative, scalable approaches for delivering financial education to low-income consumers. These programs have the potential to provide much needed data for the field about the impact and effectiveness of financial education in helping consumers to establish and achieve their goals. Also, it would provide evidence to support the notion that financial education and consumer capability reinforce each other, and serve as crucial pillars of promoting responsible finance and sustainability of financial institutions’ business models. One example of testing an integrated approach for delivering financial inclusion services among youth is the Juan Felipe Gomez Escobar Foundation, detailed in the text box below.

Bright Idea: Financial Inclusion of Vulnerable Youth

The Juan Felipe Gomez Escobar Foundation aims to improve the health, social, and economic outcomes of low-income children and their adolescent mothers in Cartagena de Indias, Colombia. Last year, Citi Foundation provided seed funding to help them include financial literacy and economic empowerment for girls and young women as part of its programs and services. The Escobar Foundation integrates the provision of routine health care along with training and access to secondary school credentials, and support for securing skilled employment or launching microenterprises. Preliminary results indicate some 110 young mothers completed the pilot program in the first several months with many earning a steady income using newly gained vocational skills.

In 2012, Citi provided increased support to expand the program for more than 750 adolescent mothers, providing flexible, yet intensive course schedules and academic coaching for secondary school completion.  Youth with employment interests in fields like tourism, culinary arts, sewing, or personal care earn professional certification delivered by local technical institutions. Others benefit from entrepreneurship training, including financial management skills development, through the local Chamber of Commerce. Upon completion of feasible business plans, youth receive technical support and a microloan for startup costs from local microfinance partners. More than 400 youth are anticipated to complete high school and gain quality jobs or launch a micro-business within one year. According to Jasmine Thomas of Citi Foundation, these triple-bottom line approaches are vital to scale financial inclusion among vulnerable, hard-to-reach youth segments. The ingenuity of community-based NGOs, like Escobar Foundation, to partner with local providers and microfinance institutions is essential in demonstrating the economic potential of youth as well as a business case for greater investment in their financial capability and inclusion.