4.7 Where do we go from here?
The YFS sector has grown impressively over the past five years. Previous State of the Field in Youth Economic Opportunities publications have outlined that progress beginning with deepening our understanding about what young people want in terms of financial services, what the youth products actually look like in practice, and which products are beginning to show impact on youth financial capability. The YFS sector, however, still has many challenges to address in order to take these promising practices to scale. A special session at the 2012 Global Youth Economic Opportunities Conference gathered YFS practitioners to discuss the gaps in the sector and how to address them. The group suggested prioritizing the following three gaps:
- Conduct more research on effective models for increasing financial capability
Over the past few years, YFS have evolved to address financial services within a broader context of economic citizenship. This includes looking at how financial services can be combined with life skills and livelihoods education to create more capable economic citizens. Research, therefore, should expand to study how linking these different elements can create greater impact on youth financial capability and economic citizenship. Both the public and private sector demand a deeper understanding of what financial capability models work for youth, and the long-term impacts of these models both from the client and institutional perspectives. This research will enable policy makers to make more informed decisions for creating national level financial capability strategies for youth. Similarly most financial institutions demand more data on how YFS can impact long-term customer loyalty and financial capability prior to making the investment in youth. Part of this research should focus on alternative delivery channels, such as schools, which are used to reach young people with financial services. The role of technology should be studied, as well, to compare technology-based models to non-technology based models for youth financial capability.
- Address legal problems including minimum age requirements within the formal banking sector
Legal barriers, including minimum legal age, cosigner requirements, and anti-money laundering laws will continue to limit the formal banking sector in serving younger clients. Some financial institutions may just assume that providing youth with independent access to savings accounts is illegal. This requires continued advocacy with large banks as they devise strategies for reaching youth. Issues to consider include: 1) determining which types of products truly require a parent or guardian co-signer 2) analyzing the role of the co-signer according to the different types of transactions (account opening, deposits, etc.) and 3) determining appropriate limits on savings accounts to prevent money-laundering or terrorist activity but not discourage deposits.
- Generate more buy-in from local and national stakeholders
Addressing youth financial inclusion requires a coordinated effort between multiple actors including local financial institutions, central banks, ministries of education, ministries of finance, etc. Each of these stakeholders might address the issue from a different perspective, however. For example, a Ministry of Education would focus on livelihoods strategies while the central bank would focus on strategies for increasing the formal economy. To more effectively generate buy-in from and cooperation between these different actors, YFS advocates need to identify value for each and how to communicate that value effectively.
Creating a country-level index, similar to the World Bank’s Doing Business Index, could help to generate more buy-in for YFS. This list would rate the level of support for YFS at the national level, or, more broadly, outline the components that lead to a healthy financial environment for youth. Indicators could measure youth access to financial services, financial education programming, and financial regulation, including microfinance. This index could serve as an incentive for countries to invest in youth financial inclusion since no country wants to be found at the bottom of the list. Top performers in the list could be identified as champions and cited, or even visited, as models for youth financial inclusion.