8.3 Youth-Friendly Market Research around the World is Helping to Identify Trends in Youth Financial Behavior

Building on the market research tools and best practices shared in the 2010 State of the Field publication, this year researchers participating in the YouthSave and UNCDF-YouthStart1 projects and at Plan Indonesia came together to share some emerging trends in the youth market. These findings, combined with market research findings presented in the 2010 State of the Field publication from MEDA, Population Council and Freedom from Hunger, will help other practitioner organizations as they set out to study their own youth markets.

YouthSave is a consortium project led by Save the Children, with Washington University’s Center for Social Development, The New America Foundation (NAF), and CGAP, in partnership with The MasterCard Foundation. Its goal is to develop and test youth savings products in Colombia, Ghana, Kenya, and Nepal. During the initial phase of the project, experts researched youth markets in each country to understand savings habits and needs with youth aged 12-18. The UNCDF-YouthStart project conducted youth-inclusive market research with youth aged 12-24 in nine countries2 in Sub-Saharan Africa for similar purposes. Plan Indonesia also conducted market research with girls aged 15-29 in Central Java.3

Some of the key trends from their research include:

  • Youth perceive and face barriers in access to financial services, including the following:
    • Cost and distance to access FSPs: Many rural youth shared that the high transportation costs to and from a FSP can create a burden to accessing financial services. In other instances, youth, particularly young women, are unable to travel to a FSP without supervision.
    • Lack of education, confidence, and awareness by youth: Many young people are dissuaded from approaching a FSP because they believe financial services are not appropriate for them. In most of the 14 countries surveyed, youth were frequently heard saying, “Banks are for adults,” or “In my culture, it’s not normal [for youth] to deal with financial institutions.” These youth are either not aware that they could access a financial product through a formal financial institution or do not have the confidence to take the first step towards doing so.
    • Lack of education, confidence, and awareness by community members: Many community members, including family members, local leaders, and even bank representatives, often have negative impressions regarding youth access to financial services. Often uneducated about the potential benefits of YFS, these individuals believe access to financial services will have an adverse effect on the young people in their community. In an interview with YouthSave, Mathew Macharia, General Manager, K-Rep Development Agency in Kenya, suggested that youth’s motivation for saving may be lower because parents and community members doubt a young person’s ability to responsibly manage their finances and fear that young people may steal in an attempt to generate savings for a deposit.4
    • Product features: Perhaps most importantly, YouthSave research shows that often existing financial products and services that are available to, or even targeted at, youth are not appealing to this market segment. Many of the existing youth products in Kenya, for example, have been imported from other countries; however, they remain untailored to the Kenyan context and contain elements such as an opening fee or operating balances that Kenyan youth cannot afford.
  • Young people access income from multiple sources.

In line with market research presented by MEDA, CHF and Freedom from Hunger in previous State of the Field publications, YouthSave and the UNCDF-YouthStart partners’ market research also highlighted that youth do in fact have access to money. However, this money tends to come from multiple sources and varies by age and school enrollment status:

  • Parents and family: Most youth reported receiving some money on a regular basis from parents and family members. For youth under the age of 14, this tends to be the main source of income.
  • Working for pay: Casual labor and small businesses are also prevalent among the youth interviewed, though out-of-school and older (19 to 24 year olds) youth tend to rely more on this income source. In-school youth were more likely to report working part-time than fulltime.
  • Two main patterns of income appeared across Kenya, Ghana, Colombia and Nepal:
    • Small amounts of fairly regular income: As noted above, youth often receive small sums of money on a regular basis either from parents and family or from odd jobs or chores.
    • Larger amounts of income on an occasional basis: At times youth will receive larger amounts of money from their parents or family as a gift for an event such as a birthday or holiday. These larger sums may also be work- and season-related. Market research carried out by Postbank and Save the Children show that in the coastal parts of Kenya youth often see an increase in income during the tourist season, with lower salaries throughout the duration of the year.5
  • Youth expenditures focus on personal and basic needs, household support, and savings.

Although young people’s spending habits vary by individual and country contexts, some trends can be seen. YouthSave market research in Kenya showed that 36 percent of youth surveyed mentioned they spend their money on confectionaries and soda; 19 percent on basic needs (clothes, transport, and basic hygiene products); 11 percent on savings (formally or informally); 11 percent on investing in animals; ten percent on household needs; and nine percent on recreation. These trends were similar in Colombia, Ghana, and Nepal, as well as across the UNCDF-YouthStart countries.

UNCDF-YouthStart’s research also pointed to differences by age, school status, and sex:

  • Younger children tend to spend more on smaller expenses that fulfill their “wants” (food, candy, entertainment).
  • Older youth tend to contribute more to household expenses and basic needs.
  • Out-of school youth invest more in small income-generating activities such as selling produce at the local market.
  • Girls, especially young mothers, are more likely than boys to spend money on basic needs for children (clothes, shoes, and food) and school materials.
  • Young people save for short-term and long-term goals.

According to YouthSave and UNCDF-YouthStart, most youth are willing and able to save money. This reinforces findings from MEDA, CHF and Freedom from Hunger. However, their reasons for saving vary considerably, which influences whether they are saving in the short-term or long-term. Almost all of the young people had short-term savings goals that often coincided with their spending habits (school materials, family expenses, and personal expenses). Longer-term savings goals included pursuing education and business start-up. Emergency funds tended to be put aside for both short-term and long-term needs. Population Council’s research reinforced these trends, where girls, aged 10-19, save primarily for personal items and education, followed by emergencies and household expenses. Similarly, girls who participated in Plan Indonesia’s market research said they primarily saved to meet financial obligations such as education, household expenses or small business expenses; social obligations including the Muslim Eid celebration, donations for marriages in the community; and for emergencies.6

  • Youth save through formal and informal mechanisms.

UNCDF-YouthStart’s and YouthSave’s research shows that youth save mainly through informal mechanisms, including using piggy banks, hiding it somewhere in the house, or through tontines7 or Rotating Savings and Credit Associations (ROSCAS). In Burkina Faso, 29 percent of Le Reseau des Caisses Populaire du Burkina (RCPB) clients save by giving their money to trusted parents or friends. In Rwanda, most youth save through informal associations and groups like tontines/ROSCAs or other village savings and loans associations (VSLAs).

The reasons for saving through informal mechanisms are linked to the access barriers mentioned in the policy section at the beginning of this chapter. These include convenience, where saving at home is easier and does not require travel; lack of access to formal financial services, either because of age restrictions or high costs of opening and maintaining an account; mistrust of formal financial institutions; and a lack of information about formal financial services. Informal product attributes, such as saving under one’s mattress, can promise convenience in terms of immediate access, simplicity, and privacy. However, youth prefer a mode of savings that offers more security and the opportunity to build assets.

8.3.1 Practical Tips: What Makes UNCDF's Youth-Friendly Market Research Work?

The following list of data considerations and resources that helped UNCDF-YouthStart project managers to guide partner FSPs as they prepared to undertake market research with young people:

  1. Undertake desk research to understand the youth situation in the country and areas of intervention: Many FSPs investigating YFS are doing so for the first time. As such, it is imperative that they gain a comprehensive understanding of the situation of young people in their country, including socioeconomic characteristics of the youth. Secondary sources recommended for this type of macro-level research include the 2007 United Nations World Youth Report, United Nations Population Fund (UNFPA) publications, International Labour Organization (ILO) publications, and World Bank reports such as the Africa Development Indicators Report.
  2. Understand youth policies and the regulatory environment: UNCDF-YouthStart notes that it is important for FSPs entering the YFS market to understand the youth policy and the regulatory implications affecting the uptake and usage of youth-friendly financial services and products. Suggested resources for understanding these policies and regulations are the Ministry of Finance, the Central Bank, The Ministry of Education, the Youth Ministry, or other UN agencies such as the United Nations Development Program (UNDP), UNFPA, the ILO, and UNCDF.
  3. Research the existing supply of financial services, both within one’s own organization and externally: Before entering the youth financial services market, FSPs must fully understand the existing supply of formal and informal youth financial services offerings. Conducting a general competitive analysis (for example, a SWOT analysis) can help an interested FSP understand what services and products others are offering to youth. However, it is equally important to understand how one’s own institution is currently touching this client segment, either directly or indirectly. Using historical data on product usage and customer relationship management (CRM) data, FSPs can begin to understand what aspects or components of these products are desirable to their target population, in order to maximize them during the product development process.
  1. Understand the existing supply of nonfinancial services, both within one’s own organization and externally: When entering the YFS market, a FSP should define its objectives in offering non-financial services and study the existing supply of these services available to the youth market both internally and externally. For those FSPs with less developed non-financial services offerings, this early stage is a good time to begin exploring the youth-serving organizations in the market, their service offerings, and how they could act as potential partners to support the FSPs’ future youth clientele.
  2. Conduct youth-inclusive market research to understand the youth perspective on financial and non-financial services. This research should be carried out through focus group discussions (FGD), Participatory Rapid Appraisal (PRA) tools adapted for youth, and in-depth interviews with the youth themselves, as well as their parents or guardians. It should include a thorough understanding of young people’s sources of income and expenses; their financial decisionmaking protocol; savings behaviors; and gaps in knowledge, skills, and attitudes.8














Summary of Key Lessons Learned on Youth Financial Behavior

The data analyzed from both the 2011 youth-friendly market research presentations at the 2011 Global Youth Economic Opportunities Conference and the data from the 2010 State of the Field in Youth Enterprise, Employment and Livelihoods Development publication provide valuable insight into how young people view financial services; how they use both formal and informal financial services; and how they spend and save their money. As other FSPs develop market research plans, these trends can help researchers formulate more accurate hypotheses and develop more tailored market research tools.