Financial Inclusion for Children and Youth CYFI Landscape Series – Summary for Practitioners
Child & Youth Finance International (CYFI) CYFI is a global system change organization working with partners in 132 countries. We have taken on the challenge of ensuring that everyone works together to reshape financial systems in order to economically and socially empower children and youth worldwide. CYFI has committed to three different roles: advocate, network connector & expert hub and network advisor.
1. Introduction The topic of financial inclusion has seen significant progress in the past five years. Continuous advocacy by civil society and intergovernmental organizations such as the United Nations and the World Bank has placed the topic firmly on the international development agenda. Financial inclusion data is increasingly available through sources such as the World Bank Global Findex. Child and Youth Finance International (CYFI) has worked to raise widespread awareness of the importance of including children and youth in national financial inclusion strategies, adding financial, social, and livelihoods educations to school curricula, and expanding the availability of Child and Youth Friendly banking products around the world. A number of interventions have provided essential information about methods of effectively approaching financial inclusion for children and youth. Research has shown that children learn more effectively when they can apply their financial learning through access to safe and appropriate financial services and are further empowered when financial education focuses on more than just the management of money.
2. Changes to the Landscape over the Past Five Years Drawing from the definition of the Center for Financial Inclusion, financial inclusion can be considered as ‘access to appropriate, quality, and affordable financial products and services’.1 A distinction must be made between formal and non-formal financial services. Formal financial services are linked to a financial institution and regulated by the central bank while non-formal financial services, like village savings groups, are not. Worldwide, millions of people do not have formal access and therefore cannot save, accumulate wealth, or access credit in a safe and regulated manner. Many of these individuals are children and youth. A child is an individual under the age of 18, or under the age of majority as prescribed by national law. Youth are persons between the ages of 15 and 24, as defined by the United Nations.2 It is important to note that this definition is highly contested and differs per region. The concept of economic citizenship builds on the achievements over the past years in the realm of financial inclusion and education. It complements financial inclusion with a focus on financial, social and livelihoods education, creating a more holistic approach to the economic empowerment of children and youth. Economic citizenship can improve economic and social well-being, reduce income and asset poverty, and lead to sustainable livelihoods for children and youth. The model of economic citizenship 1
Center for Financial Inclusion website UNESCO website 3 CYFI follows the UN definition of “youth” as those persons between the ages of 15 and 24 years, without prejudice to other definitions by Member 2
consists of four components: financial inclusion, financial education, social education and livelihoods education. These are the building blocks of empowerment and financial capability that underpin economic citizenship for children and youth.3
Figure 1. CYFI Model of Economic Citizenship
Financial education includes instruction and/or materials designed to increase financial knowledge and skills. Social education is the provision of knowledge and skills that improve individuals’ understanding and awareness of their rights and the rights of others. It also involves fostering of life skills such as problem solving, critical thinking, and interpersonal skills. Livelihoods education builds one’s ability to secure a sustainable livelihood through skills assessment and a balance between developing entrepreneurial and employability skills. Empowerment is the sense of confidence and efficacy experienced by children and youth through controlling their own lives, understanding and claiming their rights, and having empathy toward others. Financial capability combines a person’s ability to act with the opportunity to act. To be financially capable, and fully enhance their own social and economic well-being, people must have financial knowledge and skills as well as access to appropriate financial services.
Frameworks and Principles Supporting Financial Inclusion for Children and Youth A number of frameworks and principles guide financial inclusion initiatives by institutionalizing leading practices. Some of these apply specifically to children and youth. The CYFI Secretariat has worked closely with, and consulted a wide range of, stakeholders from the public and private financial sectors as well as the social and academic sectors to develop the Child and Youth Friendly Banking Principles. The principles are based on the UN Convention on the Rights of the Child and facilitate an international benchmark for safe and reliable banking products for children and
States. Children are defined as those under the age of 18 and “young person” as those between the ages of 10-24.
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youth. 4 The Children’s Rights and Business Principles (CRBP) set out ten actions that business can take to respect and support children’s rights. The CRBP was developed in a process led by UNICEF, UN Global Compact, and Save the Children. They build on the UN Guiding Principles on Business and Human Rights, UN Global Compact Principles, relevant International Labor Organization (ILO) Conventions and the Rights of the Child. 5 The United National Capital Development Fund (UNCDF), under the YouthStart Program, adapted the Smart Campaign Client Protection Principles and indicators to reflect the particular needs of young clients, in line with the Child and Youth Friendly Banking Principles. Making Cents International (MCI) developed the emerging guidelines for design and implementation of youthinclusive financial services. These guidelines have been used by a number of financial institutions in developing products for children and youth. In order to offer youth quality services on a substantial scale and sustainable basis, financial service providers should: involve youth in market research and product development, develop products and services that reflect the diversity of youth, ensure that youth have safe and supportive spaces, provide or link youth to complementary non-financial services, focus on core competencies through partnerships, involve the community, and establish institutional readiness.6 Financial institutions seem to be reluctant in offering financial products to children and youth specifically. They believe youth are difficult and, more importantly, expensive to bank. Under the framework of the YouthSave Consortium, the Consultative Group to Assist the Poor responded by developing a business case framework that helps financial institutions understand under which conditions there might be a positive business case for serving children and youth. The framework, based on existing literature, macro-level data correlations, and interviews with financial service providers, looks at the various factors influencing the profitability of youth savings products. These factors include profitability drivers, market level levers, institutional levers and segment specific levers.7
Several studies have shown the relevance of financial inclusion for children and youth. Youngsters want to save and do so when they get the opportunity. However, for most young people, the chances are still limited that they will actually receive these opportunities to save in a formal institution. According to the World Bank Global Findex, children aged 15 to 24 are between 10 to 50 percent less likely to have an account at a formal institution than adults.8 The YouthSave research, conducted in a coalition consisting of The MasterCard Foundation, Save the Children, Washington University, New America Foundation and CGAP not only shows that children (mostly aged 12-18) want to save in formal savings accounts but also that younger youth (under the age of 13) actually save more often than older youth, which strengthens the belief that it is important to introduce children to this topic at a younger age than is now common. It should be noted, however, that these results were partially due to the fact that younger savers withdraw less. 9 Due to the difference in saving methods between older and younger children, it is important the adapt products to different age groups. Research has shown that financial inclusion is positively correlated with economic growth and employment and researchers by and large believe in an underlying causal effect. The important mechanisms underlying this relationship include increasingly lower transaction costs and a better distribution of capital and risk across an economy.10 Han and Melecky suggest that broader financial inclusion could lead to increased financial stability, because a broader funding base makes banks more resilient. 11 A study by Martinez identified access to finance as an essential tool employed by governments to fight poverty and stimulate growth through the productive allocation of resources and the reduction of capital cost.12 A study done in Nigeria indicated a significant positive relationship between financial inclusion and economic growth. A significant relationship was also identified between financial inclusion and the economic wellbeing of Nigerian citizens.13
All of the frameworks provide guidance for the development of youth financial services, focusing on different aspects. Overall, these frameworks have contributed to standardizing youth financial inclusion efforts. However, this has been more on a voluntary basis than any other and financial institutions can be hesitant to undergo formal assessments.
The large number of national governments that signed the Maya Declaration and the prominent role of financial inclusion on the G20 agenda make the commitment from policymakers to advancing financial inclusion clear. The Maya Declaration is an initiative of the Alliance for Financial Inclusion (AFI), a global network of financial policymakers from more than 90 developing countries commited to unlocking “the economic and social potential of the
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The MasterCard Corporation & CYFI (2014) The MasterCard Corporation & CYFI (2014) 6 Making Cents International (2015) 7 CGAP (2014a) 8 World Bank (2015)
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Evidence of Financial Inclusion for Children and Youth
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YouthSave Consortium (2015) CGAP (2014b) 11 WorldBank (2013) 12 Martinez (2011) 13 Onaolapo (2015)
unbanked’.14 On a national level, this has translated into the development of national strategies on financial inclusion and regulatory changes. Developing a national strategy brings together key stakeholders and allows for a holistic view of financial inclusion, often also including financial education or building financial capabilities. While many countries have a national strategy for financial inclusion, only a few explicitly mention children and youth as a separate target group with specific needs. Including children and youth in the national strategy ensures that the topic is a priority on the national policy agenda. Children and youth are historically underrepresented, and it is therefore even more important that their interests and challenges are reflected in a national platform.
Research Limitations and Opportunities for Future Research New studies have provided useful insights into how children and youth save, which approaches work well, and the financial product characteristics that are most attractive to young people. Financial institutions, national authorities and civil society organizations are working together to introduce new products. The potential of technology to advance financial inclusion becomes clearer, but this is still beset by challenges. With financial inclusion taking a more prominent role in the development agenda, it is imperative that research continue to be undertaken. Existing studies are meaningful, but have their limitations, and there are still areas where further research is required to refine the approach to financial inclusion for children and youth. Two main topics that require more in-depth knowledge include 1) the long term impact of financial inclusion on children and youth, and 2) the interaction between financial inclusion and the holistic package of financial, social, and livelihoods education.
Opportunities and Challenges for Increasing Financial Inclusion Looking forward, several opportunities and challenges to increase financial inclusion for children and youth have emerged. A growing number of people are getting access to formal financial services, but the majority of them are still adults living in urban areas. Additional effort is required to also include more specific sub-groups such as children and youth in general, girls, orphans, and vulnerable children and young people living in remote, rural areas. Digital financial and the use of agents can help bring down the costs of including these vulnerable groups, as well as linking nonformal savings groups to formal financial institutions. Though many countries have made progress in both the areas of financial inclusion and financial education, the areas remain fairly separate. However, to achieve a state in which children and youth are fully capable and empowered 14 15
Alliance for Financial Inclusion (2015) World Bank (2015)
to function as economic citizens, it is important to facilitate greater integration of financial and educational services. Without complementary financial, social, and livelihoods education, whether provided by schools or banks, and the appropriate consumer protection framework, financial inclusion can lead to account dormancy and exploitation. Regulatory restrictions, such as age barriers and identification requirements needed to open a bank account, still remain a challenge. The social business case for financial inclusion of children and youth is fairly straightforward, although the long term benefits should be studied further. Give the elusive nature of the financial business case for financial service providers, the push to extend the number of Child and Youth Friendly banking products will continue to be a challenge. Resistance from the banking sector towards additional regulation, or Child and Youth Friendly certification, certainly does not make this effort any easier.
3. Current Financial Inclusion Landscape Statistics on Financial Inclusion The Global Findex database was launched by the World Bank in 2011 and provides comparable indicators showing how people around the world save, borrow, and make payments. Account ownership is an important indicator and is defined as ‘having an account either at a financial institution or through a mobile money provider.’ 15 This includes banks, credit unions, microfinance institutions, and mobile phone-based services for payments and sending and receiving money. In 2015 CYFI collected data from thirty financial institutions on the availability of products for children and youth and the key characteristics. The results show that 83 percent of respondents offered banking products for youth under 18, compared to 70 percent in 2011. From these, 86 percent of financial institutions complement the account with an educational component.16 The majority of financial institutions offer financial products to the older age segments, but the results indicate that the younger age segments are also seen as a valuable segment to target.
Key Players Any initiative to increase financial inclusion for children and youth requires funds to execute. A key funder in this area has been The MasterCard Foundation, showing commitment to children and youth as a particular target group, has funded a number of financial inclusion and economic empowerment initiatives, including YouthSave and YouthStart. The Bill and Melinda Gates Foundation, through its Financial Services for the Poor program, support the development of innovative savings products worldwide. 17 The Nike Foundation focuses specifically on 16 17
CYFI (2015) The Bill and Melinda Gates Foundation website
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promoting the economic empowerment of girls through financial education, business training, and access to savings and loans.18
support these financial institutions in projects related to financial inclusion for children and youth, often combining project implementation with impact assessment.
A number of organizations are dedicated to coordinating advocacy and implementation efforts for financial inclusion for children and youth. Of these, CYFI focuses particularly on children and youth, taking on the role of networker, advisor, innovator, and thought leader to support national governments, central banks, financial institutions, and civil society in promoting economic citizenship for young people around the world. Making Cents International is a US based organization that focuses on furthering economic opportunities for children and youth, as well as other vulnerable groups like women and smallholder farmers. The Alliance for Financial Inclusion (AFI) and the Global Partnership for Financial Inclusions (GPFI) bring together nation states, and other governmental entities like central banks to coordinate policy and regulatory changes that can enable financial inclusion. Additionally, Financial Inclusion 2020 connects private and public initiatives towards the common goal of achieving full financial inclusion by 2020. It is supported by private sector organizations like MasterCard, Citi Bank and private foundations like the Bill & Melinda Gates Foundation.
Key Initiatives
A great number of organizations have invested in research on financial inclusion in recent years. Of these, CYFI, The MasterCard Foundation, Barclays, Making Cents International, CARE, Plan International, New America, The Center for Financial Inclusion at Accion, Citi Foundation, MEDA, The SEEP Network, and others have looked at the approach for, and impact of, financial inclusion for children and youth through initiatives such as YouthStart, YouthSave, YouthInvest, Banking on Change, and Banking the Next Generation. Other organizations contribute to the wider body of literature on financial inclusion in general, such as CGAP and UNCDF. As financial inclusion requires more than a change in policy, the role of parties implementing the change on the ground is crucial. At the center of this is a wide variety of financial institutions led by national central banks. These make up the traditional financial sector and are responsible for making their products and services accessible to everyone. Microfinance institutions have a natural tendency towards providing financial services to more vulnerable groups and therefore also play a large role in providing youth financial services. Credit unions and cooperatives also play a similar role and they often work with funders and coordinators to implement financial inclusion on the ground. Many international NGO’s, such as BRAC, Save the Children, Freedom from Hunger, MEDA and Women’s World Banking, 18
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Girl Effect (2014)
CYFI Landscape Series – Financial Inclusion
Products Countless banks around the world are offering financial products and services to children and youth nowadays, and the Child and Youth Finance Movement has worked collectively to expand the reach of these quality services. The Child and Youth Friendly banking principles focus on availability, accessibility, and control for children and youth over their accounts, thereby looking at opening requirements, benefits, and costs. They also recommend including a component of Economic Citizenship Education, or at least financial education, either through workshops, web portals or applications available to young account holders. In the Netherlands, ING’s Jongerenrekening is a good example of a bank that has a child-friendly banking product for a long time. Costs are low, the account is in the child’s name and the child can operate the account independently through a debit card. In Yemen, the AL-Amal Microfinance Bank already had a savings account for youth older than 18, and recently the bank lowered the age limit and the account can now be opened by children of all ages. In Ethiopia, the Amhara Credit Savings Institute (ACSI), was one of the most successful participants of the UNCDF YouthStart program. Ethiopia has implemented a national financial inclusion strategy with a focus on youth. Lowering the age at which children can independently own and open an account proved to be very crucial to ACSI’s success. Australia’s Commonwealth Bank has encouraged children to develop a habit of saving regularly through their School Banking program for more than 80 years now. The increasing opportunities that digital technologies can offer is already impacting financial product design and delivery channels. Banks use web portals and mobile application to enable account management and parental control for children’s accounts. SIM registration requirements do limit the use by children and youth, but it still has the potential to financially include youth in a costeffective manner. Programs In the past five years, a number of programs implemented by public-private partnerships, managed both to include a large number of young clients and to provide relevant information on how to approach financial inclusion for children and youth. Some of these programs can be replicated or scaled, while others serve as an example in terms of budgeting and research. One program is school banking. School banking combines financial inclusion with
educational platforms and is a promising concept for fostering economic citizenship for children and youth. This program unites schools and banks to guide children in opening a bank account, saving and using their money. UNDCF, in partnership with The MasterCard Foundation, launched YouthStart, in 2010, to contribute to achieving the Millennium Development Goals through promoting financial inclusion for youth. Supporting ten financial institutions in 8 countries with grants and technical assistance, several financial products and non-financial services were designed, developed and rolled out. Throughout the program, 49 percent of those opening accounts were female clients. The amount saved was $13 million USD and the average savings balance was $28 USD per month.19 YouthSave, initiated in 2010 by The MasterCard Foundation, Save the Children, Washington University, New America, and CGAP, investigated the role savings accounts can play in youth development and financial inclusion. The consortium worked with local institutions in Colombia, Ghana, Kenya and Nepal to design, develop and implement tailored, sustainable savings products. Between 2010 and 2015, over 130,000 children between 12 and 18 years old opened savings account and 44,000 youth received classroom financial education.20
conducive to financial access for young people. At the same time, they should cooperate to ensure that consumer protection policies in place that are tailored towards children and youth. Financial institutions that do not currently offer financial products and services to children should consider developing them in accordance with the Child and Youth Friendly banking principles. Likewise, current child accounts, and other youth financial products should be continuously assessed to ensure that they adhere to the Child and Youth Friendly banking principles. With regards to financial, social, and livelihoods education, it seems as if financial institutions are sometimes using their applications and games as a way of showing that they are looking after young clients. However, financial education is not naturally the core business of financial institutions and there is the risk that educational materials are used for public relations and marketing messages. It is essential to work actively with policymakers and academics to understand and remove legal and regulatory barriers and enhance the quality of financial and educational interventions. This will widen consumer protection frameworks for children and youth and incorporate greater protection components and citizenship elements into financial and educational programming. For more information on financial inclusion for children and youth, please consult the complete CYFI Financial Inclusion Landscape Series Document.21
The Banking on Change program, led by Barclays, CARE International UK, and Plan UK, was launched in 2009 and aimed to improve the quality of life of the world’s poorest people by promoting a savings-led approach to microfinance. The program revealed a number of risks related to non-formal savings groups. These risks are sometimes exacerbated in the case of younger participants, such as poor governance and limited oversight, financial inexperience and the increase in taking out loans without realistic means to ever pay them back. Children and youth are already a separate target group for financial inclusion, but it is no means homogenous. Younger and older youth, girls and boys, in and out of school children, each have their own particular social and economic needs and it is important to identify these needs with age and gender specific interventions.
4. Future Outlook: Recommendations for Practitioners Much progress has been made in the past five years in expanding the reach of Child and Youth Friendly banking products for young people around the world. Practitioners should work together with policymakers to ensure any legal or regulatory barriers, such as age or identification requirements, are reduced to provide an environment more 19 20
UNCDF (2015a) YouthSave Consortium (2015)
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CYFI (2016)
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5. Bibliography Alliance for Financial Inclusion (2015), 'Maya Declaration'. Retrieved from: http://www.afiglobal.org/sites/default/files/publications/maya_declaration_2015.pdf Center for Financial Inclusion website, http://www.centerforfinancialinclusion.org/about and http://www.centerforfinancialinclusion.org/our-definition-of-financial-inclusion, Accessed on 10 April 2016 CGAP (2014a), 'The Business Case for Youth Savings: A Framework'. Retrieved from: http://www.cgap.org/sites/default/files/Focus-Note-Business-Case-for-Youth-Savings-A-Framework-Jul-2014.pdf CGAP (2014b), 'Financial Inclusion and Development: Recent Impact Evidence'. Retrieved from: http://www.cgap.org/sites/default/files/FocusNote-Financial-Inclusion-and-Development-April-2014.pdf CYFI (2016) Landscape Series: Financial Inclusion for Children and Youth https://issuu.com/childfinanceinternational/docs/cyfi-financial-inclusion-landscape/1?e=7128000/37817487 CYFI (2015), 'Children, Youth & Finance 2015'. Retrieved from: http://www.childfinanceinternational.org/resources/publications/children-youth-finance-2015.pdf Girl Effect (2014), 'Empowering Girls with Economic Assets'. Retrieved from: https://www.empowerwomen.org/~/media/files/un-women/knowledgegateway/resourcefiles/2014/08/25/11/41/girl_effect_presentation_empowering-girls-with-economic-assets.ashx Making Cents International (2015), ‘Emerging guidelines for youth-inclusive financial services’ at Caribbean Microfinance Forum 2015 Martinez, M.V. (2011), 'The Political Economy of Increased Financial Access'. Retrieved from: https://repository.library.georgetown.edu/bitstream/handle/10822/553824/martinezMonicaV.pdf?sequence=1&isAllow ed=y The Bill and Melinda Gates Foundation website. Retrieved from: http://www.gatesfoundation.org/What-We-Do/GlobalDevelopment/Financial-Services-for-the-Poor. The MasterCard Corporation & CYFI (2014), 'Banking a New Generation, developing responsible retail banking products for children and youth'. Retrieved from: http://www.childfinanceinternational.org/resources/publications/2014-bankinga-new-generation.pdf. Onaolapo, A.R. (2015), 'Effects of financial inclusion on the economic growth of Nigeria (1982-2012)', International Journal of Business and Management Review, 3(8), 18-25. Retrieved from: http://www.eajournals.org/wpcontent/uploads/Effects-of-Financial-Inclusion-on-the-Economic-Growth-of-Nigeria-1982-2012.pdf. UNCDF (2015), 'Bulding the Business Case for Youth Financial Services: Further Insights from the YouthStart Programme'. Retrieved from: http://www.uncdf.org/sites/default/files/Documents/business-case-brief.pdf. UNESCO website, http://www.unesco.org/new/en/social-and-human-sciences/themes/youth/youth-definition/. Accessed on 12 April 2016. World Bank (2015), 'The Global Findex Database 2014: Measuring Financial Inclusion around the World'. Retrieved from: https://media.worldbank.org/secure/global-findex-2014/Global-Findex-2015-Report.pdf. World Bank (2013), 'Financial Inclusion for Financial Stability, Access to Bank Deposits and the Growth of Deposits in the Global Financial Crisis'. Retrieved from: https://openknowledge.worldbank.org/bitstream/handle/10986/16010/WPS6577.pdf?sequence=1&isAllowed=y. YouthSave Consortium (2015), 'YouthSave 2010-2015: Findings from a Global Financial Inclusion Partnership'. Retrieved from: http://csd.wustl.edu/OurWork/FinIncl/GlobalAssetBuild/YouthSave/Documents/YouthSave%20synthesis%20report.pdf
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