Long ignored by the banking industry, low-income young people between the ages of 12 and 18 are finally getting their due in the form of a five-year, four-country microfinance pilot program.
In the past, this age group was seen as a non-starter in the world of savings accounts.
But thanks to the Consultative Group to Assist the Poor (CGAP), YouthSave launched this week. The YouthSave pilot program aims to identify whether it makes financial sense for banks to offer low-cost savings accounts to this group and whether the youth and their families can stand to benefit from such options.
YouthSave is a collaboration of CGAP, Save the Children, New America Foundation, the Center for Social Development at Washington University in St. Louis and one financial institution and one research partner each in Ghana, Kenya, Colombia and Nepal. YouthSave was funded by the MasterCard Foundation (which is pitching in $12.5 million) as part of its learning agenda for improving young people’s opportunities.
According to New America Foundation: “recent research has shown that helping young people accumulate savings can not only open up economic opportunities, but also affect the way they feel about themselves and their behavior on a range of fronts.”
CGAP says, surprisingly, that financial institutions were eager to join YouthSave and had the low-income teen demographic already on their radar, primarily because they recognized a business opportunity when they saw one. For starters, youth are a huge and growing demographic in many countries. As a continent, Africa is getting younger by the day and will continue to do so through 2030, even as many other continents continue to age rapidly. In other words, it makes good business sense to appeal to an untapped market particularly as other markets start to drop off.
Also, CGAP says research suggests that small savers generated several times their savings balance in profits for the financial institutions studies, mostly through the other services they used once they had the savings account. Another potential benefit would be that the young people who open accounts will serve as a model to their parents who may in turn also start to bank with the same provider.
Sounds like a win-win situation. We’ll keep an eye on the results.
Photo by Mara 1 via Flickr.