Maria Perdomo, Project Manager for YouthStart, led a panel on financial services for youth to a interested crowd of funders, practitioners and consultants at European Microfinance Week. All panelists are recipients of support from YouthStart, a programme of UNCDF and The MasterCard Foundation.
Working with youth and financial services can be a challenge requiring negotiating regulation, institutional understanding and ability, as well as communicating effectively to a young client base. The panel consisted of UNCDF and three institutions presenting case studies on how to reach youth effectively.
Benjamin Mackay of ADA discussed the Credit for Young Artisans project in Mali and Burkina Faso serving youth from 20-35 years of age. ADA works with the largest MFI in the country to target young artisans, providing loans, entrepreneurship education and financial literacy. The small pilot is working with 650 employees and apprentices in hopes of developing a larger programme. The programme was designed to quickly graduate youth into the mainstream MFI loans by giving them a riskier start-up loan that also required them to save enough to fulfill the guarantee deposit requirements of MFIs. High delinquency and information system problems were noted in the pilot, leading to changes as the programme develops.
Flavia Nakamatte of Uganda Finance Trust works with clients as young as 12 years of age, offering specific products for teenagers and another set for those 18-24 old. With support from UNCDF and the MasterCard Foundation, she investigated youth saving and spending habits to develop their "teen classic" and "youth progress" product lines. The MFI markets the products through the local leaders and authorities such as market chiefs, the church, schools as well as the parents -- people that youth trust. They have found that adults are as interested in the training as their children leading to many other account openings. Initial marketing efforts gave out t-shirts and piggy banks for those opening account but the MFI discovered that many opened accounts for the prize but did not use them. Now prizes reward the use and growth of individual's savings accounts. The programme has reached 4200 clients, 60% of whom are women. In Uganda, youth under 18 require an adult as a signatory on their account which unfortunately discourages younger savers -- just like adults they wish privacy and independence over their own savings. Maria Perdomo noted that such regulatory requirements for account opening or transacting were fairly common and could be addressed.
Jared Penner of Child and Youth Finance International (CYFI) discussed two cases that focus on youth still in school where teachers play a role in providing financial literacy in partnership with a network oflocal cooperatives (NATCO) and have reached over 40,000 youth in the Philippines. NATCO provided great outreach. The Ministry of Education supported this effort by adding a financial literacy course in schools. This school banking-based model worked well because the market was already partially educated and interested. It was noted that UNCDF and AusAID have pursued a similar model through the Ministry of Education in Fiji, embedding financial literacy into the school curriculum and working with banks and others to have them open accounts for youth.
Some participants questioned the wisdom and sustainability of giving loans to youth and suggested that the investment in youth products might be a "loss leader." Similarly, it was asked if anyone was tracking how many youth became "profitable" adult clients. A Ugandan listener asked if the institutions asked youth the source of the funds -- where they concerned about how youth earned (or acquired) their funds if they were not verifably economically active?
Some of the institutions do require a "moral" guarantee or a testimony from parents or others as to the character of the youth client. Flavia noted that many youngsters get money from doing chores for their parents, relatives or others. Those offering loans conduct due dilligence of the youth's enterprise. Panelists agreed that they saw youth as part of a suite of products available to a household as well as building a future client base--or clients for formal financial institutions. Maria noted that the cost of financial education was high and would likely only be sustainable with the government committment to financial education.