Patrick is a young proud man who just graduated from school and is ready to prepare for his future. He opened a savings account at Finca-Uganda 2 years ago when he was 16 years old. Gradually, as he followed the financial education modules offered by Finca-Uganda, he started saving to purchase a small pig. As the picture shows, in just one year, his once little pig worth 50,000 Uganda Shilling (US$ 25) has become a large healthy pig worth 125,000 Uganda Shilling (US$70).
Patrick was lucky: his parents authorized him when he was 16 years old to open, and independently manage a savings account; and Finca-Uganda was willing to bear all the costs associated with getting the consent of Patrick’s parents to open the account.
Like Finca-Uganda, most of the 10 financial service providers (FSPs) working with UNCDF’s YouthStart programme, have found regulatory constraints which impede them from serving youth in a more efficient manner. The case of Umutanguha Finance ltd, our partner in Rwanda, however, is different, as Rwanda offers quite compelling insights on how youth-friendly policies and regulatory frameworks can drastically increase financial inclusion for youth. YouthStart has begun using international and regional fora to share these and other insights from partners. For example, we shared these insights for the first time in April 2014 at the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO). We replicated this same session at the Microfinance Club of New York in October 2014, and we shared it once again last week in Luxembourg at the European Microfinance Week.
We had invited various people to participate with UNCDF at some of these events and shared with others their rich experiences. In Dakar, at the BCEAO’s event, we presented with the assistance of Mr. Kevin Kavugizo, Director of the Microfinance Supervision Department at the National Bank of Rwanda.
In Luxembourg we presented our insights with the assistance of Mr. Jules Tehoneste, CEO of Umutanguha Finance in Rwanda and Anna Gicherman from Women’s World Banking.
Panelists usually start discussing how different regulatory frameworks favor or hinder the uptake of youth savings accounts. In Rwanda, for example, youth can open and manage independently a savings account at the age of 16, and in Uganda at the age of 18. When comparing savings accounts uptake of UNCDF’s YouthStart partners in Rwanda and Uganda we see that although the FSP in Rwanda has half the number of clients overall, the percentage of youth clients is eight times greater than the FSP in Uganda (Please see figure below). Even though we are aware that there are other market and institutional level levers that impact these results, age restrictions is considered by practitioners as one lever that has helped or prevented them the most in reaching youth in an effective manner.
Panelists continue discussing other key policy and regulatory framework characteristics that facilitate or impede access to financial services by young people in the countries where they work. These include:
- The use of technology such as mobile banking/POS agent banking to reduce the cost of serving youth clients and increase usage of savings accounts (click here to see how Finca DRC has taken advantage of a technology-friendly regulatory framework to increase usage of youth saving)
- A review of the micro-leasing law (click here to see how Umutanguha Finance has taken advantage of micro-leasing to meet the needs of youth); and
- The development of a national financial literacy strategy with a specific focus on youth (click here to access the national financial literacy strategy of Rwanda).
Each of the 3 events mentionned above, offered UNCDF a platform in which policy makers, practitioners, students, and other stakeholders shared and discussed possible effects (positive or negative) of the regulatory framework on its fastest growing populace. Some of the changes we advocate for, such as lower age restrictions to open a savings account, are youth specific while others, such as regulation that favor the use of technology, are not. However, all of them directly or indirectly are likely to have disproportionate impact on youth. Given the youth employment challenge, particularly in sub-Saharan Africa, more should be done to facilitate friendlier policies for youth like Patrick so that we can support their efforts to live more productive lives.
To learn more about policy and access for youth, please read the YouthStart publication “Policy Opportunities and Constraints to access Youth Financial Services”