Taking the Bank to the Youth: A Promising Strategy for Increasing Youth Financial Inclusion in Developing Countries

Background: Youth financial inclusion has become a strong focus for all countries but especially for developing economies where youth are often the majority population. Many youth save informally and may participate in formal banking services if given the opportunity (United Nations Capital Development Fund, 2011). However, such opportunities are limited because of barriers inherent in regulatory policy, geographic access, identity verification, financial product information, financial service fees, affordability of deposit services, and documentation required to open an account (Aggarwal & Klapper, 2013; Child & Youth Finance International, 2014; Demirguc-Kunt & Klapper, 2012a;). Facilitating financial inclusion has important effects on youth development (Chowa & Ansong, 2010; Deshpande & Zimmerman, 2010; Elliott, 2012; Prina, 2014; Scanlon & Adams, 2009; Sherraden & Ansong, 2013; Ssewamala & Ismayilova, 2009). Based on the data from the YouthSave initiative, this study examines whether bank financial education and services outreach are associated with account uptake and savings in four developing countries.

YouthSave Initiative and Research Method: One strategy for removing barriers in YouthSave is “taking the bank to the youth.” YouthSave is a test of savings accounts as a tool for youth development and financial inclusion. All participating financial institutions (FIs) in Ghana, Colombia, Kenya, and Nepal developed a financial product targeting low-income youth between 12 and 18 years. Some FI branches also conducted financial education and services outreach at schools or youth clubs. Outreach includes offering information about the savings account, opening savings accounts, taking deposits, and sometimes participating in financial education sponsored by Save the Children (SC) and local community partners.

From 2012 to 2014, a total of 69,247 youth account holders across the four countries participated in the study. In Colombia, Kenya, and Nepal, we conducted branch-level analysis to assess whether FI branch participation in outreach is associated with account uptake and savings. In Ghana, researchers conducted a randomized experiment testing the impact of in-school banking on savings and other youth development outcomes. Based on this experiment, we conducted school-level analysis to assess the impact of in-school banking on account uptake and savings.  

Results: Findings from branch-level analysis in Colombia, Kenya, and Nepal show a positive association between outreach and account uptake (Colombia, p<.05; Kenya, p< .001; Nepal, p<.01).  In Nepal, targeted outreach to girls’ boarding schools also facilitated female participation. In Ghana, schools with in-school banking opened significantly more accounts than schools that offered only the opportunity to open an account, and schools with no financial services (control group) (p<.001). Youth attending schools with in-school banking also had significantly greater savings than youth in schools that did not receive financial services (p<.001).

Implication: Gaining access is the first hurdle for youth to participate in formal savings, and “taking the bank to the youth” is a strategy that increases financial inclusion. Partnerships between FIs and schools can provide youth with both financial knowledge and opportunities to save with affordable and safe products – accruing both the assets and skills to make informed decisions for their future social and economic development.