Taking Innovations in Savings Services to Youth

Delivering financial services to low-income populations in developing countries is a challenge, especially in rural areas, where a majority live without access to banks.   A recent Microfinance Gateway article neatly summarized a variety of innovative models -- such as roving deposit collectors, mobile banking, and POS (point of sale) agents – that financial institutions are employing to facilitate more inclusive access to savings services.   While the article focused primarily on services offered to adult populations, similar strategies are likely necessary to reach youth, arguably an even more challenging demographic.

The YouthSave Consortium is also exploring  whether, how and when to incorporate similarly inventive delivery solutions in our Project, which aims to develop and test savings products accessible to low-income youth in Colombia, Ghana, Kenya, and Nepal.

In Ghana, for example, the YouthSave Consortium and its financial partner, HFC-Boafo, are considering the option of sending “cash collectors” directly to in- and out of - school youth for savings collection. These services resemble the traditional roles of susu collectors in West Africa in that they provide the convenience and discipline of saving on a regular basis. However, the key distinction between the two services is that susu collectors are often times non-regulated entities that run the risk of defrauding clients and absconding with their savings, whereas HFC-Boafo’s cash collectors allow small savers to deposit their funds through a secure and regulated financial institution. Additionally, some financial institutions offer interest-bearing savings accounts, but under the susu model clients pay for savings collection services, which actually creates negative interest. This is yet another reason why YouthSave chose to partner with a regulated financial institution with the potential to safely and cost-effectively deliver savings services to youth.  

Incorporating other branchless banking methods, YouthSave partners, Kenya Post Office Savings Bank (KPOSB)and Bank of Kathmandu (BoK), are looking into mechanisms that can keep operating costs low and cash transactions secure, while maintaining outreach to youth: POS agents and mobile banking, respectively. Already KPOSB has 688 ATMs distributed across the country. In an additional effort to deepen its reach to unbanked Kenyans, KPOSB is currently implementing an ambitious plan to roll out a network of 1000 agents, including mobile phone money service outlets, pharmacies, retail shops and courier companies that can facilitate financial service transactions. Similarly, BoK in Nepal is looking to develop a POS agent network and mobile banking facility, advancing its reach to Nepal’s poorest regions. Before moving forward however, YouthSave will conduct market research to explore the utility of mobile phones among youth and ensure mobile banking as a viable delivery option.

As the Microfinance Gateway staff highlighted, there is a “growing commitment to savings evidenced [by] the increasing number of innovations by NGOs and private sector organizations.” Clearly, the exploration doesn’t end here. YouthSave hopes to continuously draw from these innovations and offer their own for practitioners that are connecting youth to financial services.