Banking on Youth, Finance and Policy

This is the first installment of our series, Policy Innovations in Youth Financial Services. The series has been an online continuation of the global roundtable that donned the same title and was hosted by CGAP. The roundtable took place in March, and was a place where policy makers from eight nations examined the importance of financial services in youth empowerment and discussed the opportunities and challenges to policy levers and innovation.

Our very own, Tanaya Kilara of CGAP is kicking off the exciting series, having authored this first post. She is shining the spotlight on the amazing synergy that was found at the Policy Innovations in Youth Financial Services Roundtable.

What might an energetic but disaffected youth, a hard-nosed banker, and a policy maker going from ministerial meetings to G20 gatherings have in common? As it turns out—quite a lot. But aligning the interests of the three will not happen automatically and requires dialogue, identification of win-win solutions with a long-term perspective, and partnerships.

There’s been a lot of talk about the business case for youth financial services. And that remains important. But exploring the policy case is equally important. Indeed, policy makers from diverse horizons—ministries of youth, finance, education, and the central bank–across numerous countries are actively exploring how to use the policy tools at their disposal to make financial services available to youth as means of fostering development outcomes in education, employment, and productivity.

So we at CGAP embarked on a journey to understand how policymakers in different countries thought about the role that financial services plays in broader youth development policies and what they can do to advance access to those services. To explore this question, we convened a roundtable with policy makers from eight countries to discuss, debate, and advance the topic of “Policy Innovations in Youth Financial Services”.

This event brought three key strands together: - youth as both a development challenge and opportunity - financial services, and the role they might play in addressing the challenges and opportunities youth represent - how policy initiatives could effectively use financial services as a lever to positively affect youth development

Youth Policy makers view youth as an opportunity and a challenge simultaneously. They are excited by the fact that youth are a source of innovation - better educated youth can contribute economically, including by supporting aging populations, contributing capital, and overall enhancing the human capital of countries. However, they recognize that realizing this opportunity is predicated on youth having access to education that actually prepares them for the needs of the labor market as well as access secure, high quality jobs. Policy makers fear that youth are currently not being prepared for the demands of the labor market, and that even when they are, the jobs are simply not available, resulting in high youth unemployment and unsatisfied aspirations. And they worry that this can lead to unrest. Watch the following video to hear directly from policy makers who attended the roundtable.

Finance In a previous blog, we talked about how financial services can help youth manage the transitions that they undergo with respect to learning, working, starting a family, staying healthy and exercising citizenship. The majority of participants at the roundtable agreed that financial services are important in addressing youth transitions. However, not all financial services are equally relevant for each pivotal phase of life. The financial services offered need to reflect the specific challenges and opportunities that youth face during specific transitions.

The table below begins to map financial products that could be relevant for the different transitions. | | continuing to learn | starting to work | beginning a family | adopting a healthful lifestyle | exercising citizenship | |---------------------|-----------------------------------------|------------------------------------------------------------------------|----------------------------------------------------------------------------|--------------------------------|------------------------| | savings, short term | learn to save | seasonal needs; consumption smoothing; sending remittances | seasonal needs; consumption smoothing | | | | savings, long term | saving for schooling | save for business investment; save for housing | save for lifecycle events; save for housing | save for medical emergencies | | | credit | education loans | business loans; home loans; consumer credit; emergency loans | home loans; consumer credit; emergency loans; education loans for children | emergency loans | | | payments | receive support payments | receive salaries; pay bills; business transactions | receive salaries; pay bills; receive support payments | | | | insurance | | health; life; property; crop; disability | health; life; disability | | | | financial education | financial identity; begin using savings | establish credit history; set financial goals; finance business growth | set financial goals; use of more complex services | | |

Policy And finally, what is the policy response to the opportunity and challenge that youth present and how do financial services fit into the broader policy toolbox for promoting youth development? There are no easy answers to this complex question, but policy makers left us with some broad principles and takeaways: 1. Financial services and non-financial services must go hand in hand to contribute to youth development goals 2. Engaging the private sector is crucial, but banks cannot be forced to act 3. Private sector and Government need to think differently about sustainability 4. There is a role for subsidy, but getting it right is not for the faint of heart 5. Impact evidence is needed, thin to date, and resource-intensive to obtain 6. Enabling and protective regulation is required

To delve into more of the discussion we had with the policymakers during the roundtable, read the synthesis document and event highlights. Over the next few weeks, we will be featuring more content from the discussions with policymakers. As always, we are interested in your reactions and eager to hear about more experiences from different countries.