Mobile Money = Youth Financial Access Leapfrogger?

Leading up to the release of the New America's latest Global Assets Project report -- Beyond the Buzz: The Allure and Challenge of Using Mobile Phones to Increase Youth Financial Inclusion -- on September 12th, YouthSave is hosting a blog series that highlights the paper’s findings. This the second of three installments.

The Buzz: Mobile Money is going to leapfrog hurdles to youth financial inclusion.

In our recent Pulse-Taking Survey, of 100 professionals from the field of youth financial inclusion, 85% reported that they believed that mobile money will have the greatest potential to boost financial inclusion in the future.

Only 55% of our respondents reported that they had used mobile money to reach youth or were planning to use it within the next year. The overwhelming trend toward mobile money in the future, and the wide gap between the percentage of respondents who use it now to those who view it as the greatest future opportunity (30%), could suggest a) an underlying enthusiasm for the use of mobile for financial access and/or b) a view that mobile phones remain a promise unfulfilled for youth financial inclusion.

Either way, mobile money is clearly on the minds of many within the field, and as one responded summarized: “[w]hen mobile money is further developed,” respondents seemed to feel that “we could see large uptake among youth.” From this perspective, the development of mobile money was a matter of not if, but when. To quote another respondent: “Mobile money will eventually be a transformative tool.

These beliefs rest on an assumption that, in the future, youth will have access to cost effective mobile money, or mobile money based products and that they will want to use them. And it’s fairly easy to assume this is the case: In the developing world, mobile penetration (the number of SIM cards per number of people in a population) is currently 89%, in many countries topping 100%.

Buzz Kill: Mobile money is still not easily accessible by youth, particularly low income.

While rapid expansion and adoption rates of mobile money products make this a feasible assumption, it highlights the need to be more cautiously optimistic. As one respondent acknowledged, “[m]obile money has a lot of potential, but banks, telcos, and regulators have a lot of collaboration to do before it will be a solution for all.”

Also, it is important not to lose sight of the significant regional variation behind the mobile penetration statistic, which makes mobile solutions extremely promising in some countries and completely unworkable in others. According to GSMA’s African Mobile Observatory Report, for example, while South Africa and Benin report mobile penetration rates of 100% and 87%, respectively, Ethiopia and Eritrea sit at just 10% and 4%. In Asia, Vietnam boasts 126% mobile penetration while Myanmar hovers around 1%.

Because many people in developing nations share their phones, the number of people who have access to phones is higher than the number of people who actually own phones. However, as seen in the following InterMedia study, even when general access is taken into account, many young people still do not have access to a phone.

Fraction of Youth (ages 15–29) Who Have Not Used a Mobile Phone Within the Past Year | Demographic | Haiti | Ghana | Kenya | Tanzania | Zambia | |------------------|-------|-------|-------|----------|--------| | Youth (15–29) | 2% | 4% | 4% | 20% | 28% | | National Average | 3% | 7% | 8% | 20% | |

These data may also be slightly misleading. Although they show that the youth population has similar access to phones as the adult population, minors often have more restricted access to mobiles. For example, 2011 Gallup Poll surveyed mobile phone ownership across 17 countries in sub-Saharan Africa and found that, in every one, youth between 15 and 18 years old had 10–20 percent lower rates of cell ownership than their 19- to 29-year-old counterparts and the population average.

More so than for the adult population, cost also limits youth access to phones. InterMedia found that around 20 percent of youth in the four countries that they surveyed identified cost–of either the handset or actually using a mobile—as the factor prohibiting them from using a phone.

Reasons That Youth (ages 15–29) Do Not Use a Mobile Phone | Reason | Ghana | Kenya | Tanzania | Zambia | |---------------------------------------------|-------|-------|----------|--------| | Handset too expensive | 22% | 10% | 20% | 32% | | Purchasing credit/using phone too expensive | 13% | 0% | 20% | 26% |

Interestingly, in the four African countries surveyed by InterMedia, only about 5 percent of youth who did not have a phone said that they did not need a phone. As past research has found, this suggests a strong latent demand for mobile phones among low-income youth, and that more youth would acquire phones if barriers to ownership were lowered. However, if mobiles are to be leveraged on a wide scale, it is important to recognize the nuance that underlies the general trend toward mobiles.

So… mobile money for youth financial inclusion has big promise, but also some challenges to overcome because it is actually catalytic for low-income youth, particularly those under 18 years old. This is particularly disappointing, because mobile solutions for financial capability should have their great impact earlier in life. We’ll explore this conundrum in tomorrow’s post.