Philippines: Driving Innovation in Youth Savings

Policymakers in various countries are closely watching the youth savings landscape for clues on which direction to take. The Central Bank of Philippines, Bangko Sentral ng Pilipinas (BSP) made a bold move by launching the ‘Kiddie Account Program’ this August. This is the first instance of an initiative in a developing country, spearheaded by the Central Bank, allowing young children to open accounts.

This program, launched in partnership with the Bank Marketing Association of the Philippines, brings 12 of the top Filipino banks together in a joint commitment to allow children aged 12 or younger to open savings accounts. Children can open accounts with initial deposits of 100 pesos (PHP) or lower in any of the 3000 branches operated by these banks. This program is expected to impact the 12 million school children under the age of 12 in the Philippines, and builds on an existing financial literacy program.

I spoke to Fe Delacruz, Director for Corporate Affairs at BSP, about this initiative. It turns out that the origins of the ‘Kiddie Account Program’ lie in a Financial Literacy program launched by the Central Bank in 2007, which integrated lessons about saving and money management into the school curriculum. The Kiddie Account now adds a practical component to the lessons. Ms. Delacruz narrated this fascinating story:

”Well before the launch of this program, a teacher in one of the schools decided to encourage her students to start saving. She was responsible for managing her students’ money and allowing them to withdraw and deposit on a weekly basis. Out of this initiative, a boy in her class saved diligently and managed to accumulate PHP 1800. With this princely sum, he bought a piglet, something that is considered a sound business investment in the Philippines. In a year, his investment multiplied and he was the proud owner of 5 piglets. To top it all, he won the everlasting admiration of his classmates by donating one roasted piglet to the school for an annual celebration!”

This story underscores the fact that kids are economically active; they do save and need safe places to put their money away. In this case, the teacher served as the honest banker, but that might not always be the case.

The Philippines’ Savings rate has traditionally been low (26.6% in 2009). The BSP conducted a survey a few years ago that indicated that less than 5% of youth regularly saved money (also look at this study from the Global Assets Project on savings for the poor in the Philippines). The BSP saw this low statistic among young people as an opportunity to change the savings culture in the Philippines - if they can change the way the present generation of elementary school children thinks about saving money, it will affect the savings culture of adult Filipinos in the years to come. This will positively impact the savings rate, providing long-term benefits not just for the students, but ultimately for the country.

One of the constraints that children and youth in many countries face is a lack of identification documentation to open an account. In the Philippines, the school ID for children above the age of 7 was deemed acceptable by the banks, Bangko Sentral and the Philippine Anti Money Laundering Council, as sufficient to open an account. So children above the age of 7 can open an account in their own name and operate it independently. Identification requirements will still pose a challenge in other countries. These countries will be watching in order to see the results of this program and learn transferable lessons. But perhaps the most important lesson here is the willingness shown by the Central Bank of the Philippines to try something new to change financial behavior. Will other regulators be inspired to innovate as well?